Sadbhav Engineering Ltd Management Discussions

The global economy continued to navigate a phase of moderate growth during the year under review, shaped by evolving trade dynamics, geopolitical developments and calibrated monetary policies across major economies. While inflationary pressures eased in several advanced economies, growth remained uneven, and emerging markets - led by India - continued to be the principal engines of global economic expansion. Infrastructure investment remained a central policy instrument across economies for sustaining demand and enhancing long-term productive capacity.

India retained its position as the fastest-growing major economy during FY 2025-26, supported by robust domestic demand, sustained public capital expenditure and a stable macroeconomic framework. The Government of Indias continued emphasis on infrastructure-led growth - through the PM Gati Shakti National Master Plan, the National Infrastructure Pipeline and enhanced budgetary allocations - has created a strong multiplier effect across the construction and allied sectors. Infrastructure creation remains the cornerstone of the national vision of Viksit Bharat 2047, and the construction sector, as one of the largest employers and contributors to gross capital formation, stands at the centre of this transformation.

India has the second largest road network in the world, and the National Highway network forms the primary arterial grid of the country. As per the Ministry of Road Transport and Highways (MoRTH), the National Highway network has expanded from approximately 91,287 km in 2014 to over 1,46,500 km in FY 2025-26, an increase of nearly 61 per cent. The pace of National Highway construction has risen from about 11.6 km per day in 2013-14 to approximately 34 km per day, reflecting sustained policy support, streamlined approvals and improved execution capacity across the industry.

Under the flagship Bharatmala Pariyojana, more than 26,400 km of highways have been awarded, of which over 20,000 km have been constructed. In line with the Union Budget 2025-26, MoRTH has identified a Public-Private Partnership (PPP) project pipeline of about 13,400 km with an estimated cost of Rs 8.3 lakh crore to be developed over the next three years, alongside a planned network of 35 Multimodal Logistics Parks under Bharatmala Pariyojana. The budgetary allocation towards roads and bridges for FY 2026-27 stands at approximately Rs 1.22 lakh crore, about 5 per cent higher than the revised estimates for FY 2025-26, underscoring the Governments continued commitment to the sector.

The Government has also intensified its asset monetisation programme, having cumulatively monetised over Rs 1.5 lakh crore of highway assets through Toll-Operate-Transfer (TOT), Infrastructure Investment Trusts (InvIT) and securitisation, with a target of Rs 30,000 crore for FY 2025-26 alone. The proceeds of monetisation are ploughed back into fresh highway development, thereby sustaining a virtuous cycle of construction opportunities for players such as your Company.

Sadbhav Engineering Limited ("the Company" or "SEL") is one of Indias established engineering, procurement and construction (EPC) companies with a track record of nearly four decades in the development of road and highway projects, irrigation infrastructure and mining operations. The equity shares of the Company have been listed on BSE Limited and the National Stock Exchange of India Limited for more than fifteen years. Over the years, the Company has executed a large portfolio of national and state highway projects, expressway packages, canal and irrigation works, and excavation and overburden removal contracts for major public sector undertakings.

The year under review has been a year of consolidation and course-correction for the Company. Elevated debt levels and the resultant burden of debt servicing in earlier years constrained the Companys working capital availability and its ability to bid for and execute new projects. During the financial year, the Company entered into a restructuring arrangement with its lending banks for restructuring of its debt. The implementation of the restructuring plan marks a decisive step towards restoration of the financial health of the Company, realignment of its repayment obligations with its cash flow generation, and release of management bandwidth towards core operations.

During FY 2025-26, the total revenue from operations stood at Rs 204.40 crore as against Rs 256 crore in the previous year. EBITDA for the year stood at Rs 56.46 crore and the net profit/(loss) after tax stood at Rs 13.38 crore. The net worth of the Company as at 31st March, 2026 stood at Rs 1037.69 crore.

The management remains firmly committed to strengthening the financial position of the Company. The immediate priorities are:

(i) faithful implementation of the debt restructuring plan and timely servicing of restructured obligations;

(ii) monetisation of non-core assets and recovery of arbitration awards, claims and retention monies;

(iii) rebuilding the order book through selective and margin-accretive bidding; and

(iv) disciplined working capital and cash flow management.

The roads and highways segment continues to be the mainstay of the Companys operations. During the year, the Company focused on completion and closure of legacy projects, settlement of claims with authorities, and preparation for re-entry into active bidding for EPC and Hybrid Annuity Mode (HAM) projects of the National Highways Authority of India (NHAI), MoRTH

(a) A large and visible pipeline of highway projects, including the PPP pipeline of about 13,400 km identified by MoRTH, expressway corridors, and state highway programmes;

(b) continued high budgetary allocation for road infrastructure and asset monetisation proceeds being recycled into new projects;

(c) growing state-level investment in irrigation and water infrastructure;

(d) increased outsourcing of mining operations by public sector undertakings; and

(e) the Companys established pre-qualifications, execution track record and experienced project teams, which position it to capitalise on these opportunities as its financial position normalises.

(a) Intense competition and aggressive bidding in the EPC space, which exerts pressure on margins;

(b) volatility in prices of key inputs such as bitumen, cement, steel and fuel;

(c) delays in land acquisition, utility shifting and receipt of clearances, which can affect project timelines; (d) delays in realisation of claims and arbitration awards; and

(e) constraints on bank guarantees and working capital limits during the transition period of the restructuring.

The outlook for the road infrastructure sector remains strong, anchored in the Governments sustained commitment to connectivity-led growth and the Vision 2047 roadmap. With the debt restructuring in place, the managements foremost objective for the coming years is the rebuilding of a healthy and sustainable order book. The Company will focus on: (i) selective bidding for road EPC projects where it enjoys established pre-qualifications; (ii) timely execution of every project undertaken, recognising that execution discipline is the foundation of profitability and client confidence; (iii) efficient cash flow management, with prudent deployment of every rupee towards execution, debt servicing and value creation; and (iv) enhancement of value for all stakeholders - shareholders, lenders, employees, clients and business partners. The management is confident that these measures, supported by the buoyant sector environment, will progressively restore the Company to a path of sustainable and profitable growth.

The Company has in place a risk management framework for identification, assessment and mitigation of risks. Key risks include financial and liquidity risk during the restructuring transition, execution and input cost risk, client concentration risk on government authorities, claims realisation risk, and regulatory and compliance risk. Mitigation measures include disciplined implementation of the restructuring plan, conservative bidding with adequate price escalation provisions, active pursuit of claims and arbitration awards, strengthening of project monitoring systems, and continuous engagement with lenders, authorities and other stakeholders.

The Company has adequate internal control systems commensurate with its size and the nature of its operations, designed to ensure the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. The internal control framework is supplemented by an internal audit programme covering key functions and project sites. The Audit Committee of the Board periodically reviews the adequacy and effectiveness of internal controls, internal audit findings and the implementation of corrective actions.

The financial performance of the Company during the year reflects the transitional phase of consolidation described above. The operational focus during the year remained on completion of ongoing works, closure of legacy contracts, settlement of claims and preservation of execution capabilities. The management believes that the operational discipline instilled during this phase, together with the restructured capital base, will translate into improved financial performance as fresh orders are secured and executed.

In accordance with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the key financial ratios of the Company, along with explanations for significant changes (i.e., change of 25% or more as compared to the immediately preceding financial year), are as under:

Sr. No. Ratio FY 2025-26 FY 2024-25 Change (%) Explanation for change of 25% or more

1 Debtors Turnover Ratio 0.52 0.21 61.81 The change is primarily attributable to the movement in revenue from operations and trade receivables during the year

2 Inventory Turnover Ratio 1.19 1.11 7.21 -

3 Current Ratio 2.55 1.07 138.19 The improvement is primarily due to a reduction in current liabilities pursuant to waiver of accrued interest on borrowings in accordance with the terms of the MRA.

4 Debt-Equity Ratio 1.01 1.16 -12.61 -

5 Net Profit Margin (%) 7.97% -59.98% 113.29 The improvement is primarily due to higher profit for the year, mainly on account of exceptional income recognised pursuant to the MRA dated March 26, 2026.

Sr. No. Ratio FY 2025-26 FY 2024-25 Change (%) Explanation for change of 25% or more 6 Return on Net Worth (%) 1.29% -18.11% -107.12 The improvement is primarily attributable to higher profit for the year, including exceptional income recognised pursuant to the Master Restructuring Agreement (MRA) dated March 26, 2026.

Details of change in Return on Net Worth as compared to the immediately preceding financial year, along with a detailed explanation thereof: The improvement is primarily attributable to higher profit for the year, including exceptional income recognised pursuant to the Master Restructuring Agreement (MRA) dated March 26, 2026.

The Company regards its human capital as its most valuable asset. Despite a challenging environment, the Company has retained a core team of experienced engineers, project managers and support staff whose expertise will be central to the execution of the Companys renewed growth plans. Industrial relations remained cordial throughout the year. As on 31st March, 2026, the Company had 128 permanent employees.

The management places on record its sincere appreciation for the cooperation and support extended by the National Highways Authority of India, the Ministry of Road Transport and Highways, state road development and irrigation authorities, and all other highway and infrastructure agencies, and looks forward to their continued cooperation. The management also thanks the lending banks and financial institutions for their support in the restructuring of the Companys debt, and the shareholders, employees, vendors and business partners for their continued confidence in the Company.

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied, since the Companys operations are influenced by various external and internal factors beyond its control, including but not limited to economic conditions, government policies and regulations, tax regimes, input prices, interest rates, and the outcome of pending claims and litigation. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events.