Sahyadri Industries Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy is currently under strain from fractured alliances, rising protectionism, and escalating geopolitical conflicts. The turmoil in West Asia has disrupted shipping lanes and supply chains, particularly affecting export flows to the Middle East and raising freight costs. Crude oil price escalation has cascaded into higher input costs across industries, intensifying inflationary pressures and weakening margins. These developments heighten the risk of stagflation, as growth momentum slows while costs continue to rise, leaving recovery prospects closely tied to energy market stabilization and the restoration of supply chain continuity.

INDIAN ECONOMIC OVERVIEW

Indias economy, while resilient, is not immune to geopolitical shocks, rising protectionism, and fractured alliances. Real GDP growth stood at 7.6% in FY25 26, supported by strong consumption and investment. However, the outlook for FY26 27 is expected to moderate, with the Reserve Bank of India projecting growth at 6.9% and the IMF at 6.5%. Elevated energy costs have translated into higher input prices across manufacturing, construction, and transport, exerting pressure on margins and inflation. Export

East have been adversely impacted by shipping disruptions and rising freight rates, while domestic industries reliant on imported raw materials are experiencing cost escalations.Despitethesechallenges,Indiasdiversifieddemand base and ongoing infrastructure investments provide a measure of resilience, though the near term outlook remains sensitive to energy market stabilization and supply chain continuity.

Source: RBI

ROOFING/CONSRUCTION INDUSTRY

The roofing and construction industry continue to operate in a challenging environment shaped by energy chain disruptions, and volatile freight costs. Elevated crude oil prices have cascaded into higher input costs for cement, steel, bitumen, and other construction materials, directly impacting project economics and margins. Shipping disruptions in West Asia have further disrupted export flows, particularly to Middle Eastern markets.

Domestic demand, however, remains resilient, supported by infrastructure investments, housing projects, and government initiatives in affordable housing. The industry is also witnessing increased adoption of fiber cement sheets and sustainable building materials, driven by cost efficiency and regulatory compliance.

While the near term outlook is clouded by inflationary pressures and supply chain risks, medium term prospects remain positive, anchored in Indias urbanization, infrastructure pipeline, and policy support. The sectors performance will hinge on stabilization of energy markets and improved logistics continuity.

THREATS, RISK AND CONCERN

The Indian roofing and construction industry face mounting challenges from energy price volatility, supply chain disruptions, and rising freight costs. In the roofing segment, manufacturers remain highly exposed to foreign exchange shocks, as raw chrysotile fibre imports priced in US Dollars cost cannot be passed to rural consumers there by compressing margins. Seasonal volatility in cement prices adds procurement risk, though domestic overcapacity provides partial insulation. The India Meteorological Departments projection of a below normal 2026 southwest monsoon at 90% of the Long Period Average the weakest in over a decade poses a significant threat to rural roofing demand. Meanwhile, logistical costs are surging with mandatory War Risk and Emergency Conflict surcharges imposed by shipping lines, and global export restrictions on rare earth minerals have spiked the price of critical industrial consumables such as specialised cutters. Together, these pressures heighten inflationary risks, erode competitiveness, and intensify liquidity concerns, leaving the industrys near term outlook sensitive to energy market stabilization, regulatory developments, and rural demand trends.

APPROACH TO OVERCOME THE THREATS:

To counter the challenges facing the roofing and construction industry, we are focusing on operational and energy conservation to offset the impact of crude oil price escalation. At the same time, increasing awareness and delivering high quality products are being prioritized to strengthen brand trust. We are also enhancing their ability to identify credit risk early, supported by market intelligence and competitor studies to refine pricing strategies based on what target markets are willing to pay for comparable quality. Product innovation and alternate solutions are being developed to cushion rural demand risks from a weak monsoon, while expansion into urban housing and infrastructure projects helps balance seasonal volatility. Collectively, these measures aim to safeguard margins, maintain competitiveness, and build resilience against external shocks.

EXPANSION PLAN:

Building on our strong market leadership in Western India and an established presence in the South, we are strategically expanding our domestic footprint. This includes a new manufacturing facility in Maharashtra to reinforce our Western operations, alongside upcoming facilities tailored to serve the Eastern states. Concurrently, we are scaling our global reach by accelerating exports and penetrating new international markets.

OPERATIONAL PERFORMANCE:

Operational performance of the Company for the Year 2025-26 is explained in detail in Board of Directors Report of the Company.

FINANCIAL OVERVIEW:

KEY FINANCIAL RATIOS APPLICABLE TO THE COMPANY

Sr. No. Financial Ratios	FY 2025-26	FY 2024-25	% Change	Reason for Significant changes i.e. change of 25% or more as compared to FY 2024-25
1 Debtors Turnover Ratio	17.58 times	17.18 times	2.34%	NA*
2 Inventory Turnover Ratio	1.90 times	1.47 times	29.32%	Reduction in inventory levels
3 Debt Service Coverage Ratio	3.41 times	0.76 times	349.96%	Repayment of Loan and Improve- ment in margin
4 Current Ratio	2.49 times	1.99 times	25.18%	Repayment of Loan
5 Operating Profit Margin	43.83%	44.38%	(1.22%)	NA*
6 Net Profit Margin	4.27%	3.21%	32.91%	Improvement in margin
7 Debt Equity	0.04 times	0.21 times	(80.29%)	Repayment of Loan

*Not being significant change.

RESEARCH AND DEVELOPMENT (R&D):

At Sahyadri, we continuously working to enhance our existing portfolio while developing innovative market solutions. By strengthening our R&D capabilities and utilizing advanced manufacturing technologies, we consistently drive growth and efficiency. Our well-equipped R&D department combines skilled talent with advanced tools to transform new ideas into profitable, scalable processes. Committed to continuous improvement and customer value, our dedicated team focuses on product upgrades, raw material optimization, and eco-friendly development, resulting in multiple successfully patented products and processes in India

CORPORATE SOCIAL RESPONSIBILITY (CSR):

Sahyadri Industries Limited is committed to improving the lives of people by empowering communities and creating sustainable impact in the areas in which it operates. It undertakes its CSR initiatives either directly or in association with external NGOs, Trusts, etc. to bring expertise and strength to ensure a larger and sustainable impact.

During the year, Board has undertaken various activities under the constructive framework of its CSR Policy designed as per Schedule VII of the Companies Act, 2013. Key highlights of activities undertaken during the year are as follows.

1. Digital Classroom Project

In collaboration with the Rotary Club, your Company proudly drives Project Saksham, an impactful initiative aimed at digitalizing rural education through interactive e-learning kits. By leveraging animated graphics, these tools make complex topics engaging and accessible for students. In FY 2025 26, the project scaled significantly with the installation of 120 e-learning kits across 101 schools in Maharashtra, directly benefiting approximately 25,164 children. In recognition of this outstanding commitment to community welfare and social responsibility, your Company was honored with the prestigious ESG CSR Award & Summit 2026 by the Rotary Club.

2. Sports Scholarship Programs

Your Company is a proud patron of Lakshya Institute, a Rashtriya Khel Protsahan Puraskar-winning sports NGO dedicated to identifying, nurturing, and elevating budding athletic talent for national and international success. In FY 2025–26, this partnership successfully empowered high-performing athletes to reach significant competitive milestones: Kunal Ghorpade the Gold Medal in the 75 Kg category at the Maharashtra Boxing Championship. Sneha Soren (Weightlifting): Clinched the Gold Medal in the 53 Kg category at the Odisha Weightlifting Championship. Shravani Lavhate (Wrestling): Selected for the Senior 50 Kg National Championship selection trials.

3. Provide Food and Medical Assistance to the Less Privileged

Your Company proudly collaborates with the Purna Vidya Trust, an organization dedicated to transforming lives through underprivileged student education, free tutoring, and value-based cultural study programs across schools, colleges, villages, and local communities. In line with our commitment to community welfare, your Company directly supported the Trusts nutritional initiatives, providing essential meals to students and vulnerable families in neighboring villages.

4. Construction of sports facility

Your Company proudly contributed to the landmark sports and recreational complex project spearheaded by the Shree Poona Gujarati Bandhu Samaj. This state-of-the-art facility will provide premium infrastructure for multiple sporting disciplines, including badminton, squash, tennis, pickleball, table tennis, and billiards. By establishing professional-grade training spaces, the initiative aims to cultivate a robust sporting culture and inspire long-term fitness and athletic passion among regional youth.

5. Yoga and Naturopathy treatment

Your Company proudly contributed to the Shree Narayan Dham Care Group, a pioneering leader in alternative medicine recognized for its exceptional propagation of Naturopathy and Ayurveda. Our financial support was directed toward the repair and structural upgrade of the additional Yoga and Naturopathy treatment section at their facility in Narayanpur, Pune. Through this infrastructure investment, your Company continues to promote holistic wellness and improve access to traditional healthcare systems.

HUMAN RESOURCES:

Sahyadri views its dedicated, motivated workforce as its greatest asset. We cultivate an empowering workplace where employees are provided with competitive compensation, a healthy environment, and the opportunity to realize their full potential. To foster creative thinking and continuous learning, the company actively encourages team members to undertake voluntary projects outside their standard scope of work. This people-first culture ensures we maintain consistently cordial and collaborative relationships with all staff and workers.

As on March 31, 2026, there were 784 permanent employees on the payroll of the Company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Sahyadri Industries maintains a robust internal control system tailored to its organizational scale and operational complexity. To support business expansion and ensure strict compliance with legal obligations and corporate policies, the Company regularly conducts comprehensive reviews of its internal frameworks. This structured approach delivers high-level, system-based checks and continuous performance monitoring.

Furthermore, an independent agency independently audits the Companys internal controls. The Audit Committee chaired by a Non-Executive Independent Director reviews all auditor recommendations and oversees their implementation. Audit findings and corresponding management action plans are presented quarterly to the Committee. Following its latest evaluation, the Audit Committee confirmed that the Companys internal financial controls were adequate and operating effectively as of March 31, 2026.

CHANGE IN RETURN OR NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH DETAIL EXPLANATION THEREOF:

As at March 31, 2026, Net Worth of Sahyadri Industries Limited is Rs. 406.09 Crores as compared to Rs. 378.29 Crores in the previous year. Change in Net Worth is due to profit earned during the year net of dividend paid.

CAUTIONARY STATEMENT:

Certain Statements in Management Discussion and Analysis Report describing the Companys views about Industry, objectives, projections, estimates and expectation etc. may be considered as ‘forward looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement. The Companys operations may be affected with supply and demand situation, input prices and their availability, changes in Government regulations, tax laws and other factors such as Industrial relations and economic developments etc. These statements are not expected to be updated or revised to take care of any changes in the underlying presumptions.