Salzer Electronics Ltd Management Discussions

In compliance with Regulation 34(3) read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report for the year ended March 31, 2026, is presented below

A. Industry structure and developments

i. Global Economic Overview

The global macroeconomic landscape during fiscal year 2025-26 was defined by a delicate balancing act between divergent economic forces. According to the International Monetary Fund (IMF) World Economic Outlook updated in January 2026, the global economy has shown remarkable resilience, adapting to shifting trade policies and geopolitical tensions. Global GDP growth is projected to remain steady at approximately 3.3% in 2026, maintaining the pace established in 2025. This stability has been largely supported by surging investments in technology-led sectors, particularly in artificial intelligence (AI) and digital infrastructure, which have partially offset the slowdown in traditional industrial manufacturing.

Inflationary trends have continued their downward trajectory globally, with headline inflation expected to decline to 3.8% in 2026 from 4.1% in the previous year This disinflation process is being aided by softening commodity prices and improved supply-side conditions, though the return to target levels remains gradual in advanced economies. Central banks in major jurisdictions, including the United Kingdom and the United States, have begun a calibrated decline in policy rates, whereas the Eurozone has maintained a more cautious stance due to unresolved structural constraints and energy-related pressures.

The external environment was further complicated by the emergence of high-frequency trade policy shifts. A defining feature of the year was the reset in trade relations between major economies, specifically the US and its trading partners. For Salzer Electronics, the volatility of US tariff structures remained a primary concern throughout much of the fiscal year until the breakthrough interim trade agreement between India and the United States in February 2026. This agreement, which slashed tariffs from a punitive 50% down to 18%, provided immediate relief to Indian machinery and electrical exporters, restoring their price competitiveness in the North American market.

Despite these positive developments, the global outlook remains tilted to the downside. Geopolitical tensions in the Middle East have periodically disrupted critical commercial shipping routes, including the Strait of Hormuz, causing sudden spikes in energy costs and industrial commodities like aluminium and sugar. These disruptions create logistical challenges, as

delivery timelines become less predictable and shipping lines impose conflict surcharges, which are subsequently passed through the supply chain.

ii. Indian Economic Outlook

The Indian economy continued its trajectory as a global outperformer during the 2025-26 period, with real GDP growth estimated at 7.60%. This robust performance was driven by a powerful combination of resilient domestic consumption, sustained public capital expenditure, and a revival in manufacturing activity supported by government policy. The Reserve Bank of India (RBI) has maintained a ‘wait and watch approach, holding the repo rate at 5.25% in early 2026 to balance the needs of economic growth against the risks of rising energy and commodity prices.

The Union Budget for 2026-27 reinforced the governments focus on infrastructure as a multiplier for economic activity, allocating a record 12.2 lakh crore for public capital expenditure. This marks a significant increase from the 11.1 lakh crore allocated in the previous fiscal year, with specific focus areas including railway modernization, highway expansion, and green energy corridors. Furthermore, the National Manufacturing Mission was launched with an emphasis on clean technology, EV batteries, and high-voltage transmission equipment — sectors that align perfectly with Salzers core expertise.

A pivotal development for Indian exporters was the India-US trade agreement finalized in early 2026. This agreement reduced tariffs on Indian machinery exports from a projected ad valorem rate of 50% down to 18%, effectively lifting an overhang that had constrained international order flows for much of the year The agreement also scrapped tariffs entirely for Generic Pharmaceuticals and certain aircraft parts, signaling a broader reset in trade ties that is expected to boost Indias external sector.

Domestic demand remained buoyant, particularly in the urban housing and commercial real estate sectors, which saw a 23% rise in residential project launches in 2025. The expansion of 5G infrastructure and the massive buildup of data centers across major cities have created a secondary wave of demand for high-reliability electrical components. While rural demand showed signs of recovery on the back of favorable agricultural output, the economy faced headwinds from a sharp spike in crude oil prices due to regional conflicts in the Middle East, which imported terms-of-trade shocks and pressured the rupee.

iii. Industry Structure and Developments

The electrical equipment industry in India, valued at approximately USD 21 billion, is a critical

component of the nations infrastructure backbone. The industry is segmented into power generation, transmission, and distribution, with sub-segments including switchgear, transformers, wires and cables, and smart meters.

a. Global and Indian Switchgear Industry

The global switchgear market was valued at USD 182 billion in 2026 and is projected to reach USD 336.2 billion by 2035, growing at a CAGR of 7.1%. This growth is being driven by the relentless push for energy efficiency, grid modernization, and the increasing integration of renewable energy sources into the global energy mix. Advanced technologies like AI, IoT, and digital monitoring are becoming standard in new installations, allowing for predictive maintenance and enhanced grid stability.

In India, the switchgear market reached a size of approximately USD 11.3 billion in 2025 and is estimated to grow at a CAGR of 5.88% through 2034. Low-voltage (LV) switchgear remains the dominant segment with a 46% market share, fueled by residential construction, smart city initiatives, and the ongoing electrification of rural areas. Air-insulated switchgear (AIS) leads the market with a 51% share due to its cost-effectiveness, although Gas-insulated switchgear (GIS) is gaining traction in urban metropolitan areas where space is a constraint.

The industry is also at a pivotal crossroads regarding environmental sustainability. The extensive use of sulphur hexafluoride (SF6) as an insulating medium, which has a high global-warming potential, is drawing increased regulatory scrutiny. This has created a lucrative market opportunity for ‘eco-efficient SF6-free models, a trend that Salzer is well-positioned to capitalize on through its ongoing R&D efforts in modular enclosures and isolators.

b. Wires and Cables Industry

The wires and cables segment accounts for nearly 40% of Indias electrical equipment market and is projected to grow to 1.5 lakh crore by the end of FY 2025-26. The sector witnessed a growth rate of 15-16% in FY26, supported by infrastructure expansion, housing demand, and the rising adoption of branded, certified cables over unorganized alternatives.

A significant trend in this segment is the shift toward organized players, who now control nearly 78% of the market, up from 45% in 2018. Consumers are increasingly prioritizing safety certifications like FRLS (Flame Retardant Low Smoke) and BIS, particularly as fire safety norms become more stringent. However, the industry is highly sensitive to copper price volatility. During the third quarter of FY26, copper prices spiked from 800 to 1,300 per kilogram, compressing margins for manufacturers and necessitating agile pricing strategies.

c. Smart Metering and RDSS

The Revamped Distribution Sector Scheme (RDSS), with a total sanctioned cost of 2.83 lakh crore, represents the most sig nificant modernization effort in Indias power distribution history. The scheme aims to install 250 million smart energy meters to improve billing efficiency and reduce AT&C losses, which have already improved from 21.9% in FY21 to 15.04% in FY25.

As of December 31,2025, over 3.90 crore smart meters have been installed under RDSS, with a total of 5.28 crore meters installed nationwide across all schemes. While the rollout speed has been slower than initially anticipated due to AMISP field coordination and infrastructure readiness, the volume of awarded projects remains immense, with 150.2 million meters already awarded as of February 2026. Due to the slow pace of installation, the Government has extended the target date for installation of approximately 25 Crore Smart Meters from March 31,2026 to March 31,2028

d. Data Centre Infrastructure

Indias data centre sector is undergoing rapid expansion, with installed capacity expected to exceed 1,700 MW in 2026, supported by substantial investments from global hyperscalers and domestic players, favourable data-localisation requirements, 5G rollout, and increasing adoption of AI-driven digital infrastructure. This growth is expected to significantly increase demand for reliable power distribution equipment, transformers, control panels, and high-performance cabling. With its established portfolio of toroidal transformers, control panels, and specialised cables, Salzer is well positioned to capitalise on these opportunities and strengthen its presence in the fast-growing data centre ecosystem.

e. Railway Modernization

Indian Railways, the worlds fourth-largest rail network, has electrified approximately 69,744 route kilometres—about 99.4% of its broad-gauge network as of January 2026—compared with an average electrification pace of about 1.4 km per day during 2004-14, which accelerated to over 15 km per day during 2019-25. Coupled with the rollout of indigenous Vande Bharat trains and semihigh-speed sleeper services, this transformation is driving sustained demand for high-voltage safety equipment and specialised locomotive switching solutions. As the leading supplier of specialised rotary switches to Indian Railways and the holder of a patented disconnecting and earthing device for high-voltage applications, Salzer is exceptionally well positioned to capitalise on the opportunities arising from this modernisation Programme.

f. Charging Stations

Indias electric mobility transition accelerated further in FY 2025-26, with EV retail sales exceeding 2.4 million units, up from approximately 2.0 million units in FY 2024-25. Supported by favourable policies, falling battery costs, and rapid charging-infrastructure deployment, EV penetration is expected to rise steadily, in line with the national objective of achieving approximately 30% of new vehicle sales by 2030. This growth is driving strong demand for reliable DC fast-charging equipment and the associated switchgear, protection, control, and energy- management systems. Leveraging its expertise in these areas and its strategic participation in the EV charging ecosystem, Salzer is well positioned to secure a meaningful share of this expanding ma rket and contribute to the development of Indias sustainable mobility infrastructure.

B. Opportunities and Threats.

i. Opportunities

Salzer is well positioned to benefit from the growing demand arising from power transmission and distribution, railway modernisation, smart metering, renewable energy, electric vehicle charging infrastructure, and the rapid expansion of data centres. Its diversified product portfolio, strong manufacturing base, established relationships with OEMs and utilities, and continued focus on innovation and indigenisation provide a solid platform for sustainable growth and market share expansion.

ii. Threats

Salzer faces risks from volatility in copper and other key raw material prices, intense competition from both domestic and international manufacturers, supply chain disruptions, and delays in customer projects or government tenders. Rapid technological advancements and evolving quality and compliance requirements

also necessitate continuous investment in research and development to maintain the Companys competitive position and profitability.

C. Segment-wise performance.

Salzer manufactures and markets its products under the Electrical and Electronics segment. For a more meaningful analysis of performance and discussion of business developments, the Companys product portfolio is classified into the following three categories:

1. Industrial Switchgear

2. Wires and Cables and

3. Building Products

a. Industrial Switchgear Segment

Salzers Industrial Switchgear segment is the cornerstone of the Companys operations and encompasses a broad portfolio of Cam operated Rotary Switches, Load Break Switches, Toroidal Transformers, Three Phase Dry Type Transformers, Wire Harness, Motor Protection Circuit Breakers etc. serving industrial, infrastructure, utility, transportation, and building applications. Anchored by its leadership in cam-operated rotary switches and a strong position in wire ducts and related switchgear products, the segment benefits from Salzers extensive in-house manufacturing capabilities, well-established distribution network, and longstanding relationships with leading OEMs and institutional customers, including Indian Railways. Continued investments in R&D, product innovation, and import substitution have enabled the Company to expand into higher- value applications such as smart metering, EV charging infrastructure, renewable energy, data centres, and high-voltage safety solutions. Supported by favourable macroeconomic trends— including industrial automation, electrification, railway modernisation, and digital infrastructure growth—the Industrial Switchgear segment remains well positioned to sustain its leadership and drive long-term growth for the Company.

The largest and most mature vertical, Industrial Switchgear, contributed 56% to the standalone FY26 revenue. The division reported revenue of 960 crore for the full year, a 20% growth driven by strong demand from industrial automation, railway electrification, and the renewable energy sector The segment maintained an EBITDA margin of approximately 11%, benefiting from its established OEM relationships and premium product mix with approximately 60% of the product mix comprising complex, high-value products.

The division commenced operations in 1985 and now serves both domestic and significant export markets. All products carry the necessary international certifications including UL, CSA, Intertek Semko, and CE.

b. Wires and Cables Division

The Wires and Cables segment contributed 39% to total standalone revenue, reporting Rs.684 crore for FY26. The division delivered 30% revenue growth for the full year FY26, reflecting sustained domestic traction in real estate and infrastructure sectors. However, margins in this segment were constrained to approximately 5% d ue to unpreced ented spikes in copper prices. The company is targeting a scale-up in volumes and calibrated price increases to achieve a 6.5% long-term EBITDA margin for this division.

The divisions product portfolio includes wires and cables, flexible busbars, enameled wires, bunched conductors and tinned wires. Schneider plays a major role in the off-take. This vertical commenced approximately 17 years ago and is primarily focused on the domestic market, though export demand is growing alongside global electrification trends.

c. Building Electrical Products

Contributing 5% to Standalone Revenue, the Building Products segment recorded 16% growth in FY26. Salzer has begun repositioning this vertical through geographical expansion, securing its first order from the Australian market during the year Efforts are underway to enhance product aesthetics and expand the product range and SKU portfolio to capture the growing premium switch market in India.

The divisions range includes modular switches (the primary driver), wires, cables, changeovers, and MCBs. Specialty products such as motion sensor, programmable timers, remote switches, and touch switches add differentiation. Silver- nickel contacts, anti-spark shields, and high- grade engineering plastics underscore the quality positioning.

Other developing Business

a. Smart Energy Business (Smart Meters)

During FY26, the Company executed smart meter orders aggregating approximately 45 crore. The company continues to engage with multiple AMISPs and is optimistic about securing larger volumes in FY27 as the RDSS rollout accelerates. Salzer remains a reliable partner for AMISPs under the RDSS program, with its Coimbatore facility fully operational at 4 million meters per annum capacity and Wirepas RF mesh technology integration.

b. Energy Management Services (EMS)

The EMS segment is centred around the landmark 192 crore BBMP street lighting project in Bengaluru. While execution began in FY25, the project is structured on a Performance-Based Contracting model, with recurring revenues expected to flow through the SPV Effilume Private Limited from Q2 FY27 (July-August 2026) at a

steady monthly run rate of 2.25 crore, creating recurring revenue visibility over an 84-month cycle.

D. Outlook

The Company has navigated the challenges arising from elevated US tariffs and is positioned to strengthen its international export momentum and is now poised to regain its momentum in international exports. The core Industrial Switchgear business remains the primary engine of growth, supported by near-universal rail electrification and the burgeoning data center market in India.

In the Smart Energy segment, the company remains optimistic about the long-term potential of RDSS, having validated its technology and manufacturing readiness. While the pace of smart meter deployment has been lower than expected, the awarded volumes remain significant, and Salzer is ready to participate as field-level coordination improves. The Companys entry into Energy Management Services through the BBMP project provides a replicable model for other urban bodies, creating recurring revenue visibility over an 84-month cycle.

Strategically, the expected commencement of commercial production in Saudi Arabia in the latter part of Q2 FY27 or the early part of Q3 FY27 will mark a new chapter in Salzers global expansion, allowing the group to capture long-term infrastructure demand across the Middle East. With a robust product pipeline, including new temperature sensors and mesh- integrated smart meters, and a relentless focus on operational excellence, Salzer is well- positioned to deliver sustaina ble and inclusive growth for all its stakeholders in the years ahead.

E. Internal control systems and their adequacy.

Salzer Electronics Limited has established a robust internal financial control framework designed to ensure operational efficiency, safeguard assets, maintain the accuracy and reliability of financial reporting, and ensure compliance with applicable laws and regulations. The effectiveness of these controls is subject to periodic review by the Audit Committee, while ongoing automation and process enhancements continue to strengthen and formalize the Companys control environment and operating policies.

F. Human Capital and Industrial Relations

Salzer views its human capital as a key driver of sustainable growth. As of March 31, 2025, the company had over 924 permanent employees, with a remarkably inclusive workforce comprising 48% women. This high gender diversity reflects Salzers commitment to providing technical and production roles to women in local rural areas.

In FY 2025-26, the company continued its investment in talent development through

structured training progra ms focused on

safety, technical skill-building, and leadership. Industrial relations remained cordial across all manufacturing units, with transparent communication channels and strict adherence to labor laws. The Nomination and Remuneration

Committee, chaired by an Independent Director, oversees the companys policies regarding the appointment and remuneration of Directors and Key Managerial Personnel.

As of March 31, 2026, the Company had 955 employees on rolls (full-year figure pending). The workforce reflects a balanced mix of experienced technical personnel and young engineering talent.

G. Principal Risks and Mitigation Approach

Salzer Electronics recognizes that identifying and mitigating risks is essential for organizational resilience.

H. Standalone Financial Performance with respect to operational performance

I. Movement in Key Ratios

*Owing to a 2% increase in consumption costs in FY26 and the exceptional gain of Rs.15.18 Cr recognized in FY25, net profit for FY26 declined, resulting in a lower net profit margin and a corresponding reduction in the return on net worth

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, and expectations may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could affect the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the India and overseas markets in which the Company operates, changes in Government Regulations, Tax Laws, and Other Statutes, and incidental factors.