Sangal Papers Ltd Management Discussions

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

Sangal Papers Limited (hereinafter referred to as the Company) was incorporated in the year 1980 and has its registered office in the State of Uttar Pradesh. The Company is engaged in the manufacture of newsprint, writing and printing paper, kraft paper, and a wide range of coloured and speciality paper for domestic as well as international markets. The Companys products are tailored to meet the diverse and evolving requirements of its customers while maintaining high standards of quality and operational excellence.

The following discussion provides an overview of the Companys business environment, industry developments, operational and financial performance, opportunities, risks, internal control systems, and future outlook for the financial year ended 31 st March 2026 .

A) INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian paper industry is expected to grow at an annual rate of approximately 6% to 7%, with overall demand projected to reach around 30 million tonnes by FY 2026-27, according to the Indian Paper Manufacturers Association (IPMA).

However, the past financial year was a very challenging one on a global scale. The industry had to deal with intense geopolitical situations, aggressive import tariffs, and volatile currency values. For companies that trade across borders, these global conditions made international shipping, logistics, and raw materials significantly more expensive.

Despite these infrastructure and geopolitical hurdles, baseline demand across various segments of the Indian Paper Industry remains highly resilient. There is a clear market shift toward higher-quality, ecofriendly products as a promising substitute since the government has banned single-use plastics. This shift is expected to create significant growth opportunities. To meet this growth safely, paper mills must focus on factory capacity upgrades, quality improvements, and low-cost energy solutions.

B) OPPORTUNITIES AND THREATS

The Company has established a strong market presence and enjoys long-standing relationships with its customers in both domestic and export markets.

Our best operational practice relies on a flexible, eco-friendly sourcing model. Since we are an FSC Certified company making sustainable products, we reduce reliance on virgin pulp. We strategically balance our fiber supply chain by mixing imported waste paper with domestic waste paper depending on international market pricing. Furthermore, to protect our margins from volatile global energy prices, our manufacturing operations rely heavily on cost-effective, local agro-based fuels. This sustainable energy strategy reduces dependence on conventional fossil fuels while supporting cost efficiency and environmental sustainability.

Global Setback & Margin Pressures

Global trade volatility, including geopolitical tensions and new tariffs, combined with a weakened local currency, significantly increased import costs for foreign raw materials. Due to high price sensitivity in the market and limited pricing power, the company was forced to absorb these expenses, resulting in reduced profit margins.

CAPEX and Technology Challenges

Manufacturing paper requires massive volumes of water and electricity. To control emissions and lower production costs, factories require continuous upgrades and heavy investments in Capital Expenditure (CAPEX). This remains an ongoing challenge for small-scale manufacturers in a price-sensitive market. Government support-such as energy incentives, stabilization of raw material trade, and improved supply chain systems-is vital to helping the industry stay sustainable and competitive.

C) SEGMENT REPORTING

Sangal Papers Limited operates in a single business segment: the manufacturing and sale of paper.

In our geographic segment, we successfully maintain a balanced mix of domestic commerce and global trade. The Company serves customers across India and exports its products to various international markets, including Sri Lanka, Singapore, Nepal, Iran, the United Arab Emirates, and other countries.

D) OUTLOOK AND FUTURE PROSPECTS

The Indian paper industry is expected to maintain steady long-term growth, supported by increasing demand from the education, packaging, publishing, and industrial sectors. The industry is a significant contributor to employment, providing livelihoods to approximately 5 lakh people directly and 15 lakh people indirectly.

The paper industry broadly comprises the following segments:

1. Printing and Writing Paper - This segment caters to textbooks, notebooks, office stationery, and educational publications. Demand is expected to remain stable, supported by increasing literacy levels and continued Government initiatives in the education sector.

2. Packaging Paper -This is the fastest-growing segment of the industry, driven by increasing demand from the FMCG, food processing, pharmaceutical, and e-commerce sectors, as well as the growing preference for sustainable packaging solutions.

3. Newsprint - This segment primarily serves newspapers and magazines and continues to face challenges due to the increasing adoption of digital media and competition from duty-free imports.

During the financial year, the Company successfully completed a major modernization and capacity expansion program through the installation and commissioning of a new 4.5 MW high-efficiency co-

generation turbine, replacing the existing 3 MW turbine, along with the upgradation of key manufacturing equipment.

Consequent to the expansion, the Companys installed manufacturing capacity has increased from 33,000 Metric Tons per annum to 66,000 Metric Tons (MT) per annum. The enhanced capacity is expected to improve operational efficiency, strengthen energy optimization, provide greater operational flexibility, and enable the Company to better serve the growing demand in both domestic and export markets. As the expanded facilities commenced operations towards the end of the financial year, the full operational and financial benefits are expected to be realized during the financial year 2026-27, subject to prevailing market and economic conditions.

The Company remains focused on enhancing operational efficiency, expanding its market presence, strengthening customer relationships, and pursuing sustainable growth while creating long-term value for all stakeholders.

E) INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

The Company identifies a risk-based internal audit scope and assesses the inherent risk in the processes and activities of the departments within the company. This ensures that appropriate risk management limits, internal control mechanisms, and mitigation strategies are in place.

There is periodical review of the adequacy and effectiveness of internal financial controls, compliance with applicable laws, accounting procedures, and established policies. The observations and recommendations are reviewed by the Audit Committee, which monitors the implementation of corrective actions to strengthen the Companys control environment.

F) FINANCIAL PERFORMANCE & KEY FINANCIAL RATIOS

1. Share Capital Structure (Funds)

• Authorized Capital: 70,00,000 shares of Rs. 10 each = Rs. 7,00,00,000

• Issued, Subscribed, and Paid-up Capital: 13,07,260 shares of Rs. 10 each = Rs. 1,30,72,600

• There is no change in the Capital Structure during the financial year.

2. Other Equity Funds

• Revaluation Reserve: Rs. 48.56 lakhs (No change)

• Retained Earnings (Balance Carried Forward): Increased from ^4,303.54 lakhs as at 31 March 2025 to ^4,542.49 lakhs as at 31 March 2026, primarily on account of the Total Comprehensive Income of ^238.95 lakhs earned during the year, representing an increase of 5.55% over the previous year and strengthening the Companys net worth.

3. Summary of Financial Performance (Rupees in Lakhs)

Particulars	Financial Year (2025-26)	Financial Year (2024-25)	% Increase / % Decrease (-)
Turnover (Revenue from Operations)	17,933.91	18,027.07	-0.52%
Profit before Depreciation, Finance Costs, Exceptional items and Tax Expense	751.45	845.03	-11.07%
Profit Before Tax (PBT)	331.22	400.09	-17.21%
Profit After Tax (PAT / Net Profit)	236.74	282.58	-16.22%
Total Comprehensive Income	238.95	278.68	-14.26%
Earnings Per Share (EPS) (in Rs.)	18.11	21.62	-16.23%

4.Details of Significant Changes in Key Financial Ratios

It may be noted that none of the key financial ratios recorded a variation of 25% or more over the previous financial year requiring additional explanation under Schedule V of the SEBI (LODR) Regulations, 2015.

Sr. No.		Key Financial Ratio	Unit		FY 2025 26	FY 2024 25		Variance %	Remarks / Reason for Change (<25%)
1		Debtor Turnover	Days		7.05	6.96		1.29%	Maintained within regular operational limits.
2		Inventory Turnover	Days		7.91	7.87		0.51%	Consistent with manufacturing cycles.
3		Debt Service Coverage Ratio	Times		2.00	1.98		1.01%	Liquidity position remained stable during the year.
4		Current Ratio	Times		1.50	1.60		-6.25%	Healthy liquidity position maintained.
5		Debt Equity Ratio	Times		0.69	0.63		9.52%	Increase due to addition of borrowings for capital expenditure.
6	Operating Profit Margin			%	2.97%		3.28%	-9.45%	Margins were impacted by the increase in raw material costs and geo-political factors.
7	Net Profit Margin			%	1.32%		1.57%	-15.92%	Impacted by foreign exchange fluctuations and challenging macroeconomic conditions
8	Return on Net Worth (RONW)			%	5.11%		6.28%	-18.63%	Aligned with current year profitability variations.

G) HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS

As on 31 March 2026, the Company had 213 permanent employees on its rolls. The Company continued to focus on employee welfare, occupational health and safety, skill development, and maintaining harmonious industrial relations throughout the year.

CAUTIONARY STATEMENT

Statements made in this Management Discussion and Analysis Report describing the Companys objectives, expectations, estimates, or projections may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various factors including changes in economic conditions, government policies, raw material prices, foreign exchange fluctuations, market demand, competitive conditions, and other factors beyond the Companys control. The Company undertakes no obligation to publicly update any forwardlooking statements except as required under applicable laws.

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For and on behalf of the Board of Directors
For Sangal Papers Limited
Date: 13/08/2026	Amit Sangal	Himanshu Sangal
Place: Mawana	Whole Time Director/CFO	Managing Director
	DIN-00091486	DIN - 00091324

D. K GUPTA & CO.

(Company Secretaries)

CERTIFICATE OF NON-DISQUALIFICATION OF DIRECTORS (Pursuant to Regulation 34(3) and Schedule V Para C clause (10)(i) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015)

To,

The Members,

SANGAL PAPERS LIMITED,

CIN: L21015UP1980PLC005138

Reg. Office: Vill. Bhainsa, 22km stone Meerut-Mawana Road, Mawana, Meerut, UP- 250401

I have examined the relevant registers, records, forms, returns and disclosures received from the Directors of Sangal Papers Limited having CIN: L21015UP1980PLC005138 and having registered office at Vill. Bhainsa, 22km stone, Meerut-Mawana Road, Mawana, Meerut, UP (hereinafter referred to as the Company), produced before me by the Company for the purpose of issuing this Certificate, in accordance with Regulation 34(3) read with Schedule V Para-C Sub clause 10(i) of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

In my opinion and to the best of my information and according to the verifications (including Directors Identification Number (DIN) status at the portal www.mca.gov.in) as considered necessary and explanations furnished to me by the Company & its officers, I hereby certify that none of the Directors on the Board of the Company as stated below for the Financial Year ending on 31 st March, 2026 have been debarred or disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India, Ministry of Corporate Affairs, or any such other Statutory Authority.

Sr. No.	Name of Director	DIN	Date of appointment in Company	Date of Cessation
1.	HIMANSHU SANGAL	00091324	25/11/1980
2.	AMIT SANGAL	00091486	27/09/1996
3.	TANMAY SANGAL	01297057	30/11/2003
4.	VINAYAK SANGAL	06833351	01/03/2014
5.	SAPAN SODHI	10178992	27/05/2023
6.	VARTIKA MALIK	00687839	27/05/2023

Ensuring the eligibility for the appointment/continuity of every Director on the Board is the responsibility of the management of the Company. Our responsibility is to express an opinion on these based on our verification. This certificate is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

for D. K. GUPTA & CO.

(Company Secretaries)

DINESH KUMAR GUPTA

(Proprietor)

C. P. No. 3599 M. No. F-5226

Peer Review Certificate no. 1993/ 2022

Place: Meerut Date: 13 th August 2026

ICSI UDIN: F005226H001097471 dated 13 th August 2026

Address: 164, Civil Lines, Behind Baijal Bhawan, Meerut - 250002, Uttar Pradesh, India

Mob: +91-9997773884, 9557089388 E-mail dkgupta08@yahoo.co.in