Satia Industries Ltd Management Discussions

Economic Overview Global Economy

The global economy in FY 2025-26 remained resilient despite heightened geopolitical tensions, ongoing trade policy uncertainty and volatility in energy and commodity markets. Economic activity was impacted by disruptions to global supply chains and shipping routes following the escalation of conflict in West Asia during the second half of the year, contributing to higher freight and fuel costs and increased uncertainty across international markets. The International Monetary Fund (IMF), in its April 2026 World Economic Outlook, projected global growth at 3.1% in 2026, reflecting the economys ability to withstand external shocks while remaining exposed to significant risks.

Global inflation moderated from the elevated levels witnessed in recent years, although price pressures persisted in several regions due to energy market fluctuations, geopolitical developments and trade- related disruptions. Financial conditions remained relatively tight in major economies, while governments and central banks continued to balance growth objectives with price stability concerns. Against this backdrop, global economic growth remained uneven across regions, with demand conditions, trade flows and investment activity varying significantly across markets.

Outlook

The global economic outlook remains cautiously positive, with the IMF expecting modest improvement in growth to 3.2% in 2027. However, downside risks continue to outweigh upside potential and include a prolonged or broader geopolitical conflict, renewed trade barriers, persistent inflationary pressures, tighter financial conditions and increased market volatility. Asa result, the global economy is expected to remain resilient but operate within an environment of elevated uncertainty, requiring continued policy support, international cooperation and adaptability across businesses and markets.

Indian Economy

Against the backdrop of a volatile global environment, India continued to stand out as one of the fastest-

growing major economies during FY 2025-26. While several economies grappled with slower growth, trade disruptions and geopolitical uncertainties, Indias growth remained supported by resilient domestic consumption, sustained public infrastructure spending, healthy services sector activity and a gradual improvement in manufacturing. The International Monetary Fund (IMF) estimated Indias growth at around 6.3% during the year, significantly ahead of the global growth rate. This resilience reinfo-ced Indias position as an important contributor to global economic growth.

The countrys economic momentum was supported by continued government focus on infrastructure development, logistics improvement, manufacturing competitiveness and investment-led growth. Capital expenditure on roads, railways, ports, power infrastructure and industrial corridors continued to support economic activity, while ongoing policy initiatives aimed at strengthening domestic manufacturing and reducing supply-chain vulnerabilities encouraged investment across sectors. Rising urbanisation, improving formalisation of the economy and increasing consumption also continued to support medium-term growth prospects.

Key Economic Factors Influencing Manufacturing Activity

Infrastructure and Logistics

Indias continued investment in transport, logistics and industrial infrastructure remained an important positive for the manufacturing sector. Improvements in road connectivity, freight movement, port infrastructure and warehousing efficiency have the potential to reduce logistics costs, improve supply- chain reliability and enhance competitveness for domestic manufacturers over the long term, [mdiabudget.gov.in], [ibef.org]

Commodity and Energy Prices

While domestic growth remained resilient, businesses continued to operate against a backdrop of volatility in global energy, commodity and freight markets. Developments in West Asia during FY 2025-26 led to periodic fluctuations in fuel prices and international

shipping costs, highlighting the continued sensitivity of manufacturing sectors to global supply-chain disruptions and energy market movements.

Currency Movements and External Trade

Global trade conditions remained uncertain during the year due to tariff actions, geopolitical developments and shifting trade relationships among major economies. Currency movements and changes in international trade flows continued to influence the competitiveness of domestic manufacturers and the landed cost of imported raw materials and finished goods. As global supply chains adjusted to trade restrictions in developed markets, India increasingly became a destination for surplus production from certain exporting nations, intensifying competitive pressures in several manufacturing segments.

Trade Policy and Import Dynamics

Trade policy continued to remain an important area of focus for Indian industry during FY 2025-26. Industry associations across several sectors raised concerns regarding the growing influx of low-cost imports from countries benefiting from preferential trade arrangements. In the paper and paperboard segment specifically, imports from ASEAN countries continued to increase, aided by duty concessions available under the ASEAN-India Trade in Goods Agreement (AITIGA), prompting renewed discussions around trade remedial measures, anti-dumping mechanisms and the broader review of existing free trade arrangements. Industry bodies have argued that these imports have created competitive challenges for domestic manufacturers, particularly in segments facingglobal oversupply.

Outlook

India is expected to remain among the fastest-growing major economies, supported by favourable demographics, rising domestic consumption, infrastructure investment, manufacturing initiatives and ongoing economic reforms. While external risks arising from geopolitical tensions, global trade fragmentation, commodity price volatility and international economic conditions remain relevant, the countrys strong domestic demand base, improving infrastructure and policy support for industrial growth provide a favourable foundation for sustained

economic expansion over the medium term.

Global Pulp and Paper Industry Market Overview

The global pulp and paper industry ccntinued to operate in a dynamic environment during FY 2025-26, shaped by evolving consumption patterns, sustainability initiatives, changing trade flows and a volatile cost environment. According to Fortune Business Insights, the global pulp and paper market is estimated at approximately USD 357.6 billion in 2026 and is projected to reach USD 416.6 billion by 2035, reflecting the continued relevance of paper-based products across packaging, hygiene, publishing and industrial applications.

Demand Trends

Demand growth continued to be driven by packaging, tissue and specialty paper grades, while graphic paper and newsprint remained under structural pressure from increasing digitisation. Packaging remained the industrys largest end-use segment, accounting for an estimated 55.1% of global demand, supported by the expansion of e-commerce, organised retail, food- service applications and the increasing adoption of fibre-based alternatives to plastic packaging.

The sanitary paper segment continued to benefit from growing awareness of hygiene, rising disposable Incomes and urbanisation across developing economies. In contrast, demand for printing and writing paper remained relatively subdued in several mature markets as businesses, educational institutions and consumers increasingly adopted digital platforms for communication and information consumption.

Regional Dynamics

Asia Pacific remained the dominant region in the global pulp and paper industry, accounting for approximately 56% of global market value in 2025. The region continued to be the primary engine of industry growth, supported by rising consumption, urbanisation, manufacturing activity and growing demand for packaging solutions across China, India and Southeast Asia. China remained the largest producer and consumer globally, while India continued toemerge as

an Important growth market driven by rising consumption and expanding end-use sectors.

At the same time, capacity additions in certain paper and packaging grades across Asia contributed to increased competitive intensity and pricing pressure in some markets. Export-oriented producers increasingly sought international markets for surplus production, contributing to greater competition across importing regions

Sustainability and Industry Transformation

Sustainability remained a defining theme across the global paper industry. Growing regulatory focus on reducing plastic waste, increasing consumer preference for environmentally responsible products and rising adoption of circular economy practices continued to support demand for recyclable and renewable paper- based solutions. According to the American Forest & Paper Association, approximately 67.9% of paper consumed in the United States was recycled, highlighting the industrys progress towards greater resource efficiency and circularity.

Manufacturers also continued to invest in recycling infrastructure, process automation, digitalisation and energy-efficient technologies to improve productivity, reduce environmental impact and enhance long-term competitiveness. Increasing research into alternative fibres and sustainable packaging solutions further reflected the industrys focus on innovation and resource optimisation.

Cost Environment

The industry continued to operate in a volatile cost environment during FY 2025-26. Wood pulp prices softened during the middle part of the year before firming towards the end of the year, while energy prices, freight costs and logistics expenses remained influenced by geopolitical developments and supply chain disruptions. Freight disruptions linked to the conflict in West Asia affected established shipping routes and increased transportation costs across several regions, contributing to cost pressures across the global value chain.

Opportunities

• Growing adoption of paper-based packaging as businesses and consumers shift towards more sustainable alternatives.

• Expansion of e-commerce, food-servics and retail channels supporting demand for fibre-based packaging solutions.

• Increasing investments in automation, cigitalisation and process optimisation to enhance operating efficiency.

• Growth in specialty paper applications catering to evolving industrial and consumer requirements.

• Rising preference for recyclable and renewable materials supporting long-term demandgrowth.

Threats

• Continued structural decline in newsprint and certain graphic paper grades due to increasing digital consumption.

• Volatility in pulp, fibre, energy, chemica and freight costs.

• Excess capacity in certain regions leading to pricing pressure and increased export competition.

• Geopolitical uncertainty and changing trade policies affecting supply chains and market access.

• Increasing environmental compliance requirements and sustainability-related investments.

Outlook

According to Fortune Business Insights, the global pulp and paper market is expected to grow steadily over the medium term, supported by demand from packaging, sanitary and specialty paper applications. Asia Pacific is expected to remain the principal growth region, while sustainability initiatives, increasing adoption of recyclable packaging solutions and evolving consumer preferences continue to support industry growth. Industry profitability, however, is expected to remain influenced by fibre availability, energy costs, freight rates, capacity additions and changing global trade dynamics

Indian Pulpand Paperlndustry Overview

According to the Indian Paper Manufacturers Association (IPMA), domestic paper demand has been growing at approximately 6-7% annually, supported by

rising literacy levels, expanding education infrastructure, growth In organised retail and increasing adoption of paper-based packaging. Demand growth has been strongest in packaging and tissue segments, which have been growing at an estimated 8-10% annually, while the writing and printing paper segment has remained relatively stable, supported by education-linked and institutional demand despite increasing digitalisation across certain end-use categories. Newsprint demand continues to remain under structural pressure.

Demand Drivers

• Education and Literacy

Education remains an important demand pillar for the industry, supporting consumption of notebooks, textbooks, copier paper and institutional supplies. Continued implementation of the National Education Policy (NEP), increasing school enrolment and improving literacy levels continue to support demand for writing and printing paper across the country.

• Packaging and Consumption Growth

Packaging remains the fastest-growing segment of the industry, driven by the expansion of e-commerce, FMCG consumption, food delivery platforms and organised retail. Growing urbanisation, rising disposable incomes and changing consumption patterns are further supporting demand for packaging- grade paper and paperboard.

• Sustainability-Led Demand

The gradual shift away from single-use plastics continues to support demand for paper-based packaging and food-service paper products. Increasing regulatory focus on sustainable alternatives and growing consumer preference for environmentally responsible products are expected to support longterm demand growth across paper-based applications.

• Emerging Markets

Rising literacy, increasing consumption and expansion of organised distribution networks in Tier II and Tier III cities continue to provide a long-term demand base for the industry. These markets remain an important growth opportunity as education, retail and commercial activity deepen across the countr

Cost Environment and Raw Material Availability

FY 2025-26 was characterised by a challenging cost environment for domestic paper manufacturers. Elevated agro-fibre costs, Flooding in parts of Punjab impacted the availability and cost of wheat straw, an important raw material for agro-based integrated mills operating in the region.

Energy, fuel and freight costs also remained volatile during the year. Toward the latter part of FY 2025-26, developments in West Asia contributed to higher fuel prices and disruptions across established shipping corridors, adding pressure on logistics and transportation costs across the value chain.

Trade Dynamics and Regulatory Developments

FY 2025-26 witnessed several important policy and trade developments impacting the industry. The Directorate General of Trade Remedies (DGfR) initiated anti-dumping investigations into paperboard imports from Indonesia, while a Minimum Import Price (MIP) on virgin multi-layer paperboard was intrcduced and subsequently extended.

Industry bodies also pursued anti-subsidy petitions to address concerns related to imports from overseas producers benefiting from government support programmes.

Imports continued to remain an importcnt industry concern, particularly from ASEAN countries and China. Industry associations highlighted the impact of competitively priced imports on domestic ‘ealisabons, especially in segments facing global oversupply and aggressive export-oriented competition. However, most trade-remedy measures implemented during the year remained concentrated in paperboard, with limited applicability to writing and printing paper grades.

Separately, the conclusion of the India-EU Free Trade Agreement and duty relief announced in Union Budget 2026 on pulp and waste-paper imports, together with streamlined customs procedures, provided some offsetting support to industry cost structures.

Opportunities

• Domestic paper demand continues to grow at approximately 6-7% annually, supported by

education, literacy Initiatives, consumption growth and expanding packaging applications.

• Indias per-capita paper consumption remains below the global average, providing significant longterm growth potential for organised manufacturers.

• Government initiatives supporting education, literacy and skill development continue to provide structural support for writing and printing paper demand.

• Potential expansion of trade-remedy measures to additional paper grades could improve the operating environment for domestic manufacturers.

Challenges

• Continued volatility in agro-fibre, energy and freight costs.

• Competitive pressure from low-cost imports, particularly from ASEAN countries and China.

• Prolonged timelines associated with anti-dumping and anti-subsidy Investigations delaying market correction.

Outlook

The long-term demand outlook for the Indian paper industry remains favourable, supported by rising literacy levels, continued education spending, urbanisation, growth in organised retail and increasing adoption of paper-based packaging solutions. Industry demand is expected to remain supported by structural growth drivers, although profitability will continue to be influenced by raw material availability, energy costs, import intensity, trade-remedy measures and broader macroeconomic developments. Growth in packaging and tissue segments is expected to continue to outpace overall industry growth, while writing and printing paper demand is expected to remain supported by education and institutional consumption despite ongoing digital substitution in certain end-use categories.

Business Overview

Satia Industries Limited (SIL) is one of Indias leading writing and printing paper manufacturers, with a legacy of more than four decades. The Company was

incorporated by Dr. Ajay Satia in 1980 and commenced operations in 1984 with an initial capacity of 4,950 tonnes per annum.

SIL operates a fully integrated manufacturing facility at Sri Muktsar Sahib, Punjab, with four paper machines, in-house pulping, chemical recovery, captive power generation and effluent treatment infrastructure. With the addition of the fourth paper machine in FY22, installed production capacity now exceeds 2,00,000 MTPA.

SIL manufactures a diversified portfolio of writing and printing paper grades catering to a broad spectrum of end-use applications. Its product range includes exercise book paper. Snow White paper, SS Maplitho paper, Ledger paper. Copier paper and colour printing paper. SIL also enjoys a strong market position in watermark paper, a specialised category requiring stringent quality specifications and technical capabilities.

SILs products are marketed through z pan-India distribution network comprising more than 100 dealers and supported by branch offices in Delhi, Chandigarh and Jaipur. In addition to serving the open market segment, the Company also caters to institutional customers across various sectors, providing it with a diversified customer base and broad market reach.

SILs operations are supported by a workforce of over 2,600 employees across manufacturing, sales, distribution and support functions.

Satias Competitive Positioning

Satias competitive position rests on its integrated manufacturing model, established presence in writing and printing paper, institutional supply relationships and pan-India distribution network. In a year when the sector faced both cost pressure and import-led pricing pressure, the Companys priority was protecting the core business while progressing efficiency and selective value-added initiatives.

Area	Positioning / relevance
Integrated operations	In-house pulping, chemical recovery, captive power and effluent treatment infrastructure support cost control and operating flexibility.
Core paper franchise	The writing and printing paper portfolio remains the main business, supported by education-linked and institutional demand.
Distribution reach	A pan-India dealer network and branch presence support both open-market and institutional business.
Operational efficiency	The PM3 upgrade and related process improvements are expected to strengthen throughput, quality and cost competitiveness over time.
Measured diversification	Sustainable tableware and moulded products are being developed as adjacent, small-scale initiatives; the core paper business remains the priority.

Sustainability and Integrated Manufacturing Advantage

The Companys use of agro-based inputs, plantation initiatives, chemical recovery, effluent treatment infrastructure and captive power supports its ability to operate efficiently while meeting environmental requirements.

• Agro-based and plantation-linked raw material initiatives support the sourcing ecosystem and reduce dependence on any single fibre source.

• Chemical recovery and effluent treatment infrastructure form an important part of the integrated manufacturing platform.

• Captive power and biomass-based fuel usage support operating resilience, particularly during periods of energy cost volatility, such as that seen in Q4 F Y26.

• Value-added product initiatives are aligned with the broader shift toward recyclable and paper-based

alternatives, though they remain small relative to the Companys current revenue base.

As part of its sustainability approach, SIL has approximately more than 500 acres of eucalyptus plantations. Under Project Green, the Company has distributed more than one lakh eucalyptus saplings to farmers for plantation over thousands of acres under its social forestry initiative.

Our Performance for FY 2025-26

FY 2025-26 was a difficult year for the domestic writing and printing paper segment, and Satias results reflect that. Revenue from operations declined 4% to Rs 14,519 million (Rs 15,120 million in FY25), EBITDA fell 51% to Rs 1,318 million with margin contracting to 9.1% from 17.9%, and profit for the period was Rs 409 million against Rs 1,186 million in FY25 (basic and d luted EPS of Rs 4.09 versus Rs 11.86).

Particulars	FY26	FY25	Change
Revenue from Operations	Rs 14,519 million	Rs 15,120 million	-4%
Total Income	Rs 15,190 million	Rs 15,312 million	-1%
EBITDA	Rs 1,318 million	Rs 2,703 million	-51%
EBITDA Margin	9.1%	17.9%	-879 bps
Profit Before Tax	Rs 310 million	Rs 1,065 million	-71%
Profit for the Period	Rs 409 million	Rs 1,186 million	-66%
Basic and Diluted EPS	Rs 4.09	Rs 11.86	-66%
Net Debt: Equity	0.25x	0.14x	Increase

The decline in profitability reflects a combination of factors that played out through the year: sustained pressure on realisations from low-cost imports, particularly in the first half of the year, before pricing began to firm in the fourth quarter; a rise in agro-fibre (wheat straw) costs following flooding in parts of Punjab during the year, affecting agro-based mills in the region; and elevated fuel and power costs in the fourth quarter following the escalation of the West Asia conflict.

On the balance sheet, total assets increased to Rs 15,578 million (Rs 14,451 million in FY25) and total shareholders funds stood at Rs 10,880 million (Rs 10,487 million in FY25). Net debt to equity rose to 0.25x

from 0.14x, reflecting drawdown against the ongoing PM3 upgrade and other capital expenditure. Pricing Improved through the fourth quarter 3S demand strengthened, a trend the Company expects to carry into FY27, subject to input cost movement and the extent of import competition.

Key Financial Ratios

Regulation 34 read with Schedule V of the 5EBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires disclosure of significant (25% or more) changes in key financial ratios, along with explanations. The following ratios have moved by more than this threshold and are explained below;

Ratio	FY26	FY25	Change	Primary reason
EBITDA Margin	9.1%	17.9%	-879 bps	Lower realisations, higher agro-fibre and fu?l costs,
PAT Margin	2.8%	7.8%	-500 bps	Flows through from EBITDA margin decline; partly offset by lower depreciation/finance cost as a share of revenue
Net Debt: Equity	0.25x	0.14x	+0.11X	Debt drawdown against ongoing capex (PM3 upgrade and related projects)
Return on Net Worth	3.83%	11.98%	-815bps	Due to decrease n profits
Interest Coverage Ratio	2.41x	5.16x	-2.75x	Due to decrease in profits

Developments at Satia Industries in FY 2025-26

Demand for the Companys products remained resilient through the year, while cost pressures stayed elevated, particularly in raw materials and fuel. Fuel costs were affected by the West Asia conflict during the fourth quarter. Import pressure remained a concern through most of the year, though it began easing towards the end of the period as pricing firmed.

The Company continued to focus on cost discipline, operational efficiency and value-added products. The cutlery business continued to run at high utilisation during the year, given its current scale, this remains an adjacent initiative rather than a material revenue driver at present.

The PM3 upgrade remains the Companys <ey ongoing initiative, aimed at improving throughput, efficiency and cost competitiveness. FY27 is expected to be a transition year as this and related projects are completed and ramped up.

Capital Expenditure

Saha continues to invest in capital expenditure aimed at improving long-term efficiency, strengthening operating capability and supporting future growth. The PM3 upgrade is central to this plan and is intended to improve productivity, product quality, throughput and cost efficiency.

The Company is also pursuing selected value-added

product initiatives, including moulded products within the cutlery business. These are aligned with the broader shift toward paper-based alternatives but will be scaled in a measured manner given their current contribution to overall revenue.

Risk Management

• Raw material risk: wood and agro-fibre (wheat straw) availability and pricing, heightened in FY26 by flooding in Punjab; partly mitigated through the Companys plantation programme (Project Green) and backward integration.

• Import competition: continued inflow of low-cost paper and paperboard from ASEAN countries and China. Government trade-remedy action to date (anti-dumping investigation, minimum import price) has been concentrated in paperboard; the timeline for any extension to printing and writing paper remains uncertain, and such proceedings typically take 12-24 months to conclude.

• Energy cost risk: exposure to global fuel and power price movements, as Illustrated by the impact of the West Asia conflict on costs in Q4 FY26.

•Currency risk: rupee movement affects the cost of any imported pulp, chemicals or machinery. •

• Execution risk: timely completion of the PM3 upgrade and ramp-up of associated capacity is important to the Companys cost position and volume growth in FY27.

Corporate Social Responsibility

CSR has remained a consistent part of the Companys operating philosophy. CSR initiatives for FY 2025-26 are described in detail in a separate section of this Annual Report. [Management input requested: actual CSR spend for FY 2025-26.]

Human Resources and Industrial Relations

The Company continued to focus on employee safety, wellness, skill development and training across levels during the year. SIL has a total employee strength of over 2,600. Industrial relations remained cordial thrmiph thpvpar

internal control systems ana ineir Adequacy.

The Company has established internal con:rol systems that provide reasonable assurance on safeguarding assets, promoting operational efficiency and ensuring compliance with statutory provisions. A firm of practising Chartered Accountants has been appointed as Internal Auditor to regularly review internal control systems in business processes and verify compliance with laid-down policies and procedures.

Internal audit reports are reviewed by senior management and placed before, and discussed at, meetings of the Audit Committee, which reviews the adequacy of internal control systems, audit findings and suggestions. The internal audit function tracks and monitors implementation of suggested improvements. The Companys statutory auditors regularly interact with the Audit Committee to share their findings and the status of further improvement actions.

Cautionary Statement

Statements in this Management Discussion and Analysis relating to the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand-supply conditions, selling prices, raw material costs and availability, changes in government regulations and tax structure, general economic developments in India and abroad, litigation, industrial relations and other unforeseen events. The Company assumes no responsibility to update these forward- looking statements, which may change based on subsequent developments, information or events.