Schneider Electric President Systems Ltd Management Discussions

Emerging economies, particularly across Asia, are expected to remain central to global growth momentum. India and China together are projected to contribute nearly 43.6% of global GDP expansion in 2026, with India accounting for approximately 17%. This shift towards Asia is supported by resilient domestic demand, sustained infrastructure investments, and the continued expansion of industrial and digital capabilities, creating a favourable demand environment for energy management and digital infrastructure solutions.

At the same time, global inflation is expected to moderate to approximately 3.8% in 2026 from 4.1% in 2025, supported by easing commodity prices and stabilising demand conditions across key markets. This improving inflation trajectory is contributing to a more predictable operating environment, enabling better cost planning and greater investment visibility.

Fiscal and monetary policies across major economies also remain broadly supportive, with advanced economies focusing on sustaining consumption and investment, while emerging markets continue to implement targeted measures to strengthen growth and macroeconomic resilience.

These macro trends are complemented by the ongoing evolution of global supply chains, with increased emphasis on diversification, localisation, and digital integration. Companies are strengthening logistics networks and adopting technology- enabled inventory systems to enhance resilience and continuity. In parallel, sustained investments in digital technologies such as automation, artificial intelligence, and connected systems are driving productivity gains and enabling next-generation infrastructure, collectively accelerating demand for integrated energy and digital solutions.

Outlook

The global economy is expected to maintain stable growth in 2026, supported by technology-led investments, improving inflation dynamics, and continued policy support. While growth levels remain below pre-pandemic averages, the underlying demand drivers for electrification, digitalisation, and sustainability remain strong.

However, geopolitical uncertainties, evolving trade frameworks, and structural economic challenges continue to present risks. Policy focus across regions is expected to remain centred on fiscal discipline, inflation management, and productivity enhancement.

Overall, the global environment presents a balanced outlook-combining near-term uncertainties with strong long-term structural tailwinds. This is expected to support sustained opportunities across data centres, secure power, and energy-efficient infrastructure, driven by accelerating digital adoption and energy transition trends.

Indian Economic Review

GDP Trend
Financial Year	Real GDP Growth Rate (%)
FY2021-22	8.7
FY 2022-23	7.0
FY 2023-24	7.6
FY 2024-25	6.5
FY 2025-26 (E)	7.6

(E: Estimated; Source: MoSPI) J

The Indian economy continued to demonstrate strong resilience during the year, supported by robust domestic demand, sustained public investment and strengthening industrial activity. India remains one of the fastest-growing major economies globally, with real GDP growth estimated at 7.6% in FY 2025-26, reflecting the continued momentum in consumption and investment-led expansion.

India continues to demonstrate a resilient growth trajectory, supported by a balanced mix of consumption and investment. Private Final Consumption Expenditure (PFCE), contributing over 60% of GDP, remains a key growth anchor, driven by rising disposable incomes, rapid urbanisation, improved access to credit and accelerating digital adoption. These factors are strengthening domestic demand and enabling broad-based expansion across sectors.

Macroeconomic stability remained largely intact during the year, with inflation contained within the Reserve Bank of Indias target range. Moderation in commodity prices, supported by calibrated policy measures, has helped stabilise cost structures and sustain economic momentum despite a volatile global environment.

Indias external sector exhibited resilience amid global trade uncertainties. Merchandise exports remained steady, supported by diversified sectoral performance, while imports reflected robust domestic demand for capital goods, intermediate inputs and energy-highlighting continued expansion in industrial and manufacturing activity.

Investment activity continues to play a pivotal role in driving growth. Sustained public capital expenditure, alongside a gradual recovery in private sector investments, is accelerating capacity creation across infrastructure, manufacturing and logistics. This is reinforcing Indias position as an increasingly competitive manufacturing and supply chain hub.

Industrial activity remained robust, supported by policy-led initiatives and improving manufacturing output. Growth in indicators such as the Index of Industrial Production reflects rising capacity utilisation, increasing formalisation and enhanced supply-side efficiencies. Manufacturing continues to benefit from targeted policy support aimed at strengthening domestic capabilities and reducing import dependence.

Initiatives such as the Production Linked Incentive (PLI) schemes are catalysing investments across strategic sectors, strengthening local value chains and encouraging global companies to expand their manufacturing footprint in India. In parallel, India is emerging as a preferred destination in global supply chain realignment strategies, supported by cost competitiveness, a skilled workforce, improving infrastructure and policy stability. These factors are fostering the development of integrated manufacturing ecosystems and enhancing Indias role in global production networks.

Outlook

Indias economic outlook remains strong, supported by robust domestic demand, sustained infrastructure investments, and expanding manufacturing capacity. Continued public capital expenditure, along with increasing private sector participation, is expected to drive long-term growth and deepen Indias integration into global supply chains. Ongoing policy initiatives, infrastructure development, and improvements in ease of doing business are further enhancing Indias attractiveness as a manufacturing and outsourcing destination, with government-led programmes focused on logistics efficiency, industrial corridors, and digital enablement strengthening the overall business ecosystem.

While external risks such as geopolitical uncertainties, commodity price volatility, and evolving global trade dynamics may create intermittent challenges for demand and cost structures, Indias underlying fundamentals remain resilient. A strong macroeconomic base, an expanding industrial footprint, and increasing alignment with global supply chain diversification position the country well for sustained medium- to long-term growth, reinforcing its emergence as a strategic hub in the global economic landscape.

Industry Structure and Developments

1. Data Centre Expansion in India

• India is emerging as a major regional data centre hub.

• Growth in hyperscale, colocation and enterprise data centres is driving demand for:

- IT Racks

- Integrated Racks

- Power Distribution Systems

- Edge Infrastructure

• AI and cloud adoption are accelerating requirements for high-density and scalable infrastructure.

Relevance to the Company

• Supports growth across IT Rack, EDGE Systems and integrated solutions.

2. AI and High-Density Computing

• Increasing AI workloads are driving higher rack power densities and more advanced cooling requirements.

• Enterprises are upgrading infrastructure to support GPUintensive and high-performance computing applications.

• Demand is increasing for:

- Advanced rack configurations

- Airflow management

- Intelligent power integration

- Liquid cooling-ready infrastructure

Relevance to the Company

• Strengthens opportunities to position the Company as a provider of next-generation rack infrastructure.

3. Edge Computing Growth

• Expansion of edge computing is being driven by:

- 5G

- Internet of Things (IoT)

- Smart cities

- Industrial automation

• Increasingly distributed computing requirements are driving demand for infrastructure closer to end users.

Relevance to the Company

• Supports opportunities across outdoor cabinets,

EDGE racks, telecom infrastructure and smart infrastructure deployments.

4. Digital Transformation

• Enterprises are increasing investments in:

- Cloud migration

- Digital operations

- Data processing infrastructure

• Government-led initiatives, including Digital India, Smart Cities and digital public infrastructure, are further accelerating digital infrastructure development.

Relevance to the Company

• Creates broad-based demand for IT and digital infrastructure solutions across sectors.

5. Telecom and Network Infrastructure

• 5G deployment and network densification are driving demand for:

- Outdoor cabinets

- Edge deployments

- Telecom enclosures

- Integrated solutions

Relevance to the Company

• Provides strong opportunities for the Integrated Rack business.

6. Industry 4.0 and Smart Manufacturing

• Increasing manufacturing automation is driving adoption of:

- Industrial enclosures

- Real-time monitoring systems

- Smart control infrastructure

• Manufacturers are investing in connected and automated production environments to enhance efficiency

and productivity.

Relevance to the Company

• Supports opportunities across industrial enclosures and integrated infrastructure solutions.

7. Data Localisation and Cybersecurity

• Growing emphasis on data governance and localisation

is encouraging investments in domestic data storage and processing infrastructure.

• Enterprises are increasingly prioritising:

- Secure infrastructure

- Compliance-ready deployments Relevance to the Company

• Supports continued investment in domestic IT and data infrastructure.

8. Sustainability and Energy Efficiency

• Data centre operators are increasingly focusing on:

- Energy-efficient infrastructure

- Optimised cooling

- Reduced power consumption

• Modular and scalable infrastructure is gaining preference to support efficient capacity expansion.

Relevance to the Company

• Creates opportunities for premium, integrated and energy- efficient infrastructure solutions.

9. Supply Chain Localisation

• Customers are increasingly seeking:

- Local manufacturing

- Faster delivery

- Supply chain resilience

• The shift towards second sourcing is strengthening opportunities within Indias manufacturing ecosystem.

Relevance to the Company

• Creates opportunities across:

- Contract Manufacturing (CMFG)

- Build-to-print solutions

- OEM manufacturing

10. Shift Towards Integrated Solutions

• Customers are increasingly seeking:

- Pre-integrated systems

- Build-to-specification solutions

- Faster deployment models

• The preference for integrated solutions is driven by the need for simplified deployment, improved efficiency and reduced time to market.

Relevance to the Company

• Supports growth in Integrated Rack solutions, higher-value offerings and improved business margins.

1. AI & High-Density Infrastructure

2. India Data Centre Growth

3. Edge Computing Expansion

4. Localisation & Manufacturing Shift

5. Integrated Solution Adoption These are the strongest long-term growth narratives.

Competitive Strengths

The Company continues to leverage its strong engineering capability, integrated manufacturing infrastructure and customised solution development expertise to address evolving customer requirements across IT, telecom, industrial and infrastructure segments.

Key strengths include

• End-to-end design, engineering and manufacturing capability

• Strong customisation and integrated solution expertise

• Large-scale manufacturing infrastructure

• Established relationships with global OEMs and enterprise customers

• Ability to support both standard and build-to- specification requirements

• Strong supply chain and sourcing capabilities

• Growing presence in integrated rack and EDGE infrastructure solutions

• Capability to support high-mix and complex manufacturing requirements

THE COMPANYS REVENUE IS DRIVEN BY FOUR MAJOR AREAS OF BUSINESS

IT & Datacenter Business

The Company offers a comprehensive portfolio of standard and customised enclosures designed to support a wide range of deployment environments, including hyperscale and enterprise data centres, server rooms, network closets, edge deployments, retail, office and industrial applications. Its solutions are tailored to meet diverse customer requirements and integrate multiple value-added accessories to deliver enhanced functionality, scalability and performance.

The portfolio includes fully integrated cabinets and enclosure solutions such as Data Centre Racks, IT Racks, Server Racks and specialised configurations for edge computing and AI- driven workloads. These solutions cater to a broad customer base including enterprises, BFSI institutions, government and public sector organisations, telecom operators and defence establishments.

The rapid adoption of artificial intelligence and high- density computing is reshaping data centre infrastructure requirements. Increasing power density and heat generation are driving the need for advanced deployment architectures, prompting a shift towards infrastructure upgrades and next- generation cooling technologies including liquid cooling solutions.

The Company continues to focus on high-density rack solutions, intelligent infrastructure integration and next- generation deployment requirements emerging from AI, cloud and edge computing applications. SEPSL is well positioned to support these evolving requirements through its engineering capabilities, customisation expertise and integrated infrastructure solutions.

Integrated Racks

The Company provides integrated enclosure solutions for applications across telecom, power distribution, data centres, transportation and industrial automation sectors. These solutions are designed for both indoor and outdoor environments, with configurations tailored to specific customer requirements and operating conditions.

Outdoor cabinets form a key part of the portfolio and are engineered to meet stringent communication standards and environmental requirements. These are typically built-to- order solutions encompassing end-to-end capabilities from design and testing to manufacturing, ensuring optimal fit, durability and performance across diverse use cases.

Constructed to withstand harsh operating environments, these enclosures are designed to meet critical performance criteria, ensuring reliability and extended lifecycle.

The solutions cater to a wide customer base including telecom service providers, OEMs deploying smart city infrastructure, rail networks, airports, utility infrastructure and industrial facilities.

Increasing adoption of outdoor digital infrastructure, surveillance systems, telecom densification and smart mobility solutions is expected to drive sustained demand in this segment.

Contract Manufacturing (CMFG)

Under this segment, the Company offers build-to- print solutions, delivering end-to-end processing and manufacturing services based on customer-provided designs. The business is supported by large-scale manufacturing facilities capable of handling high-volume requirements with precision and consistency.

The Company also establishes dedicated production lines for customers, enabling flexibility, scalability and adherence to varying product demands. Its integrated supply chain capabilities ensure efficient sourcing of materials and components at competitive costs while maintaining high standards of quality and timely delivery.

The Company continues to focus on deepening strategic customer relationships, improving manufacturing efficiency and expanding wallet share through value-added manufacturing capabilities.

Increasing localisation initiatives and supply chain diversification trends are expected to create additional opportunities in this segment.

This segment primarily serves global telecom OEMs, ATM manufacturers and industrial customers, reflecting the Companys strong execution capabilities and established relationships in high-reliability, volume-driven manufacturing.

Internal Group (IG)

Under this segment, the Company supports internal group requirements across a wide range of sheet metal works. The scope includes providing build-to-print and build-to- specification solutions along with design and development support wherever required.

The business caters to diverse application needs across geographies, supporting requirements both within India and in key international markets including Asia Pacific, Europe, the Middle East and North America.

Backed by strong engineering capabilities and integrated manufacturing infrastructure, the Company ensures consistent quality, flexibility and timely execution across projects. The segment reflects the Companys ability to support evolving internal technology, localisation and supply chain requirements across global markets while leveraging its manufacturing scale and design expertise.

Outlook

The Company remains focused on strengthening its market position through an enhanced go-to-market strategy, deeper customer engagement and greater participation across high-growth verticals. Long-term industry fundamentals remain favourable, supported by accelerating digital transformation, AI adoption, data centre expansion, edge computing deployments and increasing investments in digital and industrial infrastructure.

Against this backdrop, the Company aims to strengthen its presence across Rack, EDGE and integrated infrastructure solutions by leveraging customer-centric innovation, operational excellence, enhanced manufacturing capabilities and a diversified business portfolio. Continued focus on customer diversification, localisation, supply chain resilience and operational efficiency is expected to support profitable growth and strengthen competitiveness.

Going forward, the Company will remain focused on capturing emerging opportunities across high-growth infrastructure segments while enhancing its capabilities, expanding customer reach and creating sustainable long-term value.

Business Divisions
Segment	Contribution (%)
CMFG	26%
IT Rack	23%
Integrated Rack	19%
IG	32%

Strategic Priorities

The Company continues to focus on strengthening its market position through expansion of its product portfolio, enhancement of customer engagement and improvement in operational capabilities. Key strategic priorities include:

• Strengthening the product portfolio to address evolving customer requirements across Rack, EDGE and integrated infrastructure solutions

• Expanding channel partnerships and deepening engagement with customers, consultants and system integrators

• Driving differentiation through customised, integrated and value-added solutions

• Enhancing operational efficiency, supply chain resilience and execution capabilities

• Increasing focus on high-growth segments such as Data Centres, EDGE infrastructure, Telecom and Industrial Automation

• Strengthening localisation, engineering and manufacturing capabilities to improve competitiveness and responsiveness

• Enhancing solution-selling approach and increasing penetration in Other Customer Business (OB)

• Driving margin improvement through operational excellence, mix optimisation and value engineering initiatives

Growth Focus

Supported by favourable industry tailwinds, increasing digitalisation, expansion of data centre infrastructure, AIled computing growth and rising demand for integrated infrastructure solutions, the Company remains well positioned to capitalise on emerging market opportunities.

The Company expects continued growth opportunities across Rack, EDGE, telecom, industrial and digital infrastructure segments. Its focus on innovation, engineering excellence, operational efficiency, customer-centricity and integrated solution capabilities is expected to support sustainable and profitable long-term growth

Discussion on Financial Performance with Respect to Operational Performance

Financial Performance:

During the financial year ended March 31, 2026, the Company operated in a dynamic business environment characterised by evolving customer requirements, accelerated digitisation, increasing investments in data centre infrastructure, industrial modernisation, and growing adoption of sustainable technologies. Against this backdrop, the Company remained focused on strengthening its market position through portfolio transformation, operational excellence, innovation-driven growth, and disciplined financial management.

The Company reported revenue from operations of approximately f3,842 million during FY 2025-26. Despite a challenging business environment, the Companys profitability remained resilient, supported by strategic business mix optimisation, improved execution, and a greater contribution from value-added solution businesses.

The reduction in topline was primarily attributable to a calibrated shift away from certain lower-margin business segments, particularly within the Integrated Solutions portfolio. Management views this as a deliberate strategic transition rather than a reflection of reduced market demand. The Companys focus remained on sustainable and profitable growth through enhanced participation in solution-led businesses and customer-centric offerings.

Operational Performance and Business Highlights

Operationally, FY 2025-26 was marked by strong order inflows, portfolio diversification, and improved contribution from strategic growth businesses. The Company secured orders amounting to approximately f4,780 Mn during the year, providing healthy visibility for future revenue generation and reflecting continued customer confidence in SEPSLs capabilities and solutions.

A significant operational achievement was the continued expansion of the Companys core portfolio comprising IT infrastructure and Integrated Rack solutions. The core portfolio grew by approximately 34% year-on-year and increased its contribution to total revenue from 26% to 42%, demonstrating the success of the Companys strategy to strengthen higher-value businesses with stronger growth potential and profitability.

The Integrated Rack business emerged as a key growth driver during the year, generating revenue of approximately f736 Mn and contributing around 19% of total revenue. Growth was supported by increased customer adoption across telecom, industrial, infrastructure and non-IT sectors, reflecting broader market acceptance of SEPSLs integrated solution offerings.

The CMFG business crossed the milestone of f1 Bn in revenue, underscoring the Companys manufacturing excellence, operational collaboration and execution capabilities. Simultaneously, the OG business recorded approximately 24% year-on-year growth, further strengthening the Companys market-facing portfolio and contributing meaningfully to overall business performance.

Margin expansion remains central to our financial strategy. During the year, we maintained profitability through disciplined pricing, localisation initiatives, value engineering, and product mix optimisation. Higher local sourcing, improved manufacturing efficiency, and better cost management enhanced competitiveness while reducing supply chain dependencies.

The Company delivered EBITDA of f491.91 million with a healthy EBITDA margin of 12.80%, reflecting the benefits of a stronger business mix, disciplined pricing, and operational excellence. Profit After Tax stood at f377.29 Mn, demonstrating the Companys continued focus on value creation and profitable growth. The sustained margin performance underscores the effectiveness of our strategy to prioritise quality of earnings over volume-led growth.

Return on Capital Employed (ROCE) stood at 18.47%, compared to 28.35% in the previous year, reflecting continued focus on capital efficiency and profitability. The Companys disciplined approach to working capital management resulted in a strong liquidity position, with cash balances at f 1063.15 Mn, compared to f 742.91 Mn in FY 2024-25. Overall, the performance underscores the Companys continued focus on profitable growth, operational excellence and efficient capital allocation.

The Companys investments in technology, process improvement and productivity initiatives contributed towards operational efficiency, while continued focus on value engineering and cost optimisation supported profitability despite revenue moderation.

Sustainability and Future Readiness

Consistent with Schneider Electric Groups sustainability commitments, the Company advanced initiatives focused on renewable energy adoption, energy efficiency, and environmental stewardship.

Material Developments in Human Resources / Industrial Relations

During the year, the Company maintained a balanced approach towards business expansion while ensuring strong compliance and operational discipline. Continued investments in high-growth areas such as data centres, electric mobility and semiconductors are strengthening future readiness and aligning the business with emerging industry trends.

The Company continues to focus on building resilient business segments and strengthening its partner ecosystem, including distributors and panel builders, thereby enhancing market reach and customer engagement.

Industrial relations remained stable and harmonious across operations. The Company employed 180 permanent employees as on March 31, 2026, reflecting the scale of its operations. It continues to invest in capability building, employee engagement and organisational development.

The Company expresses its sincere appreciation to its customers, partners, suppliers and employees for their continued support in driving consistent growth in a dynamic business environment.

Key Financial Ratios
Ratio	FY 2025-26	FY 2024-251	Variance
Current Ratio	3.16	3.02	4.45%	NA
Debt-Equity Ratio	0.01	0.01	0.00%	NA
Inventory Turnover Ratio	5.78	9.16	-36.90%	Decrease is on account of decrease in cost of goods sold during the year.
Trade Receivables Ratio	3.30	3.92	-15.68%	NA
Net Profit Ratio	9.82%	10.51%	-6.57%	NA
Operating Profit Margin	12.80%	13.81%	-1.01%	NA

Risk Factors

The Company operates in a dynamic and competitive business environment and is exposed to various internal and external risks that may impact its operations, financial performance and growth prospects. The Company continuously evaluates these risks and undertakes appropriate mitigation measures to minimise potential impact.

Supply Chain Risks

The Companys operations are dependent on timely availability of key raw materials, components and logistics support. Any disruption in the supply chain, including material shortages, transportation challenges or delays from suppliers, may impact production schedules, project execution and delivery timelines.

Customer Concentration Risks

A portion of the Companys revenue is derived from key customers and specific industry segments. Any significant reduction in demand, change in procurement strategy or slowdown in customer industries may impact business performance and revenue visibility.

Raw Material Price Volatility

The Companys profitability is influenced by fluctuations in prices of key raw materials, particularly steel, CRCA, GI and other metal-based inputs. Significant increases in raw material costs may impact margins, especially in projects with fixed- price commitments and limited pass-through mechanisms.

Distribution and Channel Risks

The Company relies on distribution networks, channel partners and logistics infrastructure for market reach and customer servicing. Any disruption in channel ecosystems, operational inefficiencies or changes in market dynamics may affect sales execution and customer engagement.

Foreign Exchange Risks

The Company is exposed to foreign exchange fluctuations due to import of raw materials, components and international business transactions. Volatility in currency exchange rates may impact procurement costs, pricing competitiveness and overall profitability.

Competitive Intensity

The Company operates in highly competitive markets with presence of domestic and global players. Increasing pricing pressure, changing customer preferences and rapid technological advancements may impact market share and margins.

Technology and Market Evolution Risks

Rapid advancements in technologies such as AI, edge computing, automation and high-density infrastructure require continuous product innovation and capability enhancement. Failure to adapt to evolving market requirements and emerging technologies may impact future growth opportunities.

Regulatory and Compliance Risks

Changes in government regulations, environmental norms, trade policies, taxation and data governance frameworks may impact business operations, compliance costs and market dynamics.

Geopolitical and Global Trade Risks

The Companys business may also be impacted by geopolitical uncertainties, global trade disruptions and changing international economic conditions. Ongoing geopolitical conflicts, trade restrictions, sanctions, shipping disruptions and changes in global sourcing patterns may affect availability, lead times and pricing of raw materials, components and logistics services.

In addition, fluctuations in global commodity markets, freight costs and supply chain realignments arising from geopolitical developments may impact procurement costs, operational planning and overall business stability.

The Company continues to strengthen its risk management framework through proactive monitoring, diversification strategies and robust internal controls to mitigate potential impacts.

Internal Control Systems and Their Adequacy

The Company has established a robust internal control framework, commensurate with the size, scale and complexity of its operations. These controls are designed to ensu re orderly and efficient conduct of business, safeguard assets, ensure accuracy and reliability of financial reporting, and maintain compliance with applicable laws and regulations.

In compliance with the requirements of the Act, your Company has put in place, an independent and objective in-house internal audit department designed to provide reasonable assurance with regard to the effectiveness and adequacy of the internal control system and processes. The internal audit plan is based on risk assessment, which is approved by the Audit and Risk Management Committee.

The in-house internal audit department, along with Global Internal Audit, provides audit assurance, adds value by improving the Companys end-to-end processes through a systematic disciplined approach, from inception, through fieldwork to final reporting.

Also, as per requirements of the Act, a detailed internal financial control framework has been documented, for monitoring the effectiveness of controls in daily operations and timely remediation of deficiencies through a structured evaluation and test program. The said framework is reviewed and updated annually. Operating effectiveness of such framework is tested on an annual basis and results are presented to Board/Audit Committee. Controls self-assessments are performed by respective process owners annually for the defined controls.

The Audit and Risk Management Committee conducts a regular review of the internal audit reports submitted by the Internal Auditor and an action plan for remedial actions is put in place. The Audit Committee is continuously apprised of the action plan status. The Committee also meets the Companys statutory auditors to ascertain, inter alia, their views on the adequacy of internal control systems in the Company and keeps the Board of Directors informed of its major observations, if any.

Based on these reviews, the management affirms that the internal financial controls are adequate and operating effectively.

Disclosure of Accounting Treatment

The financial statements have been prepared in accordance with applicable accounting standards, with no material deviations observed during the year.

Disclaimer: The Management Discussion and Analysis statements are based on available data, internal assessments, and assumptions regarding government policies and economic and political developments. Actual results, performance, or achievements may differ materially from those expressed or implied, due to various factors beyond the Companys control.