Semac Construction Ltd Management Discussions

Overview

Semac was founded in 1969 as a Design Consultancy. Over the past decade, the Company extended its offering into Design and Build Services, and has progressively transitioned towards executing projects directly rather than through subcontractors. While this has changed the economics of the business, it has also increased operational complexity.

During FY26, much of our focus was directed towards strengthening the Companys Financial Discipline, Operational Capability, Governance Framework and Internal Systems, the outcomes of which are discussed in the sections below.

Alongside this, we continued strengthening commercial discipline. Our senior leadership plays an active role in reviewing tenders, negotiating commercial terms and evaluating project scope before bids are submitted, with particular attention to payment terms, working capital implications and overall capital employed. Our objective is not to maximise the size of the order book, but to build a portfolio of projects that generates acceptable returns and strengthens long-term client relationships.

Industry Structure and Developments

Indias Industrial Construction sector continues to benefit from favourable tailwinds. Government initiatives to strengthen domestic manufacturing, continued infrastructure investment and sustained private sector capital expenditure have encouraged both domestic and multinational corporations to expand manufacturing capacity across the country, supporting demand for constructing industrial facilities and associated engineering services.

The Company continued to strengthen its position within this market during the year. A significant milestone was the commencement of our relationship with a leading new multinational client, which we hope will develop into a long-term partnership built on trust, quality and execution excellence. We also successfully completed our second project for a repeat client — a new manufacturing facility at Kanpur involving civil works, pre-engineered building and MEP services — further strengthening what has become a valued long-term relationship.

Opportunities and Threats

Opportunities: Rising private sector capital expenditure, increasing investment by multinational corporations and continued emphasis on domestic manufacturing are expected to sustain demand for industrial construction over the coming years. During the year, we also deepened relationships within the organisations of target clients, which allowed us to begin participating in tenders floated by reputed corporates with upcoming capex plans, and to win repeat orders from some existing clients.

Threats: Despite favourable demand, the competitive landscape remains challenging. Increasing competition has resulted in aggressive pricing and increasingly stringent commercial terms, with several market participants continuing to prioritise revenue growth over profitability, putting pressure on industry margins and working capital.

Segment-wise / Product-wise Performance

The Companys operations comprise a single reportable business segment — Design and Build Services for industrial clients. Accordingly, no separate segment-wise or product-wise performance disclosure is provided.

Outlook

Indias manufacturing sector continues to present significant long-term opportunities. Rising private sector capital expenditure, increasing investments by multinational corporations and continued emphasis on domestic manufacturing are expected to sustain demand for industrial construction over the coming years.

Looking ahead, management will continue focusing on strengthening internal controls, improving banking relationships, enhancing operational efficiency and investing in organisational capability, in order to support future growth while maintaining financial discipline.

Risks and Concerns

We operate in a dynamic environment influenced by a range of external factors. While we remain confident in our strategy and capabilities, the following macro and industry-wide risks merit attention:

• Economic and Investment Cycles: The construction industry remains sensitive to changes in the broader economic climate. A slowdown in capital expenditure may impact the pace of new projects.

• Raw Material Price Volatility: The prices of key inputs such as steel, cement and aggregates are subject to market fluctuations, which may impact our margins in fixed price contracts.

• Regulatory Landscape: The business is subject to multiple regulatory compliances, including mining, environment, safety and labour. Any changes in laws could have an impact on project timelines and costs.

• Supply Chain Disruptions: Delays or constraints in the availability and logistics of key materials or equipment due to external factors such as geopolitical tensions, transport bottlenecks or vendor-side challenges may pose risks to timely execution.

We proactively monitor these risks and maintain robust planning and contract management practices to mitigate their potential impact. Our focus remains on delivering high-quality outcomes while preserving execution efficiency and financial discipline.

Internal Control Systems and their Adequacy

As Semac evolves into an execution-led EPC contractor, we believe close collaboration between management and operational teams is essential for faster decision-making, stronger oversight and the development of a unified organisational culture. Towards this goal, during the year, we completed the consolidation of our operations into our Gurugram headquarters, improving collaboration, organisational alignment and management oversight. We also continued implementing an integrated digital project management and monitoring platform across our operations, so that project workflows are standardised, information is available in real time, budgets are continuously monitored and management has early visibility of deviations in time, cost and quality.

Internal control systems serve as a fundamental pillar of corporate governance at Semac. We have implemented internal control mechanisms that align with our evolving scale of operations, designed to safeguard resources, ensure operational efficiency, and comply with applicable laws and regulations. Our internal control systems are commensurate with the magnitude of our operations, and suitable controls are in place for major operational activities.

The Internal Audit function operates directly under the guidance and supervision of the Audit Committee, which defines the scope of internal audit each year, reviews the efficacy and effectiveness of the audit process, and addresses any concerns arising from audits carried out. Reports of the internal auditors are placed before the Audit Committee on a quarterly basis, and the resulting decisions are implemented and monitored through action taken reports.

Discussion on Financial Performance with respect to Operational Performance

The Company delivered a strong improvement in financial performance during FY26. Revenue increased by 40% as compared to the previous year, and the Company posted a net profit of INR 7 crore, as against a loss of INR 7 crore in the previous year. While our topline is back on a growth trajectory, we have continued to keep a tight watch on costs, both project-related and overheads.

Performance

Rs. in Crores

Particulars	FY26	FY25	Increase/(Decrease) %
Revenues	247.93	177.03	40%
Profit/(Loss) before Interest & Tax	=RIGHT>11..74	(1.83)	742%
Interest	5.06	5.52	(8.5)%
Profit/(Loss) before Tax (Consolidated)	6.68	(7.35)	190.9%

Major Heads of Expenditure

Particulars	FY26	FY25	Inc/(Dec) Absolute	Increase/(Decrease) %
Cost of Services	195.17	133.51	61.66	46.2%
Employee Benefit Expense	24.20	23.33	0.87	3.7%
Finance Cost	5.06	5.52	(0.47)	(8.5)%
Depreciation/Impairment	1.53	1.68	(0.16)	(9.4)%
Other Expenses	15.30	20.33	(5.03)	(24.7)%
Profit/(Loss) before Tax	6.68	(7.35)	14.03	190.9%
Total Comprehensive Income after Tax	8.61	(5.21)	13.81	265.4 %

The inter-corporate deposit taken from Group companies two years ago, to cover the treasury gap caused by losses incurred in FY24, has largely been repaid. A significant portion was repaid during FY26, funded by working capital released through tighter management of supplier advances and other receivables. Only a small balance now remains outstanding, which we expect to repay in full during the current financial year.

Order booking during the year remained significantly below expectations. The Companys closing order book stood at approximately Rs.90 crore, reflecting delays in customer decision-making and a number of closely contested opportunities that were deferred beyond the financial year-end or not secured. Importantly, the Company consciously chose not to pursue projects with low margins or commercially unfavourable terms during the year. We would rather win fewer projects at sensible prices than bid aggressively today and repent the decision later.

Key Financial Ratios

In accordance with applicable disclosure requirements, the table below sets out key financial ratios for FY26 as compared to FY25, together with explanations for variances exceeding 25%.

Disclosure of Ratios	FY26	FY25	% Variance	Reason for Variance (if > 25%)
Current Ratio	1.44	1.31	10.1%
Debt-Equity Ratio	0.31	0.51	(38.4)%	Company repaid inter-corporate deposits during the year.
Debt Service Coverage Ratio	0.74	(0.13)	680.9%	Increase in EBITDA.
Return on Equity Ratio	0.09	(0.08)	222.7%	Increase in profit.
Inventory Turnover Ratio	104.25	150.93	(30.9)%	Inventory increased in line with value of projects executed.
Trade Receivables Turnover Ratio	5.72	4.20	36.3%	Increase in sales during the year.
Trade Payables Turnover Ratio	4.48	3.27	37. %	Increase in trade payablesdue to higheractivity levels.
Net Capital Turnover Ratio	4.82	4.11	17.4%
Net Profit Ratio	0.04	(0.03)	217.8%	Increase in sales and net profit in the current financial year.
Return on Capital Employed	0.14	(0.02)	681.7%	Increase in net profit in the current financial year.

Material Developments in Human Resources / Industrial Relations Front

People are the backbone of any organisation. Development of our people is one of the key objectives at Semac. In our view, people join an organisation primarily for professional growth and fair compensation for their skills, and we address both these needs. We help our people grow by giving them increasingly challenging assignments, at times outside their comfort zone, and expose them to areas outside their core expertise to help them grow from functional specialists to generalists, thereby building our future leadership. As the Company transitioned towards direct project execution, we also invested significant time in building a team with strong execution experience, achieving a good mix of experience and youth; this process remains ongoing. We strive to build a culture of trust and transparency at Semac. As at March 31, 2026, the Company had approximately 200 white collar employees across its head office and project sites.

Industrial relations at the Company continue to be cordial and harmonious. A participative approach to management decision-making facilitates trust and enables differences to be resolved amicably through discussion, which has helped maintain healthy relationships across the organisation.

Cautionary Statement

This Management Discussion and Analysis contains certain forward-looking statements regarding the Companys industry, business, future plans and financial performance, which are based on managements current beliefs and assumptions. Actual results may differ materially from those expressed or implied due to various risks, uncertainties and other factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

	By Order of the Board
	For Semac Construction Limited
	SD/-
	HARIVANSH DALMIA
Date : 14.08.2026	Whole Time Director
Place : Gurugram	DIN: 08750555