SEPC Ltd Management Discussions

Economic Overview

Indias economy has demonstrated strong resilience, supported by robust domestic demand, improving investment activity, continued public capital expenditure and sustained policy focus on infrastructure development. According to the latest provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI), Indias real GDP grew by 7.8% in FY 2025-26 , compared with 6.5% in FY 2024-25 , reflecting the continued strength of the domestic economy. The Governments sustained emphasis on infrastructure creation, including roads, railways, urban infrastructure, water and sanitation, power and other public infrastructure, continues to support economic activity and investment.

While global economic uncertainties, geopolitical developments, commodity price volatility, trade-related risks and fluctuations in global financial conditions remain relevant, Indias strong domestic demand, macroeconomic resilience and ongoing infrastructure investment provide a supportive foundation for sustained economic growth. The medium- to longterm outlook for infrastructure and allied sectors remains favourable, supported by the continuing need for investment in physical infrastructure and public utilities and the Governments focus on strengthening the countrys infrastructure ecosystem.

Infrastructure Industry Outlook

The infrastructure sector continues to be a key driver of Indias economic growth, supported by sustained public capital expenditure, urbanisation, industrialisation and the Governments focus on improving physical and social infrastructure. Government initiatives including the National Infrastructure Pipeline (NIP), National Monetisation Pipeline (NMP), Jal Jeevan Mission, Namami Gange Programme, National River Conservation Plan, Make in India and Production Linked Incentive (PLI) schemes continue to support investment, enhance connectivity, strengthen domestic manufacturing capabilities and encourage greater private-sector participation. The National Infrastructure Pipeline continues to be monitored and implemented across States and Ministries, while the Governments focus on infrastructure creation and

asset monetisation is expected to provide sustained opportunities for EPC and infrastructure companies. The Jal Jeevan Mission has also achieved significant progress, with approximately 15.84 crore rural households, representing 81.81% of rural households, having tap-water connections as of June 2026, creating continued opportunities in water supply, treatment and related infrastructure.

The mining and mineral sector remains strategically important for Indias infrastructure and industrial development, providing critical raw materials for steel, cement, power, transportation and manufacturing. India has substantial reserves of iron ore, coal, bauxite, zinc, copper and other minerals, with continued emphasis on mineral exploration, auction of mineral blocks, increased domestic production and faster operationalisation of mineral resources. Iron ore continues to account for the largest share of the value of principal metallic mineral production, while the Government is also encouraging private exploration and more efficient utilisation of mineral resources. As easily accessible surface deposits progressively decline, technological advancement, mechanisation and greater adoption of underground and sustainable mining practices are expected to create additional long-term opportunities.

Business Overview

SEPC Limited ("SEPC" or "the Company") is an Engineering, Procurement, Construction and Commissioning (EPCC) solutions provider with integrated capabilities across infrastructure and industrial sectors. The Company focuses on delivering end-to-end EPC solutions, including engineering, procurement, project management, construction, commissioning and associated infrastructure development. SEPC has established execution experience in water and wastewater infrastructure, roads and transportation, mining, metals and industrial projects, with capabilities supported by experienced technical and project management teams. The Company continues to focus on strengthening execution capabilities, improving project delivery and pursuing opportunities in sectors aligned with Indias infrastructure and industrial investment cycle.

Business Segments:

1. Infrastructure

?€? Water & Sewerage: The Company has over two decades of experience in water supply, drinking water, sewerage and wastewater infrastructure projects. Its capabilities cover water treatment and distribution networks, sewerage systems, pumping stations and associated civil and mechanical infrastructure, including trenchless and resin-based pipe rehabilitation solutions. The Company continues to pursue opportunities arising from government programmes focused on water supply, sanitation and urban infrastructure.

?€? Roads: SEPC has execution experience in road and transportation infrastructure, including projects undertaken for the Ministry of Road Transport and Highways (MoRTH). The Company continues to evaluate opportunities in road construction and related infrastructure through competitive bidding, strategic partnerships and joint ventures.

2. Industrial EPC

?€? ProcessPlants: The Company provides turnkey EPC solutions for industrial process facilities, with experience spanning cement plants, coal handling systems, coal gasification and feed-related plants. Its capabilities include engineering, procurement, construction, erection and commissioning of process and material handling systems.

?€? Steel Plants: SEPC has experience in the execution of facilities forming part of integrated steel plants, including sinter plants, coke plants, wire rod mills, compressors and material handling systems. The Companys capabilities are supported by technology and engineering collaborations, enabling it to undertake specialised industrial EPC assignments.

?€? Mine Development: The Company has

specialised capabilities in mine development, including deep shaft sinking and associated underground infrastructure. Its experience covers projects involving minerals such as gold, copper, coal, chrome, manganese and uranium. With increasing emphasis

on domestic mineral production, mine development and mechanisation, the Company continues to assess opportunities in this segment.

?€? Power Plants: The Company has experience across conventional and renewable power projects, including thermal, wind, solar and biomass-based power facilities. Its capabilities cover EPC and associated balance-of-plant requirements, with a continued focus on opportunities arising from Indias growing power demand and transition towards cleaner and more sustainable energy sources.

Market Size and Opportunities

Indias EPC market continues to offer significant growth opportunities, supported by sustained public capital expenditure, industrial expansion, urbanisation and Government initiatives aimed at strengthening infrastructure and domestic manufacturing. The Union Budget 2026-27 provides for 5 12.22 lakh crore of capital expenditure , equivalent to 3.1% of GDP, while effective capital expenditure is estimated at 5 17.15 lakh crore , providing continued visibility for infrastructure and EPC opportunities. The allocation for roads and bridges is 52.76 lakh crore and for railways 52.78 lakh crore, reinforcing the Governments continued focus on transport infrastructure. In the water sector, the Jal Jeevan Mission continues to drive investments in rural drinking-water infrastructure, while urban water supply, wastewater treatment, sewerage, rehabilitation and reuse projects are expected to remain important areas of opportunity. The industrial EPC market is also supported by manufacturing investments, capacity expansion, import substitution and the Governments focus on strengthening domestic value chains.

SEPC is positioned to participate selectively in the following key and emerging opportunity areas:

?€? Jal Jeevan Mission and Rural Water Supply -

Continued investment in rural drinking-water infrastructure, including multi-village water supply schemes, treatment facilities, transmission and distribution networks, pumping systems and associated operations and maintenance. The programmes focus is increasingly extending beyond household connections to source sustainability, grey-water management and longterm service delivery.

?€? Urban Water and Wastewater Infrastructure -

Opportunities in urban water supply, sewerage, wastewater treatment, rehabilitation of ageing networks and water reuse, including projects supported by multilateral development institutions such as the ADB and other development-finance agencies.

?€? Roads and Transportation Infrastructure -

Continued investment in national highways, state highways and related infrastructure, supported by the Governments sustained capital expenditure programme and increasing requirements for connectivity and logistics infrastructure. The Union Budget 2026-27 provides S2.76 lakh crore towards capital outlay on roads and bridges.

?€? Steel and Metals - Significant opportunities are expected from capacity expansion, modernisation, process improvement and environmental upgrades in the steel and metals sector. Indias crude steel capacity stood at approximately 196.6 million tonnes in FY 2024-25 , while the National Steel Policy envisages capacity of 300 million tonnes by 2030-31 , providing a substantial longterm opportunity for industrial EPC companies.

?€? Green Energy and Energy Transition - Emerging opportunities in green hydrogen, green ammonia, green methanol, renewable energy and associated infrastructure. The National Green Hydrogen Mission targets production of at least 5 million metric tonnes of green hydrogen annually by 2030 , creating potential opportunities across production, storage, transportation and downstream applications, including green ammonia, refining and green steel.

?€? Mining and Mine Development - Opportunities are expected from increased domestic mineral production, mineral exploration, mine development and modernisation, including underground mining and associated infrastructure. Growing demand for critical minerals and greater emphasis on domestic resource security are expected to support investment in mining-related infrastructure.

?€? Rural and Urban Infrastructure - Opportunities

across integrated rural and urban infrastructure, including sanitation, housing-related

infrastructure, municipal services, agricultural infrastructure and other public-utility projects, supported by continuing Government expenditure

and the growing infrastructure requirements of a rapidly urbanising economy.

SWOT Analysis

Strengths:

?€? Strong technical proficiency and niche engineering expertise.

?€? Proven track record across water, process,

metallurgy, mining and power sectors.

?€? Experienced management and established governance framework.

SWOT Analysis

Strengths

?€? Established Technical and Engineering

Capabilities: Strong technical proficiency

and specialised engineering expertise across infrastructure and industrial EPC projects,

supported by experienced technical and project management teams.

?€? Diversified Sectoral Experience: Proven execution experience across water and wastewater, roads, process plants, steel and metallurgy, mining and power sectors, providing diversification across infrastructure and industrial segments.

?€? Integrated EPC Capabilities: End-to-end

capabilities covering engineering, procurement, construction, erection and commissioning,

enabling the Company to undertake complex and multidisciplinary projects.

?€? Experienced Management and Governance:

Experienced management team with established systems and governance processes for project monitoring, execution and operational oversight.

Weaknesses

?€? Project Execution and Working Capital Intensity:

EPC operations are inherently dependent on project execution schedules, availability of work fronts, timely approvals and certification, and efficient working-capital management.

?€? Dependence on Timely Customer Payments:

Delays in certification, collections and release of project-related receivables can affect cash flows and overall project execution.

?€? Financial Leverage and Funding Requirements:

The Companys ability to execute large projects and pursue growth opportunities is dependent on maintaining adequate liquidity, access to working- capital facilities and timely financial support.

Opportunities

?€? Government Infrastructure Spending: Sustained public investment in water, wastewater, roads, urban infrastructure, railways and other public utilities provides a significant pipeline of opportunities for EPC companies.

?€? Industrial and Private Capital Expenditure:

Capacity expansion and modernisation in steel, mining, manufacturing, process industries and other industrial sectors are expected to create opportunities for specialised industrial EPC services.

?€? Water and Environmental Infrastructure:

Increasing focus on drinking-water supply, wastewater treatment, sewerage, water reuse and rehabilitation of ageing infrastructure provides long-term opportunities in the water and environmental sectors.

?€? Energy Transition and Green Infrastructure:

Emerging opportunities in renewable energy, green hydrogen, green ammonia, energy-efficiency projects and related industrial infrastructure provide potential avenues for diversification.

?€? International and GCC Opportunities: The

Company can leverage its existing presence, relationships and experience in the GCC region to selectively pursue opportunities in water, infrastructure, industrial and energy-related projects.

Threats

?€? Project Execution and Cost Risks: Delays in approvals, land availability, design changes, supply-chain disruptions, labour constraints and unforeseen site conditions may adversely affect project schedules and margins.

?€? Working Capital and Counterparty Risks:

Delayed customer payments, extended receivable cycles and changes in payment terms may place pressure on liquidity and working capital.

?€? Competitive Environment: The EPC industry is highly competitive, with participation from large

domestic and international players, which can exert pressure on project pricing and margins.

?€? Regulatory and Policy Risks: Changes in

Government policies, regulations, taxation, environmental requirements and contractual frameworks may affect project economics and execution.

?€? Macroeconomic and Commodity Price Volatility:

Fluctuations in interest rates, foreign exchange rates and prices of key inputs such as steel, cement, fuel and other materials may affect project costs and profitability.

Internal Control Systems

The Company maintains an internal control framework designed to provide reasonable assurance regarding the reliability of financial reporting, operational effectiveness, safeguarding of assets and compliance with applicable laws and regulations. The internal audit function operates independently and reports to the Chairman of the Audit Committee. Periodic reviews of internal controls and operating processes are undertaken to identify gaps, strengthen controls and support effective risk management.

Financial Performance - FY 2025-26

On a consolidated basis, SEPC Limited delivered a significant improvement in financial performance during FY 2025-26. Revenue from operations increased to 91,054.50 crore , compared with 9597.65 crore in

FY 2024-25, representing a year-on-year growth of approximately 76.44% . Total income increased to 91,085.84 crore , compared with 9646.02 crore in the previous year. The increase in revenue reflects higher execution and recognition of revenue from projects across the Groups business segments.

Profit before tax (PBT) increased to 962.17 crore in FY 2025-26 from 935.18 crore in FY 2024-25. Profit after tax (PAT) increased to 953.84 crore , compared with 924.84 crore in the previous year, representing a growth of approximately 116.74% . Total comprehensive income stood at 956.12 crore , compared with 924.46 crore in FY 2024-25. The improvement in profitability reflects higher operating revenue, improved project execution and better operating performance during the year. Earnings per share (EPS) increased to 90.30 from 90.16 in the previous year, in line with the improvement in profitability.

Key Ratios

The key financial ratios of the Company on a consolidated basis for FY 2025-26, along with the corresponding figures for FY 2024-25, are presented below. These ratios have been computed based on the audited consolidated financial statements and provide an indication of the Groups liquidity, capital structure, operational efficiency and profitability.

Particulars	FY 2025-26	FY 2024-25	Change / Comment
Current Ratio	2.55	2.91	Moderated from the previous year, while remaining at a comfortable level
Debt-Equity Ratio	0.18	0.27	Improved, indicating lower financial leverage
Net Profit Margin	5.08%	4.16%	Improved, reflecting stronger profitability
Return on Equity (ROE)	3.12%	1.65%	Improved significantly on account of higher profitability
Net Capital Turnover	0.86x	0.56x	Improved, reflecting better utilisation of net working capital

The overall movement in the key ratios indicates an improvement in the Companys profitability, financial leverage and working-capital efficiency during FY 2025-26. The moderation in the current ratio was accompanied by a stronger net capital turnover, reflecting increased revenue generation relative to the net working capital employed.

Note: Current Ratio = Current Assets / Current Liabilities; Debt-Equity Ratio = Total Debt / Equity; Net Profit Margin = Profit after Tax / Revenue from Operations; EBITDA Margin = Profit before Interest, Depreciation, Tax and Extraordinary Items / Revenue from Operations; PBT Margin = Profit before Tax / Revenue from Operations; ROE = Profit after Tax / Average Equity; Net Capital Turnover = Revenue from Operations / Average Net Working Capital. The ratios should be read in conjunction with the accompanying audited consolidated financial statements.

Human Resources

Human resources continue to be a critical enabler of SEPCs project execution capabilities and long-term growth. The Company remains focused on maintaining an appropriate mix of technical, engineering, project

management and functional expertise to support its Infrastructure and Industrial EPC businesses. Emphasis is placed on effective manpower deployment across projects and operating locations, employee engagement, capability development and succession planning, in line with the evolving requirements of the business.

Employee benefits expense on a consolidated basis stood at 528.99 crore during FY 2025-26, compared with 532.71 crore in FY 2024-25. The reduction primarily reflects changes in manpower deployment and the overall employee cost structure during the year. As at March 31, 2026, SEPC had 212 employees, with engineers constituting more than 65% of the workforce, reflecting the Companys engineering-intensive business model. The Company continues to focus on technical and functional skill development, continuous learning and training, occupational health and safety, and a positive work environment. Employee relations remain cordial, with emphasis on employee engagement, retention and productivity. The Company believes that a skilled, committed and agile workforce will remain an important foundation for successful project execution and sustainable growth.