Shadowfax Technologies Ltd Management Discussions

Economic Overview Global Economy

Calendar year 2025 closed on a resilient note for the world economy, which had grown by 3.4% in

2025 despite higher trade barriers and elevated policy uncertainty, supported by technology-sector investment, accommodative financial conditions and steady fiscal and monetary support. That momentum was interrupted in late February 2026 by the outbreak of conflict in the Middle East, which disrupted shipping through the Strait of Hormuz and triggered a sharp spike in energy and commodity prices. Following an interim agreement between the United States and Iran in late May and early June 2026, hostilities de-escalated, and oil flows through the Strait resumed, easing prices from their April peak; energy and certain product costs nonetheless remain above pre-conflict levels, and residual geopolitical risk persists. In its April 2026 World Economic Outlook, the International Monetary Fund (IMF) projects global growth to moderate to 3.1% in 2026 and 3.2% in 2027, below recent outcomes and well under pre-pandemic averages, while global headline inflation is expected to rise to about 4.4% in

2026 before easing to 3.7% in 2027.

Risks to this outlook remain firmly on the downside, including a prolonged or wider conflict, renewed trade tensions, deeper geopolitical fragmentation and a reassessment of artificial-intelligence-led productivity gains, alongside elevated public debt. Conversely, a swift de-escalation, easing trade frictions and faster AI-driven productivity could improve the trajectory. The impact is expected to be uneven across regions, with emerging-market and developing economies, whose 2026 growth the IMF revised down to 3.9%, and commodity importers more exposed.

Indian Economy

India retained its position as the fastest-growing major economy in FY 26, with real GDP estimated to have grown by approximately 7.7%, underpinned by robust private consumption, fixed investment, tax rationalisation, front-loaded government capital expenditure and a benign price environment. FY 26 was also one of the best years for inflation in recent memory: average CPI inflation was around 2.1%, a multi-year low and comfortably below the Reserve Bank of Indias (RBI) 4% target, led by a sustained

softening in food prices on the back of a favourable monsoon and ample buffer stocks. The later part of the year saw some pressure from a firmer global commodity backdrop, currency depreciation and foreign portfolio outflows.

Looking ahead, at its June 2026 review, the RBI kept the policy repo rate unchanged at 5.25% and retained a neutral stance, while lowering its FY 27 real GDP growth projection to 6.6% (from 6.9% in April) and raising its CPI inflation projection to 5.1% (from 4.6%), citing the West Asia conflict, elevated energy prices, supply-chain disruptions and monsoon-related uncertainty. The structural drivers most relevant to us, namely rising digital-commerce penetration, growing internet and smartphone adoption, expansion of organised retail into smaller towns, and continued investment in logistics and digital public infrastructure, remain firmly intact, providing a supportive multi-year demand backdrop for third-party logistics.

These structural drivers are perhaps most visible in the rise of digital commerce, which has emerged as one of the defining features of Indias consumption story. Rising incomes, deepening internet and smartphone access and the widespread adoption of digital payments have propelled online retail from a niche channel to a mainstream mode of consumption, increasingly led by value-conscious consumers in smaller towns. The headroom remains considerable: Indias per-capita e-commerce spend stands at just 1-2% of per-capita income, against 8-10% in China and 3-5% in the USA, and online retail is projected to grow at a CAGR of 20-25% between FY 25 and FY 30, well ahead of more mature markets. Within this, quick commerce is the fastest-growing category, expanding at 50-62%, while direct-to-consumer (D2C) brands and vertical, category-focused platforms are extending the market well beyond traditional horizontal marketplaces. As consumption broadens across categories and geographies, e-commerce is fast becoming the principal engine of demand for the logistics industry that supports it.

Sources: IMF, World Economic Outlook, April 2026 ("Global Economy in the Shadow of War"); Reserve Bank of India, Monetary Policy Statement, June 2026; MoSPI provisional estimates for FY 26. Industry data referenced in the following section is drawn from the RedSeer Report (as cited in our Red Herring Prospectus) and other independent industry reports.

Industry Overview: Indian Logistics Sector

Logistics is the backbone of Indias economy, spanning the transportation, handling and storage of goods across the value chain. As of FY 25, the overall Indian logistics market was estimated at 21-23 trillion (US$247-270 billion), representing approximately 6-7% of Indias GDP, and has grown at a CAGR of 2.5-5% since FY 20. A series of government initiatives, including Bharatmala and PM Gati Shakti for corridor- based connectivity, the National Logistics Policy, and digitisation efforts such as FASTag, e-way bills and digital fuel cards, continue to lower logistics costs, drive formalisation and improve efficiency.

Within this, e-commerce logistics is the fastest- growing and most complex pocket, and the primary industry that we serve. India remains substantially under-penetrated: e-commerce contributed only about 7.6% of retail in FY 26, against roughly 32% in China and 19% in the USA, and the country was at just 3-4 e-commerce shipments per capita versus 75-85 in China and 60-70 in the USA. This gap underpins a long growth runway: industry estimates suggest online retail penetration could roughly double towards approximately 14% over the coming five years, with the B2C e-commerce logistics market and shipment volumes both projected to compound in the mid- to-high teens annually. As lower average-order-value categories such as fashion, beauty, and personal care expand, and as tier-2 and smaller cities contribute a rising share, shipment volumes are growing faster than e-commerce value, mirroring the trajectory seen in more mature markets such as China.

Traditional courier networks were not built for the scale, speed, technology integration, returns management and cash-on-delivery reconciliation that digital commerce demands, creating white space for new- age, technology-led third-party logistics (3PL) players. Organised 3PL providers catered to an estimated 40-42% of e-commerce shipments in FY 26, though outsourcing intensity varies widely by sub-segment (higher for non-horizontal and niche platforms and still nascent in quick commerce), leaving considerable headroom. Over the longer term, the share of 3PL is expected to rise as the limited profitability of captive logistics arms favours outsourcing, even as large- platform insourcing creates near-term volatility; the

market is also consolidating around a few scaled national operators, improving structural economics for the leading players. This is supported by Indias volumetric and growing gig workforce estimated at over 10 million workers, projected to reach approximately 24 million (about 4% of the workforce) by FY 30, which enables flexible, variable-cost last-mile networks. Newer demand vectors are further expanding the addressable opportunity for differentiated 3PL providers with broad service portfolios: the rapid scale- up of quick commerce and its extension into vertical, category-specific platforms, the proliferation of D2C and SME brands, and the shift of volumetric-parcel and high-value categories online.

Opportunities and Threats

The Indian logistics industry, and e-commerce logistics in particular, is being reshaped by rapid formalisation, digitisation and evolving consumption patterns. The key trends and factors driving industry growth, and the principal challenges facing the industry, are set out below.

Opportunities

• Economic growth: India remained the fastest- growing major economy in FY 26, and sustained GDP growth, rising consumption and the expansion of organised retail are expected to be major drivers of logistics demand.

• Rising incomes and a young, digital population:

growing per-capita incomes, an expanding middle- income segment and a volumetric, digitally-native under-30 population continue to accelerate the online purchase of goods and services.

• E-commerce under-penetration: with

e-commerce at only about 7-8% of retail, well below levels in China and the USA, the sector has a long growth runway, and shipment volumes are expected to grow faster than value.

• New commerce models: quick commerce, vertical quick commerce, direct-to-consumer (D2C) and social commerce continue to disrupt traditional retail, while categories such as fashion, beauty and personal care and volumetric or high-value goods increasingly move online.

• Shift towards organised 3PL: as the limited profitability of captive logistics favours outsourcing and the market consolidates around a few scaled national operators, the share of organised third- party logistics is expected to rise.

• Demand for integrated, technology-led services: enterprises increasingly seek partners offering integrated first-mile, mid-mile and last- mile, warehousing and technology solutions on a total-cost basis, favouring players with deep national capabilities.

• Technology and AI: automation, data and artificial intelligence are improving routing, sortation, forecasting and cost efficiency across the industry, and are expected to unlock further productivity gains and new demand.

• Gig workforce and government support: a

volumetric and growing gig workforce enables flexible, variable-cost last-mile networks, while initiatives such as the National Logistics Policy, PM Gati Shakti and continued infrastructure investment lower costs and support formalisation.

Threats

• Volatile fuel and input costs: fuel is a major component of transportation cost, and fuel-price and wage inflation, amplified by geopolitical events, can pressure industry margins.

• Infrastructure gaps: deficiencies in road, telecommunications, internet and air-cargo infrastructure can affect network efficiency and reliability.

• Macroeconomic and consumption risks: any

slowdown in economic or consumption growth, or a shift of consumption to alternate channels, could reduce logistics demand.

Company Overview About the Company

Shadowfax Technologies Limited is a new-age, technology-led third-party logistics (3PL) company that leverages technology to facilitate the penetration of digital commerce in India. As of 31 March 2026, our network reached 15,656 pin codes, supported by 4,778 first-mile, middle-mile and last-mile touchpoints and more than 47 lakh square feet of operational space. We serve a wide spectrum of enterprise clients across horizontal and non-horizontal e-commerce, quick commerce, food marketplaces, on-demand mobility and D2C brands.

We operate across three service lines. Express comprises forward parcel delivery together with value-added services (reverse pickups, hand-in-hand exchange, and prime same-day and next-day delivery) for e-commerce clients. Hyperlocal covers quick-commerce fulfilment, food and on-demand delivery, and mobility services in high-density consumption centres. Other logistics services include critical (high-value) logistics through CriticaLog, strategic insourcing of unbundled services, and dark-store operations. This breadth allows us to address the most diverse and complex needs of our clients from a single, integrated platform.

We are the fastest-growing 3PL company of scale in India, having expanded our express-market share from approximately 8% in FY 22 to an estimated 27-29% by the fourth quarter of FY 26, and we are the market leader in reverse-pickup, same-day delivery and 3PL quick-commerce solutions. Our scaled, asset-right national network pairs leased facilities and a leased linehaul fleet with in-house automation, preserving flexibility and operating leverage, while delivering industry-leading return metrics. Crucially, 100% of last-mile deliveries are executed through what is among Indias largest crowdsourced gig delivery- partner networks, a variable-cost model in which a single partner can fulfil e-commerce, food and quick-commerce orders on one app. A proprietary, in-house technology stack, together with increasingly embedded AI, underpins serviceability, cost efficiency and service quality.

Business Performance Review Financial Performance

We delivered a step-change in financial performance in FY 26, combining record growth with a meaningful expansion in profitability. Revenue from operations grew 69.1% year-on-year to 4,202.44 crore, while profit after tax rose to 111.71 crore from 6.43 crore. A summary of our consolidated financial performance for the year is set out below.

Particulars	FY 26	FY 25	Growth %
Revenue from operations	4,202.44	2,485.13	69.1%
Other income	36.15	29.52	22.5%
Total income	4,238.59	2,514.65	68.6%
Employee benefits expense	392.50	265.58	47.8%
Finance costs	19.88	14.41	38.0%
Depreciation and amortisation	117.37	65.24	79.9%
Other expenses	3,598.10	2,163.36	66.3%
Total expenses	4,127.85	2,508.59	64.5%
Profit before tax	110.74	6.06	n.m.
Tax expense	(0.97)	(0.37)	n.m.
Profit for the year	111.71	6.43	n.m.
Adjusted EBITDA	159.22	48.66	n.m.
Adjusted EBITDA margin (%)	3.8%	2.0%	+180 bps

Figures are on a consolidated basis as per the audited financial statements. Adjusted EBITDA is a non-GAAP measure disclosed in our quarterly earnings materials, computed as Ind AS EBITDA adjusted for share-based payment (ESOP) expense, lease accounting under Ind AS 116 and one-time items.

Revenue by Service Line

The composition of our revenue across the three service lines for the year is presented below.

Service line	FY 26 ^	% share	FY 25	% share	YoY %
Express	3,041.01	72.4%	1,716.09	69.1%	77.2%
Hyperlocal	791.99	18.8%	513.24	20.7%	54.3%
Other logistics services	369.44	8.8%	255.80	10.3%	44.4%
Total revenue from operations	4,202.44	100.0%	2,485.13	100.0%	69.1%

Performance highlights

• Express revenue grew 77.2% to 3,041.01 crore and now contributes about 72% of total revenue. Growth was driven by continued market-share expansion, new client wins, deeper engagement and rising wallet share with existing customers, sustained pin-code and network expansion, and improving service quality. Full-year express order volumes rose around 71%, with yields aided by an increasing mix of volumetric, large and D2C parcels.

• Hyperlocal revenue grew 54.3% to 791.99 crore, led by the scale-up of quick-commerce volumes where we are the largest 3PL player. We commenced operations with Amazon Now during the year and continued to serve all major horizontal quick-commerce platforms, positioning the segment for further wallet-share gains.

Other logistics services revenue grew 44.4% to 369.44 crore, comprising critical (high-value) logistics through CriticaLog, dark-store operations and other services.

Cost Analysis

Our cost structure improved as scale-led operating leverage played out across most heads, with total operating expenses declining to 96.2% of revenue from operations in FY 26 from 98.0% in FY 25. The table below presents the principal cost heads as a percentage of revenue from operations.

% of revenue from operations	FY 26	FY 25
Employee benefit expenses (ex-ESOP)	8.8%	9.4%
Partner expenses	52.6%	54.3%
Transportation charges	18.4%	18.7%
Rent	3.2%	3.5%
Lost shipments & quality-check cost	7.1%	5.7%
Consumables	2.0%	2.2%
Other expenses	4.2%	4.2%
Total expenses	96.2%	98.0%

• Partner expenses, the largest cost head, rose 63.6% to 2,209.11 crore in line with higher delivery volumes, but improved to 52.6% of revenue (from 54.3% in FY 25), reflecting the variable, crowdsourced nature of the last-mile network.

• Transportation charges increased 66.7% to 773.64 crore with network and volume growth, while easing marginally to 18.4% of revenue.

• Employee benefits expense grew 47.8% to 392.50 crore, reflecting investment in sales, technology and operations talent (including the expansion of the sales team and tier-2 sales offices); however, excluding ESOP charges, it declined to 8.8% of revenue (from 9.4% in FY 25).

• Lost shipments and quality-check costs rose to 7.1% of revenue (from 5.7% in FY 25), largely on account of higher losses during the launch of the volumetric-parcel business in the first half and quality-check debits in the reverse-logistics product. We are in the process of implementing

corrective measures, and the ratio moderated to 6.1% by the fourth quarter.

• Depreciation and amortisation increased 79.9% to 117.37 crore, driven mainly by higher right-of-use asset depreciation as the leased network of sort centres and last-mile facilities expanded, alongside an increase in depreciation on property, plant and equipment following capital expenditure of 185 crore in FY 26.

• Finance costs rose 38.0% to 19.88 crore, almost entirely due to higher interest on lease liabilities from network expansion.

Profitability

Profitability improved sharply on the back of revenue growth and operating leverage. Adjusted EBITDA nearly tripled to 159 crore, with the margin expanding by approximately 180 basis points to 3.8% from 2.0%. Profit after tax grew to 111.71 crore (a 2.7% margin) from 6.43 crore in FY 25 (0.3% margin), our first year of 100 crore-plus PAT.

Key Financial Ratios

The table below presents the key financial ratios for the current and the previous financial years.

Ratio	FY 26	FY 25	Remarks
Current Ratio	1.84	1.81	Current assets divided by current liabilities; a measure of short-term liquidity. Broadly stable year- on-year
Debt Equity Ratio	0.14	0.20	Total borrowings divided by total shareholders equity; a measure of leverage. Improved on a lower borrowing base and a strengthened equity position, keeping us near debt-free.
Trade Receivable Turnover Ratio	9.97	9.69	Revenue from operations divided by average trade receivables; a measure of collection efficiency. Marginally improved on steady billing and collections.
Net Capital Turnover Ratio	7.33	7.38	Revenue from operations divided by average working capital (current assets less current liabilities); a measure of working-capital efficiency. Broadly stable year-on-year.
Adjusted EBITDA Margin	3.79%	1.96%	Adjusted EBITDA as a percentage of revenue from operations. Expanded by about 180 basis points on scale-led operating leverage across partner, employee, transportation and rent costs.
Net Profit Margin	2.66%	0.26%	Profit after tax as a percentage of revenue from operations. Improved sharply on revenue growth and operating leverage, marking our first full year of profitability at scale.
Return on Equity Ratio	9.29%	1.19%	Profit after tax divided by average shareholders equity. Rose materially on higher profit after tax.

Strategic Growth Roadmap

We enter FY 27 with strong momentum, greater scale, a well-capitalised balance sheet and a clear strategic agenda. Our central thesis is that Indias digital penetration, only about 7-8% of retail in FY 25, will continue to rise by an estimated 120-150 basis points each year towards approximately 14% by FY 30, and that as a model-agnostic platform serving deliveries from ten minutes to several days, we are positioned to be a primary beneficiary of this shift.

Growth is being pursued through five focused engines:

• D2C and SMEs: The newly launched Shadowfax 360 platform enables zero-touch, self-serve onboarding for small sellers at flat-rate pricing. With around 15-16 lakh online sellers in India and direct ordering still nascent at 20% penetration, this funnel is significant; our D2C business grew about 2.5 times in FY 26 and is expected to grow with similar momentum.

• Volumetric-parcel capability (Prime Large): a

comprehensive solution for heavy and volumetric categories. Live in around 6,000 pin codes today

and targeting 10,000 by FY 27, with white goods and heavy shipments to be added. Demand is largely pull-driven, with higher per-shipment realisations and high entry barriers; the business grew three-to-four times over FY 25.

Coverage and pin-code expansion: having reached 15,656 of about 19,300 serviceable pin codes, we target approximately 17,000 by the end of FY 27 and full national coverage by FY 28.

Vertical quick commerce and dark stores:

building on proven pilot unit economics, we plan to scale from around 15 to about 100 dark stores in FY 27 to serve curated, vertical quick-commerce platforms (such as premium grocery, fashion, beauty, childcare, pet care and gourmet), where 3PL is expected to be the natural fulfilment answer.

CriticaLog: now 100% owned, CriticaLog serves more than 500 customers in high-value segments such as jewellery, luxury apparel and electronics. Brand and technology integration is underway, strengthening our value-added-services portfolio and opening two-way cross-sell opportunities.

Underpinning all five engines is a relentless focus on value-added services and two long-term design choices. First, artificial intelligence is being embedded as a core operating layer, improving routing, partner acquisition, demand forecasting and software-delivery speed, and expected to unlock both efficiency gains and new digital demand over time. Second, we are doubling down on a network architecture in which everything "under the roof" (last-mile facilities, sortation centres and dark stores) is self-operated and progressively automated, with a limited, optimised number of last-mile nodes, while everything "on the road" (last-mile delivery and linehaul) remains asset-right and variable. We believe this architecture, compounded over time, is central to our long-term growth and profitability.

Human Resources

Our people remain at the centre of our growth journey. As a technology-led logistics platform, we recognise that our ability to scale operations, drive innovation and deliver consistent service quality is built upon the strength of our workforce and organisational culture. As of 31 March 2026, we had 5,400+ permanent employees and worked alongside more than 19,000 contractual workforce members across technology, operations, sales, logistics and corporate functions. We remained focused on building an agile, high- performing and inclusive organisation by investing in talent development, employee engagement and leadership capability.

During FY 26, we continued to strengthen our talent management and capability-building initiatives across functions and organisational levels. Our learning and development initiatives focused particularly on the Operations team, covering functional and operational skills, process enablement and emerging areas such as Al-driven tools and digital platforms. Targeted programmes also supported internal talent development, role-specific and compliance learning, sales capability, analytics and technical skills, as well as leadership development and succession readiness. These initiatives are aimed at strengthening functional expertise and preparing our people to take on greater responsibilities as the business scales.

Employee engagement remained a key area of focus during the year. We continued to build employee connect through sports and engagement activities, recognition programmes and initiatives that encourage

employees to participate directly in ground operations. The "I Also Deliver" campaign provided employees with an opportunity to work alongside delivery partners during peak periods, gain first-hand customer and operational insights and contribute to order clearance. We also continued to advance diversity, equity and inclusion through our Women in Logistics (WiL) initiative, with support covering workplace safety, flexible working, childcare, financial and leadership development and regional POSH committees.

Our delivery partners are an integral part of our last-mile operating model. We had more than 2.6 lakh quarterly active delivery partners during the year and continued to focus on partner engagement, welfare, safety and financial support. Initiatives included support for insurance nominations and claims, income tax return filing, seasonal safety measures and standardised rider equipment, along with engagement programmes at last-mile facilities. These efforts support a more engaged partner ecosystem and the Companys ability to deliver consistent last-mile services as the network expands.

Further details on our people practices and social initiatives are provided in the ‘Our People chapter on page 35 of this Annual Report.

Risks to the Industry and Our Business

The logistics industry, including us, is subject to a range of risks and concerns that could affect our business in various ways:

• Political, macroeconomic and demographic changes could adversely affect economic conditions in India and, in turn, the logistics industry; as we derive substantially all of our revenue from India, this could affect our earnings.

• Natural disasters, epidemics, pandemics, acts of war, geopolitical tensions and similar events could materially disrupt the industry and our operations.

• Rising fuel prices and inflationary pressure on wages and assets can affect cash flows and profitability across the industry.

• Changes in taxation, or in logistics, labour, gig- worker and data-protection regulation, could increase compliance costs and affect our business.

• Deficiencies in Indias road, telecommunications, internet, air-cargo and airport infrastructure could affect the functioning of logistics operations and technology systems.

• The availability, retention and cost of delivery and transportation manpower, including gig delivery partners, together with any labour unrest, could affect operations and earnings.

• Industry growth is closely correlated with the growth of e-commerce and consumption in India, and any slowdown, or a shift of consumption to alternate channels, could reduce volumes.

• A significant portion of industry volumes is concentrated among a few volumetric customers, whose decisions, including insourcing their platform volumes, could adversely affect outsourced logistics demand.

• Changes in competitive dynamics, including competition from the captive logistics arms of volumetric customers, could affect market share and pricing.

• Reliance on partners and third parties for first- mile, mid-mile and last-mile services, contractual manpower and fleet poses operational and financial risks.

• As proprietary and third-party technology infrastructure is critical to operations, any disruption or cyber-security breach could affect business continuity and the confidentiality of data.

• Any disruption to key logistics or transportation facilities could affect operations and cash flows.

Internal Control Systems

We maintain a well-defined framework of internal

controls that is commensurate with the nature, size

and complexity of our operations. These controls are

designed to provide reasonable assurance regarding the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of fraud and error, accuracy and completeness of accounting records, reliability of financial reporting and the timely preparation of financial information, and compliance with applicable laws and regulations. Controls are reviewed and updated periodically to keep pace with our rapid growth and expanding network.

The design and operating effectiveness of these controls are tested by management and reviewed by an internal audit function, comprising in-house teams and third-party internal audit firms such as Grant Thornton Bharat LLP. The Audit Committee of the Board, composed of independent and non-executive directors, periodically reviews the adequacy of the internal control systems, significant audit findings, audit plans and the status of remedial actions, and monitors the implementation of audit recommendations. Based on these reviews, the Board is of the opinion that our internal financial controls were adequate and operating effectively as at 31 March 2026.

Cautionary Statement

Statements in this Management Discussion and Analysis describing our objectives, projections, estimates, expectations, plans or outlook, as well as descriptions of industry conditions or events, may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results, performance or achievements could differ materially from those expressed or implied in such statements. Several factors could cause a material difference to our operations, including economic and market conditions affecting demand and supply, changes in government regulations, tax laws and other statutes, geopolitical developments, commodity and fuel price movements, natural calamities, pandemics and other factors over which we have no direct control. We undertake no obligation to publicly update or revise any forward-looking statement on the basis of any subsequent developments, information or events.