Shayona Engineering Ltd Management Discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

Indias industrial environment remained supportive during FY 2025-26. According to the Ministry of Statistics and Programme Implementation (MoSPI), the Index of Industrial Production for April-March 2025-26 recorded growth of 5.0% in manufacturing. Within manufacturing, fabricated metal products grew by 7.5% and machinery and equipment by 6.5%. On a use-based classification, capital goods and infrastructure/construction goods recorded growth of 8.3% and 9.8%, respectively. These trends are relevant to the Companys engineering, fabrication, machinery and project-execution activities, although Company-specific demand remains dependent on customer capital expenditure and project cycles.

The operating environment for polymer-based products was comparatively moderate, with the IIP for manufacture of rubber and plastics products recording growth of 0.6% during FY 2025-26. At the same time, public water-supply infrastructure continued to provide a demand backdrop for piping systems. The Ministry of Jal Shakti reported that, as at March 3, 2026, approximately 15.82 crore of 19.36 crore rural households (81.71%) had tap-water supply under the Jal Jeevan Mission, with works for the remaining households at various stages of implementation. The Mission has been extended up to 2028.

Against this industry backdrop, the Company operates across engineering and allied manufacturing activities and, during FY 2025-26, expanded into manufacture of PVC Pipes & Fittings and HDPE Pipes & Fittings. The diversification increases the breadth of the Companys manufacturing platform, while the performance of the new piping activity will depend on market development, capacity utilisation, product acceptance and competitive conditions.

2. BUSINESS OVERVIEW

Shayona Engineering Limited provides engineering and manufacturing solutions across precision machining, fabrication, process equipment, automation and turnkey execution. Its principal capabilities include:

CNC machining and turning services; heavy fabrication and structural engineering; dies, moulds and precision components; casting and forging;

industrial automation, material handling, weighing and batching systems; engineering design, reverse engineering and process equipment; turnkey project execution, including solutions for the PVC pipe extrusion industry; and manufacture of PVC and HDPE pipes and fittings.

The Companys engineering platform is supported by machining, fabrication, automation and design capabilities intended to address customised industrial requirements. Its piping solutions include PVC and HDPE pipes and fittings for applications such as water supply, plumbing, construction and irrigation. Commercial production at the Menpura Division commenced with effect from January - 2026.

During the year, the Company focused on scaling its existing engineering operations, commissioning the Menpura manufacturing facility, widening its product portfolio and strengthening its capital base through the Initial Public Offering (IPO).

3. FINANCIAL AND OPERATIONAL PERFORMANCE

The financial performance for FY 2025-26 compared with FY 2024-25 is summarised below:

in lakh

Particulars	FY 2025-26	FY 2024-25	Change
Revenue from Operations	4,027.23	2,316.13	73.88%
Other Income	3.99	1.56	155.77%
Total Income	4,031.22	2,317.69	73.93%
EBITDA	756.53	513.43	47.35%
Finance Cost	160.60	95.56	68.06%
Depreciation & Amortisation	61.85	25.98	138.07%
Profit Before Tax	534.08	391.89	36.28%
Profit After Tax	404.14	241.91	67.06%

Revenue from operations increased by 73.88% to 4,027.23 lakh from 2,316.13 lakh. EBITDA increased by 47.35% to 756.53 lakh, while Profit Before Tax and Profit After Tax increased by 36.28% and 67.06%, respectively. EBITDA margin moderated to approximately 18.78% from 22.17%, reflecting that the operating cost base increased at a faster rate than EBITDA during the scale-up in operations.

Finance cost increased by 68.06% to 160.60 lakh and depreciation and amortisation increased by 138.07% to 61.85 lakh. The higher depreciation is consistent with the substantial increase in the Companys property, plant and equipment following capital expenditure and commencement of commercial production at the Menpura Division. Total assets increased to 5,341.62 lakh from 2,960.12 lakh, while shareholders funds strengthened materially following the IPO and retention of profits.

The higher scale of operations also resulted in greater working-capital absorption. Trade receivables increased to 2,182.32 lakh from 1,173.87 lakh, and net cash used in operating activities was 579.57 lakh compared with 224.86 lakh in the previous year. Accordingly, managements focus on receivable realisation, working-capital discipline and utilisation of the expanded asset base remains relevant to the Companys operating performance.

4. KEY DEVELOPMENTS DURING THE YEAR

The Company completed its IPO during FY 2025-26 and its equity shares were listed on the SME Platform of BSE Limited on January 30, 2026. The fresh issue strengthened the equity base and provided resources for the objects stated in the Prospectus. Details relating to utilisation of IPO proceeds, including the temporary category-wise variation reported as at March 31, 2026, are disclosed in the Boards Report and the financial statements.

The Members approved alteration of the Main Object Clause during the year to include manufacture and allied activities relating to PVC, HDPE and other polymer-based pipes, tubes, conduits, fittings and allied products.

Commercial production of PVC Pipes & Fittings and HDPE Pipes & Fittings commenced at the Menpura Division with effect from January - 2026. As the activity commenced during the last quarter of the financial year, its contribution remained below the threshold for separate reportable-segment disclosure for FY 2025-26.

5. OPPORTUNITIES

The principal opportunities relevant to the Company include the following:

Industrial and capital expenditure cycle

Growth in manufacturing, capital goods and infrastructure/construction activity can support demand for machining, fabricated components, process equipment, material-handling systems and turnkey engineering solutions. The Companys ability to participate in such opportunities will depend on customer capital expenditure, tender/project conversion and execution capability.

Water infrastructure and piping applications

Continued implementation of rural water-supply, irrigation and allied infrastructure projects provides a relevant market backdrop for PVC and HDPE piping systems. The Companys new piping operations broaden its addressable product portfolio, subject to product approvals, pricing, distribution development and competitive intensity.

Integrated engineering and automation capabilities

The Companys combination of machining, fabrication, automation, reverse engineering and turnkey execution enables it to address requirements involving customised equipment and integrated solutions rather than stand-alone components alone.

Expanded manufacturing platform and capital base

Commissioning of the Menpura Division and the strengthened capital base following the IPO provide a platform for capacity utilisation, product diversification and customer development. The pace of returns from these investments will depend on utilisation levels, order conversion and working-capital efficiency.

These opportunities are subject to market conditions, customer demand, competitive intensity, availability and pricing of inputs, regulatory requirements and the Companys ability to execute its business plans.

6. RISKS AND CONCERNS

The Companys business and financial performance are exposed to, inter alia, the following risks:

Raw material and input-cost volatility

The engineering business is exposed to movements in prices of metals and fabricated inputs, while the piping business is exposed to polymer/raw-material prices. Inability to pass through cost increases in a timely manner may affect margins and competitiveness.

Working-capital and credit concentration

The Companys operations are working-capital intensive. Trade receivables increased materially during the year and the audited financial statements disclose that approximately 71% of trade receivables were attributable to a single party as at March 31, 2026. This concentration increases sensitivity to collection timing and counterparty performance.

Competition and customer/project cycles

The Company operates in competitive industrial markets involving organised and unorganised participants. Demand is linked to customer capital expenditure, industrial activity and project cycles, and competitive pricing may affect order conversion and margins.

Execution and scale-up risk

Performance depends on timely procurement, production planning, quality control, project execution and delivery. The recently commissioned piping operation also carries ramp-up risk relating to capacity utilisation, market penetration, product mix and operating efficiency.

Financial and interest-rate risk

Borrowings increased during the year and finance cost rose by 68.06%. Changes in interest rates, borrowing mix, cash conversion and working-capital requirements may therefore affect profitability and liquidity.

Regulatory, quality and compliance risk

The Companys products and operations are subject to applicable corporate, securities, taxation, labour, environmental, product-quality and industry-specific requirements. Changes in regulatory standards or non-compliance may increase cost or affect operations and market access.

The Company identifies and reviews business, operational, financial and regulatory risks as part of its management and governance processes and seeks to mitigate them through operating controls, financial discipline and compliance monitoring.

7. SEGMENT-WISE / PRODUCT-WISE PERFORMANCE

Based on the internal reporting structure and management assessment disclosed in the audited financial statements, the Companys operations for FY 2025-26 were considered one reportable business segment, namely engineering and allied manufacturing activities. Revenue from PVC & HDPE Pipes and Fittings remained below the quantitative threshold prescribed under Accounting Standard (AS) 17 for separate reportable-segment disclosure.

Revenue from international customers was also below the applicable quantitative threshold for separate geographical-segment disclosure. Accordingly, separate segment-wise or geographical financial information has not been presented for FY 2025-26.

The Company will continue to evaluate segment reporting in subsequent periods based on the scale and relative contribution of the piping business and other activities.

8. OUTLOOK

The Companys outlook is centred on improving utilisation of its expanded manufacturing base while continuing to develop its established engineering activities. The operating environment is supported by manufacturing and infrastructure activity, but near-term performance will depend on order inflow, conversion of opportunities, working-capital management and ramp-up of the Menpura Division.

Key operating priorities include:

improving utilisation and productivity across existing facilities; developing the PVC and HDPE pipes and fittings business; strengthening customer relationships and market reach; improving receivable realisation and working-capital efficiency; selective adoption of automation and process improvements; and disciplined deployment of capital towards the stated business objectives.

The outlook is subject to changes in economic and industrial conditions, input prices, competition, customer demand, financing conditions, regulatory requirements and the Companys ability to execute its plans.

9. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has internal financial controls and operating controls commensurate with the size and nature of its business. The Statutory Auditors, in their report on internal financial controls over financial reporting, opined that the Company had, in all material respects, adequate internal financial controls over financial reporting and that such controls were operating effectively as at March 31, 2026.

Consequent upon listing of the Companys equity shares on the BSE SME Platform, the internal audit requirement became applicable during the latter part of FY 2025-26. The Board, at its meeting held on May 26, 2026, appointed M/s. J A Y A M & Associates LLP, Chartered Accountants, as Internal Auditor, with the scope also covering the relevant period of FY 2025-26.

The statutory audit observations also identified areas for process strengthening, including maintenance of inventory records at a more granular level and related reconciliations. The Company continues to strengthen financial, operational and compliance controls having regard to the scale and evolving regulatory requirements of a listed entity.

10. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Human resources remain integral to the Companys engineering, manufacturing and project-execution capabilities. The Company continues to focus on employee engagement, skill development, safety, accountability and productivity.

Industrial relations remained cordial during FY 2025-26, and there were no material human-resource developments having a significant adverse effect on operations.

As at March 31, 2026, the Company had 28 employees, comprising 20 male employees and 8 female employees.

11. KEY FINANCIAL RATIOS

The following key financial ratios have been computed from the audited financial statements. The reason for each year-on-year movement of 25% or more is incorporated in the table itself:

Ratio	FY 2025-26	FY 2024-25	Change / Explanation for Material Variation
Current Ratio	1.81	1.29	40.3% increase - current assets increased materially faster than current liabilities, principally due to higher trade receivables, cash/bank balances and other current assets.
Debt-Equity Ratio	0.76	1.41	46.2% decrease - although total debt increased, shareholders funds expanded substantially following the IPO and retention of profits.
Inventory Turnover Ratio	20.91	10.75	94.4% increase - revenue grew by 73.9% while average inventory reduced to about 192.64 lakh from 215.40 lakh.
Trade Receivable (Debtors) Turnover Ratio	2.40	2.67	10.0% decrease
Interest Coverage Ratio	4.33	5.10	15.2% decrease
			52.5% decrease - working capital increased
Net Capital Turnover Ratio	2.90	6.10	to about 1,389.74 lakh from 379.55 lakh, outpacing revenue growth as the current-asset base expanded.
Operating Profit Margin	17.25%	21.05%	18.0% decrease
Net Profit Margin	10.04%	10.44%	3.9% decrease
Return on Net Worth / Equity	22.13%	34.91%	36.6% decrease - profit after tax increased by 67.1%, but average shareholders equity increased more sharply following the IPO, moderating the return on the enlarged capital base.

Interest Coverage Ratio has been computed as EBIT divided by finance cost; Operating Profit Margin as EBIT divided by revenue from operations; and Return on Net Worth as profit after tax divided by average shareholders equity. Ratios are rounded for presentation.

12. CAUTIONARY STATEMENT

This Management Discussion and Analysis contains statements relating to the Companys objectives, plans, expectations, estimates and outlook that may constitute forward-looking statements within the meaning of applicable laws and regulations.

Forward-looking statements are based on current assumptions and expectations and are subject to risks and uncertainties, including changes in economic and industrial conditions, customer demand, competition, input prices, working-capital cycles, financing conditions, regulatory requirements and other factors beyond the Companys control. Actual results may differ materially from those expressed or implied.

The Company undertakes no obligation to publicly update or revise any forward-looking statement except as may be required under applicable law.