Shigan Quantum Technologies Ltd Management Discussions

This Management Discussion and Analysis Report (MD&A) forms part of the Annual Report of Shigan Quantum Technologies Limited (the Company) for the financial year 2025-26, and is furnished pursuant to Regulation 34(2)(e) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

1. ECONOMIC OVERVIEW - GLOBAL AND DOMESTIC

Global environment

The global economy continued to navigate a fragmented and uncertain environment during financial year 2025-26, marked by prolonged geopolitical tensions including the ongoing conflict in West Asia elevated trade and tariff-related uncertainty, and volatility in prices of key industrial commodities such as steel, aluminium, copper and other non-ferrous metals that are critical inputs for auto-component manufacturers. Central banks in several advanced economies continued a gradual monetary easing cycle, even as supply-chain realignment (friend-shoring and ‘in-country-for-country manufacturing strategies) and technology-led disruption continued to reshape global automotive and electronics value chains. These dynamics have a direct bearing on the Companys input costs (metals, electronic components and semiconductors) and on the pace of technology collaborations with overseas partners.

Domestic environment

India remained among the fastest-growing major economies through financial year 2025-26, with the National Statistics Office and the Reserve Bank of India (RBI) placing real GDP growth for the year in the range of approximately 7.4-7.6%, supported by robust services and manufacturing activity, healthy corporate and bank balance sheets, and resilient private consumption. The rationalisation of Goods and Services Tax (GST) rates under “GST 2.0", effective during the year, together with successive repo rate cuts by the RBI, materially improved vehicle affordability and financing costs, and was cited by the Society of Indian Automobile Manufacturers (‘SIAM) as a key driver of record automobile sales in financial year 2025- 26. Fuel prices directly impact vehicle sales and demand for alternative-fuel solutions, particularly in the commercial vehicle segment, where operating costs are a key consideration. The Union Budget 2026-27 continued the Governments thrust on domestic manufacturing, capital expenditure and Production Linked Incentive (‘PLI) schemes, reinforcing the “Atmanirbhar Bharat and “Make in India" agenda that is central to the Companys localisation strategy. These favourable domestic conditions more than offset external headwinds during the year and created a broadly supportive backdrop for the automotive component industry.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

Indian automotive industry - record year

As per data released by SIAM, financial year 2025-26 was a landmark year for the Indian automotive industry, with passenger vehicles, commercial vehicles, three-wheelers and two-wheelers all posting their highest-ever sales in a Financial Year, the first time all segments have simultaneously scaled new peaks since financial year 2018-19. Domestic wholesales across categories crossed 2.83 crore units for the year. Passenger vehicle (PV) wholesales rose to about 46.43 lakh units (up ~7.9% year-on-year), commercial vehicle wholesales rose to about 10.80 lakh units (up ~12.6%), and two-wheeler wholesales rose to about 2.17 crore units (up ~10.7%). SIAM attributed the growth principally to the positive sentiment created by GST 2.0 reforms and successive RBI repo rate cuts through the year. However, CNG and LNG vehicles did not receive a preferential GST treatment, which may limit the positive impact of the GST reforms on demand for alternative-fuel vehicles. SIAM expects the overall momentum to be sustained into Financial Year 2026-27, subject to close monitoring of geopolitical risks such as the West Asia conflict and their bearing on commodity prices, freight rates and supply chains.

Alternative fuels - CNG continues to widen its lead over diesel

Alternative fuel powertrains consolidated their structural gains in the Indian passenger vehicle market during the financial year 2025-26. Industry data (SIAM/FADA) indicates that CNG-powered cars crossed the 10 lakh unit mark for the first time, taking CNGs share of PV sales to approximately 22%, ahead of diesel (which held roughly 18-19% share) for the second consecutive year. Taken together, CNG, electric and hybrid vehicles crossed approximately 13.4 lakh units, or close to 30% of total PV sales in the financial year 2025-26, with OEM factory-fitted CNG offerings (led by Maruti Suzuki, followed by Tata Motors and Hyundai) increasingly displacing the aftermarket conversion segment. This structural shift, driven by a persistent fuel-cost advantage of CNG over petrol and diesel, continues to expand the addressable market for indigenous CNG/LNG fuel-system component manufacturers. While CNG adoption increased in the passenger vehicle segment, demand for CNG vehicles in the commercial vehicle segment remained comparatively subdued during the year.

City Gas Distribution (‘CGD) infrastructure continued to expand nationwide, widening the network of CNG stations and PNG connections and reinforcing consumer confidence in the fuel.

Electric mobility - policy-backed acceleration

Electric vehicles achieved a milestone in Financial Year 2025-26, with over 2 lakh units sold in a single Financial Year for the first time, even though EVs still account for only around 4% of total car sales, underlining significant headroom for growth. The Governments PM E-DRIVE scheme (outlay of ^10,900 crore) continued to underwrite the transition, and during the year the Ministry of Heavy Industries extended the schemes tenure to 31 March 2028 for e-buses, e-trucks and testing-agency upgradation, with a dedicated allocation of approximately ^4,391 crore earmarked for the roll-out of over 14,000 electric buses across major cities, including Delhi. Public EV charging infrastructure crossed 27,000 stations nationally. At the State level, Delhis revised EV policy, higher green/entry tax on polluting vehicles, and the scheduled ban on BS-IV diesel vehicles in the National Capital Region effective October 2026 are early but durable signals of a structural shift toward electric and cleaner-fuel mobility - a trend management expects to gather pace across other metros over the medium term.

Hydrogen and green-fuel initiatives

The National Green Hydrogen Mission continues to anchor Indias green-fuel roadmap, with the Union Cabinet-sanctioned outlay of ^19,744 crore (including ^17,490 crore under the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme) supporting pilot projects and R&D toward the Governments target of a 15% share of natural gas, and hydrogen-ready mobility, in Indias energy mix by 2030. SIAM members continue to invest in hydrogen fuel-cell systems and hydrogen-ICE technology, and the Companys continues to track this space closely given its multi-decade expertise in gaseous-fuel injection systems, which are readily extendable to hydrogen applications.

Vehicle fire safety - an emerging regulatory driver

Vehicle fire-safety regulation is emerging as a distinct growth vector for the industry. Amendments to AIS-135 are expected to progressively mandate Fire Detection and Suppression System (FDSS)/Fire Detection and Alarm System (FDAS) coverage for electric buses, in addition to existing requirements for CNG/diesel buses, even as several OEMs are voluntarily adopting integrated fire-protection systems ahead of mandated timelines for asset-protection and export- readiness reasons. Government deployment programmes such as PM E-DRIVE and PM e-Bus Sewa, which together target tens of thousands of new electric buses over the next few years, are expected to expand the addressable market for compliant fire-detection and suppression solutions.

Our Company within this landscape

The Company is positioned as an end-to-end alternative-fuel systems partner to leading OEMs, with over two decades of experience across CNG, LNG and, more recently, hydrogen-ready fuel systems, complemented by a growing Fire Protection Systems (FPS/FDSS) business and an Electronics Design and Manufacturing Services (EMS) and EV-components portfolio operated through its subsidiary. The Company is one of the few companies in India to have fully indigenised BS-IV and BS-VI + OBD-II CNG fuel systems using multipoint gas injection (MPGI) technology, and continues to expand its addressable market through capacity investments and technology partnerships, as elaborated under Segment-wise/Product-wise Performance and ‘Outlook below.

3. OPPORTUNITIES AND THREATS

Opportunities

• Structural shift to CNG/LNG: CNGs widening lead over diesel in PV sales, expanding CGD infrastructure, and OEM factory-fitment strategies support sustained volume growth in the Companys core Alternative Fuel Systems business.

• Electrification of commercial fleets: Government programmes (PM E-DRIVE, PM e-Bus Sewa) targeting large- scale deployment of electric buses, and State-level policies (e.g., Delhis EV policy framework and increasing regulatory restrictions on higher-emission vehicles in the NCR, open a growing market for EV components, auxiliary controllers and EV-specific fire-protection systems.

• Regulatory tailwind in fire safety: Anticipated AIS-135 amendments mandating FDSS/FDAS coverage for electric buses, alongside voluntary OEM adoption, position the Companys Fire Protection Systems business - already growing faster than the Company average - for continued scale-up.

• Technology partnerships and localisation: New Technology License and Technology Assistance Agreements entered into during Financial Year 2025-26 (with ICE-T (Changzhou) Co., Ltd., China for automotive sensors and controllers, and with V&T Electric (Xinjiang) Co. Ltd. for EV controllers and auxiliary inverters) give the Company access to global technology for localisation under the Atmanirbhar Bharat and PLI/FAME frameworks, and can meaningfully expand the Electronics/EV components segment over the medium term.

• New customer acquisition and diversification: Addition of marquee OEM customers such as Daimler India Commercial Vehicles/Mercedes-Benz Group and PMI Electro Mobility during the year reduces customer concentration risk and demonstrates the Companys ability to serve premier OEMs across fuel platforms.

• Capacity expansion: The upcoming Unit 2 facility at Reliance METL, Jhajjar (approximately 19,000 sq.m.), designed for EV components and advanced electronics manufacturing, positions the Company to scale its newer business lines without capacity constraints.

• Export potential: Localised, cost-competitive manufacturing under “Innovating Glocally” creates an opportunity to serve export markets in ASEAN and the Middle East through the Companys EMS and EV-component capabilities.

Threats

• CNG-diesel price differential: A reduced cost advantage of CNG over diesel during Financial Year 2025-26 softened demand growth in the CNG fuel-systems business, a trend management believes is largely industry- wide but which may persist if fuel-price differentials do not widen.

• LNG vehicle adoption: The introduction and wider adoption of LNG-fuelled vehicles has been slower than expected due to inadequate LNG refuelling infrastructure and limited availability of LNG stations. The limited infrastructure has also led OEMs to adopt a cautious approach towards the launch and expansion of LNG-fuelled vehicle models, as demand remains closely linked to the availability of a reliable refuelling network.

• Input cost volatility and supply-chain disruptions: Rising prices of industrial metals (steel, non-ferrous metals), higher labour costs and supply-chain disruptions during the year compressed EBITDA margins, and the Company was not always able to pass on the full impact to customers given competitive OEM pricing dynamics.

• Customer/OEM concentration and pricing pressure: A meaningful share of revenue continues to be derived from a limited set of large OEM customers, exposing the Company to their production schedules, sourcing decisions and price negotiations.

• Competitive intensity: Both established Tier-1 suppliers and new entrants are investing in EV and fire-safety component capabilities, which could pressure pricing and market share over time.

• Technology and execution risk: Benefits from newly signed technology-licensing and assistance agreements are contingent on successful localisation, product validation and OEM approval cycles, which typically take time to translate into revenue.

• Geopolitical and supply-chain risk: Prolonged conflict in West Asia or renewed trade/tariff disruption could affect the cost and availability of imported components, electronic parts and semiconductors.

• Regulatory and policy risk: Changes in emission norms, EV/CNG incentive structures, or delays in scheme implementation (e.g., PM E-DRIVE, AIS-135 amendments) could alter the pace of demand for the Companys newer product lines.

• Trade and tariff developments: Delays in the implementation of FTAs may affect the timing and availability of potential tariff benefits on imported components, which could otherwise help mitigate import costs.

4. SEGMENT-WISE / PRODUCT-WISE PERFORMANCE

The Company reports its business across three principal lines: Alternative Fuel Systems (CNG/LNG), Fire Protection Systems (FPS/FDSS), and Electronics (EMS and EV components, largely through its subsidiary, Shigan Electronics Private Limited). Revenue contribution and growth, on a standalone basis, for the financial year 2025-26 were as follows:

Business Line	Financial Year 2025- 26 Revenue from operations (t Mn)	% of Total Revenue	Growth Over Financial Year 2024-25
Alternative Fuel Systems (CNG/LNG)	1,456	64%	7.05%
Fire Protection Systems (FPS/FDSS)	564	24%	17.50%
Electronics (EMS & EV Components)	266	12%	3%

Alternative Fuel Systems remained the largest contributor at 64% of total revenue, growing 7.05% during the year. Growth in this segment was primarily driven by higher automotive passenger car sales, which grew approximately 30% compared to the previous year, benefiting the Companys CNG-related product lines even as the LNG sub-segment faced softer demand on account of the narrowing LNG-diesel price gap referred to earlier.

Fire Protection Systems was the fastest-growing segment, up 17.50% during the year, aided principally by the addition of new customers, including Daimler India Commercial Vehicles (DICV). This segment continues to benefit from increasing OEM focus on vehicle and passenger safety, ahead of anticipated regulatory mandates under AIS-135.

Electronics (EMS and EV components) grew a modest 3% during the year, reflecting the early stage of this business; however, management believes this segment anchored by new technology-licensing arrangements and the Jhajjar facility will be the principal driver of incremental growth going forward, as elaborated under Outlook below.

Financial performance overview

A summary of the Companys consolidated financial performance over the last four years is set out below

(in Crore, unless stated otherwise):

Particulars	Financial Year 2022-23	Financial Year 2023-24	Financial Year 2024-25	Financial Year 2025-26
Revenue from Operations	163.66	151.91	210.97	218.43
EBITDA	10.00	12.91	21.07	18.72
EBITDA Margin (%)	6.23%	8.50%	9.99%	8.57%
Profit After Tax (PAT)	3.67	4.77	8.73	6.75
Net Worth	53.83	70.65	92.96	99.26
Working Capital (Days)	79	110	84	98

On a standalone basis, financial year 2025-26 total revenue grew 9% year-on-year to ^ 231.32 crore (Financial Year

2024- 25: ^ 211.83 crore), while consolidated total revenue grew 4.2% to ^ 221.15 crore (Financial Year 2024-25: ^ 212.25 crore). Consolidated EBITDA margin for the year stood at 9.69% (Financial Year 2024-25: 10.54%), with H2 Financial Year 2025-26 margins improving sequentially by nearly 300 basis points over H1 Financial Year

2025- 26 on the back of operational efficiency measures, even as full-year margins remained below Financial Year 2024-25 due to higher input costs. Consolidated PAT for the year was ^ 6.75 crore (Financial Year 2024-25: ^ 8.73 crore), a decline of approximately 22.7%, with H2 Financial Year 2025-26 PAT of ^ 4.31 crore recovering sharply - up 77% over H1 Financial Year 2025-26 reflecting the benefit of cost-management actions taken during the year. The Board has recommended a final dividend of 5% (^ 0.50 per equity share of ^10 each) for financial year 2025-26.

5. OUTLOOK

Management expects the Companys traditional Alternative Fuel Systems business to continue growing steadily, underpinned by the structural, policy-supported shift toward CNG in the Indian passenger and LNG in commercial vehicle market. At the same time, the Company views EV components as the principal driver of its next phase of growth, and intends to scale this business with a deliberate, phased approach rather than rapid, unplanned expansion.

Key elements of the Companys forward strategy:

• Scaling the EV components and Electronics business for localisation of auxiliary controllers for electric buses, and progressive ramp-up of the Jhajjar facility for EMS and EV-component manufacturing.

• Commercialising the technology partnerships entered into with V&T Electric (Xinjiang) Co. Ltd. to localise controllers, EV controllers and auxiliary inverters, with a stated ambition of achieving 75% localisation within three years under Government EV incentive schemes, including PM E-DRIVE.

• Deepening the Fire Protection Systems franchise by expanding into State Transport Undertakings and private fleet operators under PM E-DRIVE/PM e-Bus Sewa, and preparing for anticipated AIS-135 mandates on EV-bus fire safety.

• Continuing to broaden the OEM customer base beyond existing relationships, building on the financial year 2025-26 wins with Daimler (Mercedes-Benz Group) and PMI Electro Mobility.

• Monitoring and responding to State-level regulatory tailwinds, such as Delhis EV policy and the scheduled ban on BS-IV diesel commercial goods vehicles in the NCR from October 2026, which management expects to translate into durable demand for cleaner-fuel and electric components over the medium term.

• Maintaining cost discipline and working-capital management to protect margins in an environment of continuing input-cost volatility.

While the financial year 2025-26 EBITDA margins and profitability were impacted by input cost pressures, the sequential improvement in H2 financial year 2025-26 margins and profitability, together with the Companys expanding order book and diversified growth verticals, gives management confidence in the Companys medium- term growth trajectory. As stated by the Managing Director, the Company remains “grounded in its numbers, honest about its challenges, and genuinely optimistic about what lies ahead.”

6. RISKS AND CONCERNS

The Companys Risk Management framework seeks to identify, assess and mitigate risks that could impact the achievement of its business objectives. Key risks and the Companys mitigation approach are summarised below:

Raw material and input cost risk

The Companys margins are sensitive to prices of steel, aluminium, brass and other non-ferrous metals and electronic components, which were elevated during the financial year 2025-26. The Company continued to mitigate these cost pressures through operational efficiency, vendor rationalisation, value engineering, and calibrated pass-through in customer negotiations, supported by the sequential margin improvement achieved in H2 financial year 2025-26.

Customer/OEM concentration risk

Dependence on a limited set of large automotive OEMs exposes the Company to their production cycles and sourcing decisions. To mitigate this risk, the Company continued to diversify its customer base, (including new OEM wins during the financial year 2025-26) and expansion across multiple product lines and fuel platforms to reduce reliance on any single customer or technology.

Technology and execution risk

Newly signed technology-licensing and assistance agreements require successful localisation, testing and OEM validation before they translate into revenue, and delays could affect the pace of growth in the Electronics/EV components segment. The Company is mitigating this risk through phased capacity investment (including the Jhajjar facility), in-house R&D capability, and structured engineering support from technology partners.

Regulatory and policy risk

Changes in emission norms, delays or modifications to EV/CNG incentive schemes including PM E-DRIVE, or deferment of anticipated AIS-135 fire-safety mandates could affect demand for the Companys product lines. The Company mitigates this risk through close engagement with industry bodies such as SIAM and continuous tracking of policy developments.

Working capital and liquidity risk

Working capital days increased to 98 in the financial year 2025-26 (financial year 2024-25: 84), with debtor and inventory cycles remaining elevated relative to historical levels, increasing reliance on borrowings (consolidated borrowings of ^ 66.11 crore as at 31st March, 2026). The Company is addressing this through tighter receivables management, inventory optimisation initiatives, and continued monitoring of the cash conversion cycle; cash flow from operations, on consolidated basis, improved markedly in the financial year 2025-26 to ^ 8 crore (financial year 2024-25: cash outflow of ^ 6 crore).

Delay in TREM-V implementation:

The proposed deferment of TREM-V norms for the specified tractor segment to 2032 may delay the adoption of CBG-powered tractors and defer the Companys expansion into the tractor segment. The Company mitigates this risk through continued monitoring of regulatory developments, evaluation of emerging market opportunities, and diversification across its existing product and fuel-technology portfolio.

Interest rate and financing risk

Rising borrowings to fund capacity expansion increase exposure to interest rate movements; finance cost rose to ^ 7.60 crore in the financial year 2025-26 from ^ 6.55 crore in the financial year 2024-25. The Company continues to mitigate this risk through prudent capital allocation, phased capex, and continued evaluation of the optimal debt-equity mix.

Cyclicality and macro/geopolitical risk

The automotive component industry remains sensitive to macroeconomic cycles, fuel-price differentials, and geopolitical developments such as the ongoing West Asia conflict, which could affect input costs, freight rates and OEM production schedules. The Company mitigates these risks through diversification across fuel platforms (CNG, LNG, EV, hydrogen-ready systems) and end-use segments (passenger, commercial, off-highway, locomotive).

Competition risk

Increased participation by established Tier-1 suppliers and new entrants across EV and fire-safety components could exert pricing pressure. The Company seeks to address this through continued investment in R&D, technology partnerships, and the Companys track record as the first Indian company to fully indigenise BS-IV/BS-VI + OBD-II CNG fuel systems.

Foreign Exchange Risk

The Company is exposed to foreign exchange fluctuations arising from imports of raw materials, technology-related payments and other transactions denominated in foreign currencies, particularly the US Dollar. Adverse movements in exchange rates may increase input and operating costs and could affect profitability. The Company seeks to mitigate this risk through regular monitoring of foreign currency exposures, prudent management of foreign currency payables and receivables, appropriate pricing mechanisms.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place internal control systems commensurate with the size, scale and nature of its operations, covering financial reporting, procurement, inventory management, and compliance with applicable laws and regulations. These controls are periodically reviewed by the Internal Auditors, and significant suggestion / observations, if any, together with corrective action plans, are placed before the Audit Committee of the Board. The Statutory Auditors have also reported on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting as at 31st March, 2026. Management believes these controls are adequate for the size of the Companys operations, and continues to strengthen them in line with the Companys growth, including through the recent strengthening of the corporate governance.

8. HUMAN RESOURCES AND LEADERSHIP

The Company continued to strengthen its leadership and operating team during the financial year 2025-26, with key additions including Mr. Prashant K. Banerjee as an Independent Director, with over 36 years of automotive engineering and regulatory experience, and a long association with SIAM), Mr. Sandip Verma (Business Acquisition, bringing over 28 years of automotive industry experience including with BorgWarner and Delphi Technologies), and Mr. Sachin Dagar (Company Secretary and Compliance Officer). The Company continues to view its engineering talent and institutional OEM relationships, built over more than two decades, as a core competitive strength, and remains committed to building organisational capability in step with its diversification into EV components, electronics and fire-protection systems. As at 31st March, 2026, the Company had 92 employees.

9. Details of significant changes in Key Financial Ratio(s) attributable to change of 25% or more:

Particulars	Financial Year 2025-26	Financial Year 2024-25	Change %
Net Profit Ratio		4.03%	(25.56)

Explanation: The increase in finance costs and fluctuations in the US dollar exchange rate during the year adversely impacted the profitability of the Company during the financial year 2025-26. This, in turn, resulted in a decrease in the Companys profit margins and impacted the net profit ratio as compared to the previous financial year.

10. Details of change in Return on Net Worth

Particulars	Financial Year 2025-26	Financial Year 2024-25	Change %
Return on Net Worth	7.14%	10.66%	(33.05)

Explanation: The increase in finance costs and fluctuations in the US dollar exchange rate during the year adversely impacted the profitability of the Company during the financial year 2025-26. This resulted in a decrease in the Companys profit percentage, which consequently impacted the return on net worth as compared to the previous financial year.

CONCLUDING REMARKS

Financial Year 2025-26 was a year in which the Companys established Alternative Fuel Systems and Fire Protection Systems businesses delivered resilient growth despite a challenging cost environment, while the Company took deliberate steps through new customer wins, technology partnerships and capacity investments to build its next growth engine in EV components and electronics through its wholly owned subsidiary, Shigan Electronics Private Limited. With Indias automotive industry entering financial year 2026-27 on the back of a record financial year 2025-26, supportive Government policy across CNG, EV and fire-safety domains, and the Companys own diversified and technology-led portfolio, the management remain confident of the Companys ability to deliver sustainable, long-term value to all stakeholders.

Cautionary Statement: Statements in this MD&A describing the Companys objectives, projections, estimates and expectations may constitute “forward-looking statements" within the meaning of applicable securities laws. Actual resuits could differ materially from those expressed or implied, on account of various risk factors and uncertainties, including but not limited to those discussed under Risks and Concerns. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.