Shri Kanha Stainless Ltd Management Discussions

For the Financial Year 2025-26

01 INDUSTRY STRUCTURE AND DEVELOPMENTS

Shri Kanha Stainless Limited ("SKSL, "the Company") operates in the precision cold-rolled stainless steel strip, coil, sheet

and circle segment of Indias broader stainless steel industry, manufacturing 200, 300 and 400 series grades at its facility in Reengus, Sikar district, Rajasthan, on the Delhi-Mumbai industrial corridor.

Indias stainless steel consumption grew approximately 8% year-on-year to reach 4.85 million tonnes in FY2024-25 - the

latest year for which industry-wide figures are available - against an installed national production capacity of roughly 7.5 million tonnes operating at about 60% utilisation, with medium-term demand growth guided at 7-8% per annum, supported by emerging applications in green energy, water infrastructure, defence and aerospace, alongside established demand from automotive, consumer durables, construction and process industries. (Source: Indian Stainless Steel Development

Association (ISSDA), as reported byYieh Corp Steel News, yieh.com, Aug 2026)

Domestic manufacturers also benefit from a more supportive quality-compliance regime: the Steel and Steel Products (Quality Control) Order, 2024 (effective September 2, 2024, amended November 20, 2025) mandates BIS Standard Marking

and valid test certification for cold-rolled sheets and strips among 145 covered primary steel products, raising the compliance bar for imports and reinforcing the position of certified domestic producers. (Source: Steel and Steel Products (Quality Control) Order, 2024, as summarised by MBG Corporate Services, mbgcorp.com)

On the cost side, nickel - a key input for austenitic (300-series) stainless steel - remained volatile through the year. As a current reference point rather than an FY26 average, LME nickel was trading around US$16,877/tonne as of late August 2026 (subsequent to the FY26 year-end), up approximately 10% over the preceding twelve months, with prices influenced

by tighter Indonesian ore-export quotas. Such input-cost volatility has a direct bearing on the industrys cost of material consumed and working-capital requirements. (Source: Trading Economics, LME nickel price data as of Aug 25, 2026, tradingeconomics.com/commodity/nickel)

Separately, the global stainless steel industry, through forums such as the International Stainless Steel Forum / World Stainless, promotes the materials recyclability and circular-economy credentials as a durable, sustainable alternative to shorter-life materials in appliances, construction and industrial equipment - a substitution narrative also cited in the Companys own strategic materials. (Source: World Stainless (International Stainless Steel

Forum), worldstainless.org/sustainability)

02 COMPANY OVERVIEW, OPPORTUNITIES AND THREATS

Business profile

SKSL brings over 35 years of on-ground manufacturing experience in precision stainless steel cold-rolled strips. The Company transitioned to a public limited company in August 2024 and completed its Initial Public Offering of 51,42,400 equity shares (face value ~10 each) at an issue price of ~90 per share, listing on the National Stock Exchange (NSE) on December 10, 2025. Net IPO proceeds of ~4,048.75 lakh were received during the year and deployed towards debt

reduction, working capital and capacity expansion (see Section 5). The Company operates as a single reportable segment-manufacturing and trading of stainless steel (Note 39 to the financial statements).

The Companys principal engineering differentiator is its ability to roll strip down to 0.08 mm - thinner than a human hair (~0.07-0.10 mm) - using a specialised 20-Hi rolling mill with real-time Automatic Gauge Control. Standard domestic rolling

capacity typically bottoms out around 0.15-0.20 mm, so this ultra-thin capability, together with a fully in-house value chain (slitting, cold rolling, bright annealing and final cut-and-polish under ISO 9001:2015 and BIS-compliant quality systems), gives SKSL access to niche, higher-margin applications in precision electronics, surgical instruments and razor-blade/shaving-blade manufacturing where competition is limited and standard mills cannot economically compete.

03 SEGMENT-WISE/ PRODUCT-WISE PERFORMANCE

The Company operates in a single reportable segment - manufacturing and trading of stainless steel - as identified by management under Ind AS 108 (Note 39 to the financial statements); segment-wise or product-wise performance disclosure is accordingly not applicable.

Opportunities

? Expansion of manufacturing capacity to serve higher-value, tighter-tolerance product niches where technical barriers to entry are high and competitive intensity is comparatively low.

? Structural sustainability tailwinds, including substitution of shorter-life materials with recyclable stainless steel, and continued urbanisation- and infrastructure-led demand growth across automotive, consumer durables and industrial

end-markets.

? A more supportive quality-compliance regime that favours certified domestic manufacturers over non-compliant imports.

? Recurring, relationship-driven dealer and customer relationships that support near-term revenue visibility.

Threats and challenges

? Concentration risk inherent in a dealer-led distribution model, including reliance on a limited number of large customers and related-party counterparties.

? Exposure to volatility in key raw material prices, which can compress margins where increases are not fully passed through to customers.

? Working capital intensity arising from extended customer credit periods and vendor-qualification cycles typical of the industry.

? Execution risk associated with capacity-expansion plans, and geographic concentration in a single manufacturing location.

04 DISCUSSION ON FINANCIAL PERFORMANCE- RESULTS OF OPERATIONS

The Company delivered broad-based growth in FY26, with revenue from operations rising 41.1% and profit after tax rising

50.9% over FY25, aided by an improved product mix, higher capacity utilisation and moderating finance costs, partly offset by one-time listing-related expenses.

PARTICULARS( IN LAKH)	FY 2025-26	FY 2024-25	% CHANGE
Revenue from Operations	20,564.88	14,579.11	+41.1%
other Income	17.59	59.60	-70.5%
Total Income	20,582.47	14,638.71	+40.6%
Cost of Material Consumed	17,745.19	12,930.94	+37.2%
Changes in Inventories	134.12	(347.17)	n.m.
(WIP/FG)
Employee Benefit Expenses	341.84	295.11	+15.8%
Finance Costs	438.01	476.32	-8.0%
Depreciation & Amortisation	170.79	152.89	+11.7%
Other Expenses	583.21	362.33	+61.0%
Total Expenses	19,413.16	13,870.43	+40.0%
EBITDA*	1,760.52	1,337.90	+31.6%
Profit Before Tax	1,169.31	768.29	+52.2%
Tax Expense (net)	295.62	189.24	+56.2%
Profit After Tax	873.69	579.05	+50.9%
Basic & Diluted EPS ( /share)	7.28	5.55	+31.2%

*EBITDA computed by management as Profit Before Tax+ Finance Costs+ Depreciation & Amortisation - Other Income (a non-GAAP measure, not directly disclosed in the audited statement of profit and loss). Source: Statement of Profit and Loss and accompanying Notes 20-28, audited financial statements for the year ended March 31, 2026.

Key drivers

? Revenue growth was driven by an improved product mix and higher capacity utilisation, while cost of material consumed grew more slowly than revenue, improving gross margins.

? Other expenses increased mainly on account of costs associated with the Companys transition to listed status and higher operating throughput during the year.

? Finance costs declined as a portion of borrowings was repaid using IPO proceeds, lowering the average cost of debt despite higher short-term borrowings.

? EBITDA margin moderated modestly, largely reflecting non-recurring listing-related costs and lower other income, even as EBITDA and profitability grew strongly in absolute terms.

? Profit after tax grew faster than revenue on the back of operating leverage and lower finance costs, while earnings-per-share growth trailed profit growth because the weighted average share count increased following the equity issuance (IPO)

completed during the year. os FINANCIAL POSITION - BALANCE SHEET

PARTICULARS( IN LAKH)	31-MAR-2026	31-MAR-2025	% CHANGE
Share Capital	1,558.24	87.00	n.m.
Reserves 6 Surplus	4,580.42	1,129.21	+305.7%
Shareholders Funds (Net	6,138.66	1,216.21	+404.7%
Worth)
Long-Term Borrowings	239.12	601.33	-60.2%
Short-Term Borrowings	5,325.74	4,496.71	+18.4%
Trade Payables	2,787.37	3,914.04	-28.8%
other Liabilities 6 Provisions	525.39	385.12	+36.4%
Total Equity 6 Liabilities	15,016.28	10,613.41	+41.5%
Net Block- Property, Plant 6	1,799.12	1,701.89	+5.7%
Equipt.
Inventories	4,822.01	2,520.13	+91.3%
Trade Receivables	5,015.74	5,360.23	-6.4%
Cash & Bank Balances	512.82	170.51	+200.8%
other Current/Non-Current	2,866.59	860.65	+233.1%
Assets
Total Assets	15,016.28	10,613.41	+41.5%

Source: Statement of Assets and Liabilities and Notes 2-19, audited financial statements for the year ended March 31, 2026,

INR Lakhs, rounded.

os CASH FLOW ANALYSIS

PARTICULARS( IN LAKH)	FY 2025-26	FY 2024-25
Operating profit before working capital	1,762.98	1,347.13
changes
Net cash used in Operating Activities	(3,121.69)	(877.95)
Net cash used in/ from Investing Activities	(598.65)	463.27
Net cash from/ (used in) Financing	4,077.56	(771.92)
Activities
Net Increase/ (Decrease) in Cash 6 Cash	357.22	(1,186.60)
Equivalents
Closing Cash 6 Cash Equivalents	367.38	10.16

Underlying operating profitability before working-capital movements improved 30.9% to n,762.98 lakh. However, net cash used in operating activities widened to ~3,121.69 lakh (from ~877.95 lakh) as the Company absorbed ~2,301.88 lakh into

inventory build-up and n,126.67 lakh into reduced trade payables, only partly offset by a ~344.49 lakh reduction in receivables. This working-capital investment was funded through the IPO: net cash from financing activities was ~4,077.56 lakh (comprising ~4,048.75 lakh net IPO proceeds and ~829.03 lakh net short-term borrowings, partly offset by ~362.21 lakh of long-term debt repayment and ~438.01 lakh of interest paid), while investing activities absorbed ~598.65 lakh,

mainly ~303.58 lakh of capital expenditure on property, plant and equipment. Overall, cash and cash equivalents rose to ~367.38 lakh at year-end from ~10.16 lakh, materially strengthening liquidity.

01 KEY FINANCIAL RATIOS

The table below sets out the Companys key financial ratios for FY26 and FY25. Rows 1-10 reproduce the formula (numerator/denominator) and ratios disclosed by the Company in Note 41 to the audited financial statements, prepared

under Schedule Ill (Division II) to the Companies Act, 2013. Rows 11-12 (Interest Coverage Ratio and Operating Profit Margin) are separately computed by management to meet the distinct ratio-disclosure requirement of Schedule V, Part B of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which are not otherwise tabulated in Note 41. Explanations are provided for variations of 25% or more year-on-year, together with the mandatory explanation of

change in Return on Net Worth.

RATIO	FORMULA (NUMERATOR/ DENOMINATOR)	FY26	FY25	% CHG	EXPLANATIONo FOR CHANGE (> 25%)
Current Ratio (x)	Current Assets/ Current Liabilities	1.49	1.01	+48.2%	Increase mainly due to higher inventory and advances to suppliers.
Debt-Equity Ratio (x)	Total Debt (incl. current maturities of LT borrowings)/ Net Worth	0.91	4.19	-78.4%	Decrease due to increase in share capital (I PO/bonus) and profit during the year, raising net worth.
Debt Service	(Net Profit after Tax	1.85	1.25	+48.7%	Increase mainly
Coverage Ratio (x)	+ Non-cash Operating Expenses+ Interest Expense)/ (Interest 6 Lease Payments+ Principal Repayments)				due to repayment of loan and higher profit during the year.
Return on Equity (%)	Net Profit after Tax/ Average Net Worth	23.76%	62.49%	-38.7 pp•	Decrease mainly due to the sharp increase in share capital (I PO/bonus issue) enlarging the average net-worth base, despite higher absolute profit.
Inventory Turnover Ratio (x)	Revenue from Operations/ Average Inventory	5.60	8.65	-35.2%	Decrease mainly due to increase in inventory during the year (capacity ramp-up/ raw- material buffering).
Trade Receivables Turnover Ratio (x)	Revenue from Operations/ Average Trade Receivable	3.96	3.57	+11.1%	Improved collection efficiency; below the 25% disclosure threshold.
Trade Payables Turnover Ratio (x)	Total Purchases/ Average Trade Payables	6.02	5.07	+18.9%	Below the 25% disclosure threshold.
Net Capital Turnover Ratio (x)	Revenue from Operations/ Working Capital (Current Assets - Current Liabilities)	9.80	(23.75)	+141.3%	Working capital turned positive during the year mainly due to the increase in inventory and reduction in current liabilities.
Net Profit Ratio(%)	Net Profit after Tax/ Revenue from Operations	4.25%	3.97%	+0.28 pp*	Improved margin; below the 25% disclosure threshold.
Return on Capital Employed(%}	Earnings before Interest 8 Tax/ Capital Employed (Net Worth+ Total Debt- Intangible Assets)	13.58%	19.20%	-29.3%*	Decrease mainly due to the increase in capital employed following the IPO outpacing the growth in earnings.
Interest Coverage Ratio(x)t	Earnings before Interest 8 Tax/ Finance Costs	3.67	2.61	+40.4%	Increase mainly due to lower finance costs following repayment of long- term borrowings, combined with higher profitability during the year.
Operating Profit Margin (%}t	Operating Profit (PBT + Finance Costs - Other Income)/ Revenue from Operations	7.73%	8.13%	-4.9%	Below the 25% disclosure threshold.

*Percentage-point (pp} changes and computed percentage changes shown for ratios expressed as percentages; underlying figures as disclosed in Note 41 ("Financial Ratios") to the audited financial statements for the year ended March 31, 2026.

tlnterest Coverage Ratio and Operating Profit Margin are management-computed (not separately disclosed in Note 41) to

satisfy the specific ratio list named in SEBI (LODR) Regulations, 2015, Schedule V, Part B, and have not been separately reviewed by the statutory auditors. "n.m." denotes not meaningful.

Return on net worth

Return on Net Worth (RoNW) = Net Profit after Tax """ Average Net Worth (Shareholders Funds). On this formula, RoNW declined from 62.49% in FY25 to 23. 76% in FY26. This is a base-effect outcome of the Company"s equity-funded deleveraging: average net worth increased far faster than absolute profit after tax (which itself grew 50.9%}, following the equity issuance (IPO) completed during the year. Management views the moderation in ROE as a direct and expected consequence of strengthening the balance sheet ahead of planned capacity expansion, rather than a deterioration in operating performance, which is better reflected in the 31.6% growth in EBITDA and 50.9% growth in PAT discussed in Section 4.

os OUTLOOK

The Companys near-term outlook is anchored on its planned capacity-expansion programme, intended to increase overall production capacity and support entry into higher-value, precision-engineered product segments. This is expected to be supported by continuing industry demand growth, a regulatory environment favourable to compliant domestic producers, and the structural shift toward recyclable, sustainable materials, while remaining mindful of raw-material price volatility and execution risk on expansion plans.

oe RISKS AND CONCERNS

? Commodity price risk: stainless steel input costs remain volatile, and unhedged price swings can compress margins.

? Customer and related-party concentration risk, requiring continued arm"s-length governance and diversification efforts.

? Working capital and liquidity risk arising from extended customer credit periods and inventory requirements, increasing reliance on short-term borrowings.

? Execution risk associated with capacity expansion, and geographic concentration in a single manufacturing location.

? Regulatory and compliance risk associated with evolving quality-control standards and listed-company governance requirements.

? Legal and contractual risk arising from disputes with counterparties in the ordinary course of business.

10 INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains an internal quality-assurance and testing framework aligned with applicable ISO and BIS compliance standards, supported by statutory, tax and internal audit oversight and a Board that includes Independent Directors. These systems were further strengthened during the year in connection with the Companys transition to listed status. The Board and management believe the internal control systems are commensurate with the size, scale and nature of operations.

11 HUMAN RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY

As of the reporting date, the Company employed 81 persons. The workforce is organised around dedicated production and quality/compliance functions. Employee-related costs increased during the year, reflecting wage growth and enhanced governance-related remuneration following the Company"s transition to listed status. Having crossed the applicable statutory threshold, the Company also incurred its first Corporate Social Responsibility expenditure during the year, directed toward community education and welfare initiatives.

12 CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied, on account of factors such as raw-material

(particularly nickel) price volatility, changes in government regulations including BIS/import policy, tax laws, economic and industry conditions affecting demand and supply, execution risk on capacity-expansion plans, and other factors beyond the Companys control. 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.