Sobhagya Mercantile Ltd Management Discussions

Global Economic Overview

The global economy is navigating a complex landscape shaped by two opposing forces: energy-price pressures and trade route disruptions arising from conflict in the Middle East, countered by an accelerated global technology investment cycle driven by artificial intelligence (AI) deployment.

According to the International Monetary Fund (IMF) World Economic Outlook Update (July 2026), global real GDP growth is projected to moderate to 3.0% in 2026 before recovering to 3.4% in 2027. This reflects a slight deceleration from the 3.5% average recorded during 2024-2025, though cumulative growth projections remain broadly steady compared to earlier estimates.

Key Macroeconomic Trends & Divergences

1. Inflation and Monetary Stance

• Disinflation Stall: Driven by elevated energy, commodity, and fertilizer costs, global headline inflation is projected to rise to 4.7% in 2026 (up from 4.1% in 2025) before easing to 3.9% in 2027.

• Monetary Policy: Central banks maintain cautious and restrictive policy stances to prevent second-round inflation pressures while stabilizing long-term expectations.

2. Trade Volumes & Supply Chains

• Global trade volume growth is expected to slow sharply to 3.5% in 2026 from 5.0% in 2025 due to early trade front-loading, elevated shipping costs, and tariff impacts, before rebounding to 4.3% in 2027.

3. Regional Performance Highlights

• India (Bright Spot): India remains the fastest-growing major economy globally, with real GDP projected to grow at 6.4% in FY2026 and pick up to 6.7% in FY2027 (on a fiscal year basis), driven by resilient private consumption, robust services activity, and domestic investment.

• Advanced Economies: Projected to grow at 1.7% in 2026 and 1.8% in 2027. The United States remains resilient with 2.3% growth in 2026, supported by fiscal spending and tech investment. The Euro Area experiences modest expansion at 0.9% in 2026 due to higher energy costs and subdued consumer sentiment.

• Emerging Markets & Developing Economies (EMDEs): Overall growth is forecast at 3.8% in 2026 before expanding to 4.5% in 2027. Chinas growth moderates to 4.6% in 2026 amid structural headwinds and weak domestic demand.

Outlook Summary

While near-term growth faces downside risks from geopolitical volatility, supply chain frictions, and tight financial conditions, the medium-term outlook remains underpinned by accelerating AI infrastructure buildouts, strong high-tech manufacturing, and structural economic reforms in high- growth emerging markets like India.

Key Takeaways

• India remains the fastest-growing major economy.

• Global growth is projected at 3.0% in 2026 and 3.4% in 2027, according to the IMFs July 2026 update.

• IMF has lowered its global growth forecast amid geopolitical tensions.

• Rising oil prices are adding to global inflation pressures.

• Energy and commodity price swings may alter input costs.

• Indias infrastructure spend offers opportunities for road construction.

• Mining outcomes rely on demand, prices, and regulatory approvals.

GLOBAL ECONOMIC INDICATORS AT A GLANCE:

Indicator / Metric	2025	2026 (P)	2027 (P)
Global Output Growth	3.50%	3.00%	3.40%
Advanced Economies Growth	1.90%	1.70%	1.80%
Emerging Market & Developing Economies	4.50%	3.80%	4.50%
India GDP Growth (FY Basis)	7.70%	6.40%	6.70%
Global Headline Inflation	4.10%	4.70%	3.90%
World Trade Volume Growth	5.00%	3.50%	4.30%

Forces Shaping The Outlook

The macroeconomic landscape for 2026 and beyond is characterized by intense divergence, driven by opposing global macro forces. While geopolitical conflicts weigh on supply chains and commodity prices, structural investment in advanced technology continues to provide strong offsetting momentum.

1. Geopolitical Conflicts and Commodity Price Volatility

• Energy & Commodity Pressures: Ongoing conflicts, particularly in the Middle East, continue to disrupt crucial shipping lanes, impacting shipping costs and causing volatility in crude oil, gas, and fertilizer markets.

• Asymmetric Regional Impact: The economic toll is highly uneven. Energy importers with limited high-tech footprint face severe term-of-trade degradation and margin compression, whereas net energy exporters benefit from favorable terms of trade.

2. The AI & Global Technology Investment Cycle

• Tech-Driven Productivity: Accelerated capital expenditure into Artificial Intelligence (AI) infrastructure, semiconductor fabrication, and digital transformation serves as a significant growth engine for the global economy.

• Integration Advantage: Economies deeply integrated into the global technology value chain such as select advanced economies and high-tech manufacturing hubs are experiencing strong activity that offsets broader global drag.

3. Stalled Disinflation & Monetary Policy Stance

• Inflation Persistence: Driven by elevated energy costs and freight rates, global headline inflation is expected to tick up to 4.7% in 2026 before easing to 3.9% in 2027. This upward tick indicates that the steady disinflation observed since early 2024 has temporarily Inflationary conditions may influence the cost of fuel, construction materials, transportation, labour and other inputs relevant to infrastructure and mining businesses.

• Cautious Central Banking: Central bank monetary calibration creates mixed global financing conditions. Shifts in interest rates directly affect borrowing costs, working capital, and investment decisions, impacting project execution and capital deployment for infrastructure businesses.

4. Supply Chain Realignment and Trade Fragmentation

• Supply Chain: While the Companys principal activities are domestic in nature, changes in global supply chains may indirectly affect the availability and cost of machinery, equipment, spare parts, fuel and other inputs used in construction and mining activities.

• Nearshoring & Resilience: Businesses worldwide are restructuring supply chains around "friend-shoring" and nearshoring models to build long-term operational resilience against policy and geopolitical disruptions.

5. Emerging Market Resilience: The India Advantage

• Fastest-Growing Major Economy: Amid global volatility, India stands out with projected real GDP growth of 6.4% in FY2026 and 6.7% in FY2027.

• Domestic Drivers: Indias expansion is underpinned by strong structural demand, sustained public capital expenditure, vibrant services exports, and rising private consumption, insulating the domestic economy against external headwinds.

Key Management Takeaway:

To navigate these macroeconomic crosscurrents, businesses must prioritize supply-chain agility, invest heavily in tech-enabled operational productivity, and maintain disciplined capital allocation to withstand elevated interest rates and potential market volatility.

Risks To The Outlook

Risks to the global economic outlook are more balanced than earlier in the year, though the overall balance of risks remains tilted to the downside. Geopolitical friction, inflation stickiness, and divergence in domestic economic performance continue to pose ongoing challenges.

Key Downside Risk Factors

1. Geopolitical Conflicts and Oil Price Shocks

• Middle East & Black Sea Escalation: A potential broadening of regional conflicts poses a major risk to international shipping lanes and energy supply lines.

• Commodity Price Spikes: Oil prices are assumed at $89.27/barrel in 2026 and $78.70/barrel in 2027 based on futures markets. Any supply disruption could trigger a sharp price spike, worsening input costs, driving up global inflation, and constraining growth in energy-importing economies.

2. Stalled Disinflation & Monetary Policy Tightening

• Persistent Inflation Pressures: Global headline inflation is projected at 4.7% in 2026 before moderating to 3.9% in 2027, indicating that disinflation has temporarily stalled.

• "Higher-for-Longer" Rates: If elevated energy and shipping costs feed into second-round inflation, central banks may be forced to maintain higher policy rates. Interest rate differentials and a stronger US dollar could alter global capital flows and increase external financing pressure on emerging markets.

3. Technology Risk: "AI Disappoints " Scenario

• Productivity & Capex Underperformance: A key downside risk to the global tech tailwind is the potential that productivity gains and revenue realization from massive AI capital investments fall short of market expectations. A pullback in corporate technology spending could drag down economic growth in economies heavily reliant on the high-tech supply chain.

Domestic Counter-Cyclical Buffers & Mitigants 1. Indian Macroeconomic Insulation

• Fiscal Consolidation Path: The Union Budget 2026-27 targets a narrowed fiscal deficit of 4.3% of GDP (down from 4.4% in FY 2025-26 RE), on a glide path toward 50% central liabilities by March 2031. This provides macro-stability and reinforces investor confidence.

• Investment Impulse: Public capital expenditure has been raised from Rs11.2 lakh crore to Rs12.2 lakh crore, sustaining investment-led growth and crowding in private investment.

• Moderate Inflation & Domestic Demand: Inflation in India remains relatively contained (~4%), supported by a strengthening labor market, steady wage growth, and continuous structural reforms (such as GST simplification and notification of Labour Codes).

Year	Global Headline Inflation
2025	4.1%
2026	4.7%
2027	3.9%

Indian Economy

Real GDP gowth is estimated at around 7.5% duringFY 2025-26 for the Indian economy, supported by strong domestic demand, resilient private consumption and sustained public investment. Growth will ? be underpinned by moderate inflation, a S resilient labour market and continued 9 momentum in manufacturing and services. B Investment activity is expected to strengthen further on the back of over 350 g structural reforms rolled out during the year including GST simplification and notification of the Labour Codes alongside sustained public capital spending. Inflation is expected to remain contained, though a less benign monsoon or elevated global commodity prices remain key watch- points.

The Union Budget for fiscal year 2026-27 targets continued fiscal consolidation, narrowing the headline fiscal deficit from 4.4% of GDP (RE 2025-26) to 4.3% of GDP in FY 2026-27, with revenue deficit steady at 1.5% of GDP. The Centres outstanding liabilities are estimated at 55.6% of GDP, on a path toward 50% by March 2031. Public capex has been raised from Rs. 11.2 lakh crore to Rs. 12.2 lakh crore, while continued reform of tax administration, logistics efficiency and deregulation is expected to further bolster private investment.

Domestic Demand Support Activity

Domestic demand remained resilient through FY 2025- 26, supported by robust private consumption, sustained public capital spending and continued momentum in industrial activity. GST simplification and other structural reforms part of the over 350 reforms rolled out during the year along with moderate inflation and a strengthening labour market, helped sustain household spending and business investment through the year. Private consumption continued to strengthen through the year, aided by moderate inflation, recent tax relief and steady wage growth, while public capital ependiture budgted to rise from Rs. 11.2 lakh crore to Rs. 12.2 lakh crore in 2026- 27 provided a continued fiscal impulse to investment-led demand.

The MSME sector received targeted support through a dedicated Rs. 10,000 crore SME Growth Fund and liquidity measures under TReDS, strengthening the base of demand beyond large enterprises.

Looking ahead, sustained rural demand, continued policy predictability and the governments stated focus on deregulation and ease of doing business are expected to keep domestic consumption on a steady growth path, even as external headwinds including tariff-related uncertainty and volatile commodity prices remain key monitorables.

High budgetary allocation for infrastructure

The government has increased its infrastructure capital outlay to Rs 12.2 lakh crore for 2026-27, an increase over the Rs 11.2 lakh crore allocated in 2025-26, reaffirming infrastructure as a core growth lever. This is supported by the newly established Infrastructure Risk Guarantee Fund, which will de-risk private lending into infrastructure projects, and by capital recycling of CPSE real estate assets through dedicated REITs to free up fresh capital for new project investment. The Rs 2 lakh crore SASCI Scheme continues to support states in building city-level infrastructure, while Purvodaya the governments Integrated East Coast Industrial Corridor initiative extends the infrastructure push into Eastern India through five new tourism destinations and 4,000 electric buses allocated to the region (Union Budget 2026-27).

	2022	2023	2024	2025	2026	2027
	(Current prices INR trillion)		Percentage changes, volume (2021/2022 prices)
GDP at market prices	261.2	7.2	7.1	7.6	6.3	6.4
Private consumption	149.2	5.8	5.8	8.2	6.8	7.2
Government consumption	28.9	0.6	6.5	5.6	5.5	6
Gross fixed capital formation	84.5	7.3	6.4	7.1	6	7.2
Final domestic demand	262.7	5.7	6.1	7.6	6.4	7.1
Stockbuilding1,2	5.3	0.8	0	0	0	0
Total domestic demand	268	6.6	6.8	8.5	6.3	7
Exports of goods and services	62.8	0.7	6.6	6.6	3	4
Imports of goods and services	69.6	-1	5.3	10.2	3.5	6.6
Net exportsi	-6.8	0.4	0.2	-1	-0.2	-0.7
GDP deflator	_	3.5	2.5	1.1	3.1	3.6
Consumer price index	_	5.4	4.6	2.1	4.8	4
Central government financial balance (% of GDP)	_	-5.7	-4.9	-4.5	-4.8	-4.5
Central government gross debt (% of GDP)	_	59.8	58.4	57.3	56.2	54.8
General government financial balance (% of GDP)	_	-8.3	-8.1	-7.4	-7.7	-7.4
General government gross debt (% of GDP) Current account balance (% of GDP)	_	85	84.1	83.5	83.1	82.1
		-0.8	-0.6	-0.7	-2.1	-1.2

Rs

Ministry / Scheme	2026-27 (BE)	Change vs 2025-26 RE
Road Transport & Highways	Rs 3,09,875 crore	0.079
Railways	Rs 2,81,377 crore	0.101
Public capex (overall)	Rs 12.2 lakh crore	up from Rs 11.2 lakh
Dedicated Freight Corridor	Surat-Dankuni (new)	—
National Waterways	20 new waterways	to be operationalised
SASCI Scheme (state infra support)	Rs 2 lakh crore	—

Infrastructure industry overview

In the Union Budget 2026-27, capital investment outlay for infrastructure has been increased to Rs. 12.2 lakh crore, up from Rs. 11.2 lakh crore in 2025-26. An Infrastructure Risk Guarantee Fund has been set up to offer partial credit guarantees to lenders, aimed at crowding in more private investment in infrastructure. Key allocations directly relevant to SMLs business include a new Dedicated Freight Corridor connecting Surat to Dankuni, 20 new National Waterways to be operationalised over the next five years, and dedicated schemes to boost domestic manufacturing of construction and infrastructure equipment.

Water infrastructure adds a further opportunity, with Rs. 6,587 crore allocated to the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), including lift irrigation schemes and a new Rs. 1,600 crore scheme to replace open field channels with pressurised piped irrigation networks.

Steel Industry Overview

The Union Budget 2026-2027 sets a strong foundation for the steel sector. This is mainly driven by a record government infrastructure budget of f12.2 lakh crore, which has increased from f11.2 lakh crore last year. A major highlight for heavy industries is a new f20,000 crore, 5-year green fund aimed at capturing carbon pollution. This initiative helps the steel sector, along with power, cement, and oil refineries, adopt eco-friendly production methods. To lower production costs for special steel alloys, the government has removed import taxes on machinery used to process key minerals. Additionally, new dedicated freight railway lines connecting Dankuni in the East to Surat in the West will make transporting heavy raw materials like coal, iron ore, and finished steel much faster and cheaper.

In addition, the government is opening 20 new river transport waterways, starting with one in Odisha that connects mineral-rich areas like Talcher and Angul directly to key ports like Paradeep and Dhamra. To boost domestic equipment manufacturing, a new support program called the CIE scheme was created to help make heavy building machines locally. Meanwhile, urban development is getting a major push with a f5,000 crore allocation per regional city zone over five years to build up modern infrastructure in smaller Tier-II and Tier-III towns. For Sobhagya Mercantile Limited, the continued focus on infrastructure development presents a potential

The budget also introduces tax and trade updates to make doing business safer and easier. A new Infrastructure Risk Guarantee Fund has been set up to offer credit protection to lenders, making private companies feel safer investing in massive building projects. To help factories use up their extra manufacturing space, a special one-time rule allows export-zone plants to sell goods locally at discounted tax rates. Finally, shipping speed and port clearance for imported raw materials and steel exports will be much faster thanks to modern digital customs systems and non-intrusive AI container scanners.

Infrastructure construction industry overview

The Union Budget 2026-2027 provides a massive boost to the infrastructure construction industry, anchored by a record public capital expenditure outlay of f12.2 lakh crore. Effective capital expenditure, which includes grants for capital asset creation, reaches f 17.15 lakh crore, reinforcing the governments capex-led growth strategy to crowd in private sector investment. To make large construction projects less risky for private developers and contractors, the budget introduced the Infrastructure Risk Guarantee Fund, which offers partial credit guarantees to lenders during the development and building phases. Furthermore, long-term financing options are being expanded through institutions like NaBFID and NIIF, along with streamlined rules for Infrastructure Investment Trusts (InvITs) to recycle capital into new projects.

At the execution level, transport megaprojects form a core driver for construction activity across the country. High-speed rail construction is getting a significant push with the planned development of 7 inter-city rail growth corridors connecting major economic hubs such as Mumbai-Pune, Delhi-Varanasi, and Hyderabad- Bengaluru. Simultaneously, the expansion of Dedicated Freight Corridors and the addition of 20 new National Waterways over five years will require extensive dredging, port facility expansion, and terminal construction. To support last-mile transport and regional mobility, the budget also promotes coastal shipping infrastructure under the Coastal Cargo Promotion Scheme and provides viability gap funding for seaplane operations and regional aviation hubs.

Urban transformation and domestic manufacturing support round out the budgets construction strategy. A total allocation of f5,000 crore per City Economic Region (CER) over five years is set to transform Tier-II and Tier-III towns into modern regional growth hubs through reform-and-results-based local infrastructure projects. To reduce import reliance and strengthen the local supply chain, the government launched a dedicated scheme for the domestic manufacturing of construction and heavy infrastructure equipment.

Combined with increased outlays for essential utility projects like the Jal Jeevan Mission, these initiatives provide strong, long-term demand visibility for engineering, procurement, and construction (EPC) contractors across India.

Infrastructure engineering Industry overview

Infrastructure engineering is undergoing a revolutionary shift, evolving from simple heavy civil work into a dynamic, tech-driven strategic enabler for national economic growth. Driven by the vision of Viksit Bharat and a record public capital outlay in the Union Budget 2026-2027, the sector is translating massive public investments into multi-modal transport networks, climate-resilient urban systems, and renewable energy grids under frameworks like PM GatiShakti. SMLs continued increase in public infrastructure expenditure presents opportunities across its core infrastructure construction and engineering activities, particularly in road and irrigation projects. The Companys existing experience in executing road infrastructure projects in Maharashtra, including projects under EPC and Hybrid Annuity Model (HAM) structures, provides a platform to participate in the continued infrastructure development cycle.

Stone crushing industry overview

The demand for crushed stone and manufactured sand (M-sand) has accelerated significantly across national road, rail, and urban developments. The market displays strong momentum and a clear upward trend, reinforced by the governments sustained push toward large-scale infrastructure execution.

The India stone crushing market is witnessing significant expansion as the construction and civil infrastructure sectors utilize crushed stones as non-substitutable raw materials. The markets positive outlook is directly driven by massive consumption in ley projects, including the development of 7 regional high-speed rail corridors, expanding Dedicated Freight Corridors, and modernizing 20 new National Waterways. Furthermore, urban infrastructure investments supported by a f5,000 crore allocation per City Economic Region across Tier-II and Tier-III towns are boosting consumption for building foundations, road bases, and concrete aggregates. Supported by tax incentives for critical mineral processing capital goods and a growing industry focus on eco-friendly, energy-efficient crushing technology, the market overview points to an exceptionally positive outlook with lucrative opportunities for crushing equipment manufacturers and aggregate suppliers to cater to national growth.

Mining Industry overview

Indias mining sector remains vital for energy security, industrial growth, and critical raw materials. Government policies continue to prioritize domestic mineral availability, exploration, and local processing capabilities for strategic minerals.

For SML, the mining vertical represents a potential long-term growth opportunity through its coal and critical mineral initiatives.

Marki Mangli-IV Coal Mine

The Marki Mangli-IV coal block project has completed its public hearing process and received environmental clearance vide letter dated 07.08.2026. The project is not yet operational and commercial production should not be represented as having commenced. Future development and commencement of operations remain subject to receipt of the requisite approvals, fulfilment of statutory conditions and project implementation requirements.

Vadakhol Asoli Critical Minerals Project

Vadakhol Asoli Mining Private Limited was incorporated on 25 th April 2026 as a subsidiary of SML for pursuing a composite critical minerals project. The project is at a development stage and is proposed to focus on Nickel, Chromium, Cobalt and associated minerals. The project remains subject to applicable exploration, mining, environmental, land, statutory and other regulatory approvals and therefore should be regarded as a prospective business opportunity rather than an established operating business.

Equipment leasing industry overview

The Indian construction equipment rental and leasing market is expected to maintain a steady growth momentum, driven by expanding infrastructure commitments. Automation in construction, mega-transportation projects, and the expansion of national highway networks continue to fuel demand across the country. High capital outlay and steep maintenance costs associated with specialized machinery have led contractors to increasingly prefer renting or leasing machinery over direct purchases.

In the Union Budget 2026-2027, public capital expenditure was increased to a record f 12.2 lakh crore. This sustained CapEx push, combined with the launch of the Scheme for Enhancement of Construction and Infrastructure Equipment (CIE), directly supports the growth of domestic machinery production including tunnel-boring machines, high-capacity cranes, and heavy lifts creating a strong structural foundation for the equipment leasing market.

Material handling equipment, particularly heavy-duty cranes, continues to play a pivotal role in Indias large-scale engineering projects, making it the primary revenue generator in the construction equipment rental market. The announcement of major multi-year developments such as the 7 new regional high-speed rail corridors, new Dedicated Freight Corridors, and port-led infrastructure along 20 new National Waterways requires extensive material handling capabilities over extended project lifecycles. Rather than locking up balance sheet capital in expensive high-capacity cranes and specialized haulage units, developers are increasingly turning to long-term equipment leasing arrangements.

Water Infrastructure & Irrigation Industry Overview

The Indian water infrastructure and irrigation sector continues to witness steady growth, backed by an allocation of f 6,587 crore to the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) in the Union Budget 2026-27.

As the flagship umbrella program under the Department of Water Resources, River Development and Ganga Rejuvenation, PMKSY combines major infrastructure initiatives including the Accelerated Irrigation Benefits Programme (AIBP) and watershed development with micro-irrigation practices under the Per Drop More Crop initiative. Since FY 2016-17, the program has created or restored irrigation potential across 24.61 million hectares, benefiting over 27 million farmers with cumulative central assistance exceeding f64,407 crore.

The Companys entry into the irrigation segment through the Adyal Lift Irrigation Scheme provides exposure to this infrastructure opportunity.

The project involves construction of the Adyal Lift Irrigation Scheme and has an estimated contract value of f260.53 crore with an execution period of 33 months, subject to the terms and conditions of the relevant contract.

To further enhance last-mile efficiency, the government introduced the Modernization of Command Area Development and Water Management (M-CADWM) sub-scheme under PMKSY-AIBP with an initial outlay of f 1,600 crore. This scheme focuses on replacing open field channels with pressurized piped irrigation networks and micro-irrigation links, creating significant engineering demand for pipeline-laying, civil construction, and high-capacity pump installations. Moving forward, the budget prioritizes energy- linked operational efficiency such as adopting solar-powered pumps under PM-KUSUM to reduce diesel reliance and completing ongoing AIBP and lift irrigation projects rather than initiating large-scale new dam or canal construction.

• Accelerated Public CAPEX & Multi-Modal Corridors: Sustained government momentum highlighted by the f12.2 lakh crore public CAPEX outlay for FY 2026-27 and targeted expansions under the PM Gati Shakti Master Plan continues to unlock high-value opportunities across heavy civil construction, freight corridors, and multi-modal transport infrastructure.

• Commercial Mining & Critical Mineral Expansion: Continued reforms in commercial coal mining, combined with new government incentives for critical minerals and modern equipment adoption, drive robust demand in heavy earthmoving, extraction, and mining services.

• Urban Expansion & Infrastructure Services: Rapid urban development, regional transit corridors, and the rollout of City Economic Regions (CERs) are accelerating demand for specialized engineering consultancy, turnkey contracting, and modern construction services.

• Demand Shift Toward Equipment Leasing & Fleet Rental: As megainfrastructure projects scale up in complexity and capital intensity, contractors are increasingly shifting toward asset-light operational models, boosting longterm demand for high-capacity equipment leasing and specialized crane rental services.

• Input Cost Volatility & Supply Chain Friction: Unpredictable price swings in key commodities like steel, cement, and global fuel exacerbated by ongoing geopolitical tensions and trade crosscurrents pose an ongoing risk to project margin management.

• Evolving HSE & Environmental Compliance Regulations: Adherence to increasingly stringent Health, Safety, and Environment (HSE) standards, along with updated environmental permitting norms, increases operational complexity and may elevate upfront compliance costs.

• Execution Bottlenecks & Right-of-Way Delays: Persistent structural challenges in large-scale infrastructure execution including land acquisition delays, multi-agency permit clearances, and localized labor shortages continue to impact project completion timelines and cash flows.

STRENGTHS

Sobhagya Mercantile Limited (SML), established in 1983, has transformed from a single-focus entity into a multi-disciplinary infrastructure conglomerate. Operating across core economic verticals including infrastructure construction, engineering consultancy, mining, equipment leasing, and steel manufacturing the company drives sustainable growth by aligning with national development priorities.

COMPANY OVERVIEW

Sobhagya Mercantile Limited ("SML"), incorporated in 1983 and listed on the BSE (Scrip Code: 512014), is a diversified infrastructure and resources company with operations spanning infrastructure construction, engineering consultancy, mining, equipment leasing, material production, and steel manufacturing. The Company has established a strong presence across both public and private sector projects, supported by modern equipment, advanced technology, and a skilled workforce.

The Infrastructure Construction division continues to drive strong progress across key regional corridors in Maharashtra, executing major highway projects including NAG 182, NAG 167, and NAG 176 under HAM and EPC models. Expanding its infrastructure footprint, SML secured a f 219.78 crore road project (49.5 km) via its SRK-SVS joint venture from MSIDC. Additionally, the Company strategically entered the irrigation sector with a f260.53 crore contract for the Adyal Lift Irrigation Scheme under the Gosikhurd Project through a 40%-owned joint venture. Complementing these core verticals, the Infrastructure Engineering segment provides end-to-end consultancy and DPR services, while the Material Production division supplies high-quality aggregates via its fully functional stone-crushing facilities.

SML made significant progress across its mining, steel, and leasing verticals. The Marki Mangli-IV coal block project in Yavatmal completed its public hearing and received Environmental Clearance on 07.08.2026. Expanding into critical minerals, SML incorporated a new subsidiary, Vadakhol Asoli Mining Private Limited, for a composite Nickel, Chromium, and Cobalt project in Maharashtra. Its equipment leasing business provides modern machinery fleets to lower clients capital expenditure. Additionally, SML is developing an integrated steel plant at Konsari, Gadchiroli, which holds "Mega Project" status from the Maharashtra government and has applied for industrial land allotment to supply high-grade construction and industrial steel.

With a track record of timely execution, financial resilience, and sectoral diversification, SML is strategically positioned to leverage Indias infrastructure growth momentum. Driven by the governments sustained capital expenditure outlay of f 11.21 lakh crore, expansion into irrigation and critical minerals, increasing demand for leasing solutions, and strong prospects in the steel sector, SML continues to create long-term value across the infrastructure landscape.

1. NAG 182 Road Project - Chandrapur District, Maharashtra

Executed under the Hybrid Annuity Model, this project covers, connecting key locations such as Chimur, Talodhi, Neri, Madanapur, Ukkudapar, Parwa, Warora, and Armori. The project aims to improve regional road infrastructure and enhance

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3. NAG 176 Road Project - Chandrapur District, Maharashtra

Spanning approximately, this package includes stretches such as Bahmni Adegaon, Khatkheda-Malewada, Navtala-Dongargaon, Shivra Doma, Satgaon-Bhiwapur, Chaklohara-Chikhala, and Wadhona-Girgaon. The project supports efficient transportation and economic development in the region.

2. NAG 167 Road Project - Chandrapur District, Maharashtra

Comprising multiple sub-projects, including Surbodi-Paharani-Brahman Road, Govindpur-Mangrul-Kitadi-Chindhichak, and Neri-Jambhulghat-Bhisi Road, this package strengthens intra-district connectivity.

4. Nandgaon Khandeshwar Rajura - Chandur Railway Kurha Road Project- Amravati District, Maharashtra

Awarded by the Maharashtra State Infrastructure Development Corporation (MSIDC) to M/s. SRK-SVS Joint Venture, this project involves improving a total road length of 49.5 km valued at Rs219.78 Cr, the project aims to enhance regional road infrastructure and strengthen last-mile connectivity across key local routes.

1. Marki Mangli-IV Coal Block - Yavatmal District, Maharashtra

Located in the District Yavatmal, this key energy asset has successfully completed its public hearing phase. The project is currently advancing towards obtaining Environmental Clearance, marking a major milestone toward operational readiness and strengthening our long- term resource security.

FINANCIAL ANALYSIS:

Particulars	FY24	FY25	FY26
Revenue from Operations	11,523.75	15,728.42	23,250.41
Other Income	486.86	312.30	259.18
Total Revenue	12,010.61	16,040.73	23,509.59
EBITDA	1,802.90	2,552.57	3,564.07
Profit Before Tax	1,572.85	2,384.12	3,271.03
Tax Expenses	414.59	831.04	1,067.16
Profit After Tax	1,158.26	1,553.08	2,203.87

• EBITDA Margins

Margins declined in FY26 (16.23% 15.33%) primarily due to a rise in input and execution costs, a shift toward a lower-margin project mix, and some erosion in operational efficiency during the period.

• Net Profit Margins

Margins declined in FY26 (9.87% 9.48%) primarily due to a rise in input and execution costs, a shift toward a lower-margin project mix.

• Debtors Turnover Ratio

The decrease in debtors turnover ratio (2.49 1.92) is due to slower collections combined with an increase in sales.

• Inventory Turnover

The increase in inventory turnover ratio (81.61 93.69) is primarily driven by faster movement of inventory and improved execution pace relative to inventory held during the period.

• Interest Coverage Ratio

The decrease in interest coverage ratio (40.58 36.64) is primarily due to higher finance costs.

• Current Ratio

The increase in current ratio (1.81 2.21) is primarily due to an improvement in current assets relative to current liabilities, reflecting stronger short-term liquidity during the period.

• Debt Equity Ratio

The increase in debt equity ratio (0.08 0.11) is primarily due to a higher proportion of borrowings relative to shareholders equity during the period.

• Operating Profit Margin

The decrease in operating profit margin (32.01% 28.26%) is primarily due to a rise in operating costs.

• Return on Net Worth

The decrease in return on net worth (19.43% 11.42%) is primarily due to lower net profit combined with an increase in shareholders equity during the period.

RATIOS:

Particulars	FY25	FY26
EBITDA Margins	16.23	15.33
Net Profit Margins	9.87	9.48
Debtors Turnover Ratio	2.49	1.92
Inventory Turnover	81.61	93.69
Interest Coverage Ratio	40.58	36.64
Current Ratio	1.81	2.21
Debt Equity Ratio	0.08	0.11
Operating Profit Margin	32.01	28.26
Return on Net Worth	19.43	11.42

OUTLO OK

Moving forward, the companys focus on enhancing operational efficiency, managing costs, and optimizing its product portfolio is expected to drive further improvements in profitability. The continued sales growth, alongside strategic investments, positions the company well for sustained financial health.

RISK

Regulatory Risks

1 These involve compliance with laws and regulations governing the infrastructure and construction sectors. Changes in regulations can impact project timelines, costs, and operational practices.

Competition Risks

The infrastructure sector is highly competitive. SML faces risks from existing competitors and new entrants, which may affect market share and profitability.

Business Risks

Financial Risk: Fluctuations in interest rates, currency exchange rates, and credit risks can adversely affect financial performance.

Political Risk: Changes in government policies, political instability, or geopolitical tensions can impact operations and project viability.

Legal Risk: Potential legal disputes or liabilities arising from contracts, compliance issues, or regulatory challenges.

Technology Obsolescence

Rapid advancements in technology can render existing processes or equipment outdated, necessitating continuous investment in new technologies to maintain competitiveness.

Retention of Workforce

The ability to attract and retain skilled labor is crucial in the construction sector. High turnover rates or skill shortages can hinder project execution and operational efficiency.

Operational Risks

These include risks associated with day-to-day operations, such as project delays, safety incidents, and supply chain disruptions, which can affect overall performance.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has well laid out policies on financial reporting, asset management, adherence to management policies and also on promoting compliance of ethical and well-defined standards. The Company follows an exhaustive budgetary control and standard costing system. Moreover, the Management team regularly meets to monitor goals and results and scrutinizes reasons for deviations in order to take necessary corrective steps. The Audit Committee which meets at regular intervals also review the internal control systems along with the Management and the Internal Auditors. The internal audit is conducted at the Company and covers all key areas. All audit observations and follow up actions are discussed with the Management and also with the Statutory Auditors and are consistently reviewed by the Audit Committee.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

During the year under review, the Company achieved a total income of Rs. 23509.59 Lakhs and a profit of Rs. 2210.83 Lakhs, reflecting an increase from the previous years income of Rs. 7468.86 Lakhs and profit of Rs. 652.71 Lakhs. The Company remains focused on improving its profitability and operational performance in the coming years through strategic initiatives, operational efficiencies and a comprehensive approach towards sustainable and long-term growth.

HUMAN RESOURCES

The Company has chosen to outsource its entire payroll management to MKS Multimedia Private Limited. During the financial year 2025-26, MKS Multimedia Private Limited has engaged approximately 157 employees to work for the Company. These employees are essentially performing roles within the Company, even though they are on the payroll of MKS Multimedia Private Limited.

CAUTIONARY STATEMENT:

The Management Discussion and Analysis may include statements regarding the Companys goals, projections, and expectations, which could be considered "forward-looking statements" as defined by relevant laws and regulations. These statements are based on informed judgments and estimates; however, actual outcomes may vary significantly from those anticipated. The forwardlooking statements are subject to various risks and uncertainties, including economic conditions affecting demand, supply, and pricing in the domestic and international markets where the Company operates, changes in government regulations and policies, tax laws, and other factors that could impact the Companys operations.