SP Refractories Ltd Management Discussions

Annexure- IV

Report INDUSTRIAL STRUCTURE AND DEVELOPMENTS:

S P Refractories Limited, a National Stock Exchange EMERGE platform registered Company, is engaged in the manufacturing and supply of high-quality refractory materials used primarily in steel, cement, foundry, and other high-temperature industries. With extensive experience in the refractory sector, the Company has established a strong presence through its focus on product quality, customer satisfaction, and timely delivery.

The Indian refractory industry continues to play a significant role in supporting core manufacturing sectors, particularly steel, cement, glass, and non-ferrous industries. The sector is witnessing steady growth due to increasing infrastructure development, rising domestic steel production, and demand for advanced refractory solutions offering improved durability, efficiency, and performance.

The global refractory market continues to evolve with increased emphasis on energy efficiency, sustainability, and development of high-performance materials to meet the requirements of modern industrial processes.

BUSINESS OVERVIEW

S P Refractories Limited is engaged in the manufacturing and supply of refractory products, including Magnesia Carbon Bricks, Castables, and other monolithic refractory solutions used in furnaces, kilns, and industrial heating applications.

The Companys manufacturing facility located at Nagpur is equipped with suitable production infrastructure and follows quality-driven manufacturing practices. The Company continues to strengthen its market position through customized product solutions, efficient production processes, timely execution, and long-standing customer relationships.

FINANCIAL PERFORMANCE

During the financial year 2025-2026, the Company recorded revenue from operations and other income of Rs. 2,817.43 lakhs as compared to Rs. 3,026.01 lakhs in the previous year. Despite

a moderate decline in revenue, the Company maintained operational stability and achieved improved profitability through effective cost management and operational efficiencies.

The Companys profit from continuing operations increased significantly to Rs. 352.89 lakhs during the year as compared to Rs. 209.06 lakhs in the previous year, reflecting improved business performance and efficient management of resources.

The Company remains focused on strengthening operational capabilities, improving margins, and creating sustainable value for stakeholders.

OPERATIONAL PERFORMANCE

During the year, the Company continued to enhance its operational efficiency by optimizing production processes, improving resource utilization, and maintaining stringent quality standards. The Company has focused on strengthening its manufacturing capabilities and improving supply chain efficiency to ensure timely delivery and customer satisfaction. Continuous improvement initiatives and adoption of better production practices have supported the Company in maintaining competitiveness in the refractory industry.

SALES AND MARKETING INITIATIVES

The Company continues to focus on expanding its customer base and strengthening its market presence through the following initiatives:

? Market Expansion: The Company continues to explore opportunities across various geographical markets and industrial segments to expand its customer base and enhance market penetration.

? Product Development: The Company focuses on continuous improvement and development of refractory products aligned with evolving customer requirements, technological advancements, and industry trends.

? Customer Engagement: The Company emphasizes long-term customer relationships through consistent product quality, technical support, customized solutions, and timely delivery commitments.

OPPORTUNITIES AND THREATS Opportunities

The Company operates in an industry with significant growth potential arising from:

• Increasing demand from steel, cement, and infrastructure sectors.

• Expansion of domestic manufacturing and industrial activities.

• Growing requirement for advanced, durable, and energy-efficient refractory solutions.

• Opportunities to expand presence across new geographical markets.

• Strong industry experience and technical expertise of the promoters.

• Established quality standards and customer-focused approach.

Threats and Challenges

The Company continues to monitor and manage various industry-related challenges, including:

• Fluctuations in prices and availability of key raw materials.

• Increasing regulatory requirements relating to environmental compliance.

• Competition from domestic and international players.

• Requirement for continuous technological advancement.

• Availability and retention of skilled manpower.

• Foreign exchange fluctuations impacting imported raw materials.

Outlook:

The Company remains optimistic about the growth prospects of the refractory industry and its ability to capitalize on emerging opportunities. The expected growth in infrastructure development and industrial expansion is likely to support demand for refractory products.

Going forward, the Company will continue to focus on operational excellence, product quality, customer satisfaction and market expansion. The Company remains committed to creating sustainable value for its stakeholders through responsible growth and strategic initiatives.

Risk and Concerns:

The Company operates in an environment influenced by various external and internal factors, including raw material price volatility, competitive pressures, regulatory requirements, and changing market dynamics.

To effectively manage these risks, the Company continues to focus on:

? Supply Chain Optimization: Strengthening supplier relationships and optimizing procurement strategies to ensure availability of quality raw materials at competitive costs.

? Sustainability Initiatives: Adopting responsible business practices and ensuring compliance with applicable environmental standards.

? Innovation: Continuously upgrading product offerings and maintaining high-quality standards to meet customer expectations.

Internal Control System and their adequacy:

The Company has established a comprehensive internal control framework commensurate with the size and complexity of its operations. The internal control systems are designed to ensure operational efficiency, compliance with applicable laws and regulations, safeguarding of assets, and reliability of financial reporting.

The effectiveness of internal controls is periodically reviewed through internal assessments, statutory audits, and management reviews. Necessary improvements are implemented to strengthen the control environment and mitigate identified risks.

Human Resources:

The Company recognizes its employees as a key driver of its success and remains committed to nurturing a skilled, motivated, and engaged workforce. The Company fosters a culture of continuous learning, collaboration, and professional development by providing opportunities for skill enhancement and growth. Through its focus on maintaining a safe, inclusive, and productive workplace environment, the Company continues to empower its employees and support sustainable organizational growth.

Segment-wise or product-wise performance:

The Company is presently engaged in single segment of manufacturing and supplying of high- quality refractory material and the performance of Company for the financial year 2025-26 is summarized below:

Particulars	31/03/2026	31/03/2025
Revenue From Operations	2815.16	3025.41
Other Income	2.27	0.60
Total Income (Revenue)	2817.43	3026.01
Net Profit/Loss before Interest, Depreciation and Tax	530.82	353.73
Less: Finance Cost	15.01	34.40
Less: Depreciation and amortization for the year	41.91	40.00
Net Profit/Loss before exceptional and extraordinary items and tax	473.90	279.33
Less: Exceptional Items	0.00	0.00
Profit before extraordinary items and tax	473.90	279.33
Less: Extraordinary Items	0.00	00.00
Profit before tax	473.90	279.33
Less: Tax Expenses
i. Current tax expense	117.30	66.02
ii. Deferred tax Liability/(Assets)	3.71	4.25
Profit/Loss for the period from continuing operations	352.89	209.06
Profit/Loss from discontinuing operations	0.00	0.00
Tax expense of discontinuing operations	0.00	0.00
Profit/Loss from discontinuing operations (after tax)	0.00	0.00
Profit/Loss transferred/adjusted to General Reserve	0.00	0.00
Basic earnings per equity share	19.72	11.68
Diluted earnings per equity share	19.72	11.68

Key Observations:

1. Revenue Overview: Revenue from operations and other income stood at Rs. 2,817.43 Lakhs during the year as compared to Rs. 3026.01 Lakhs in the previous year. Despite the moderation in revenue, the Company remained focused on strengthening its operational efficiency and long-term growth initiatives.

Discussion on financial performance with respect to operational performance:

1. Revenue Analysis:

Revenue from Operations and Other Income:

? 31st March, 2026: Rs. 2,817.43 Lakhs

? 31st March, 2025: Rs. 3026.01 Lakhs

Analysis: The revenue for the year was Rs. 2,817.43 Lakhs compared to Rs. 3026.01 Lakhs in the previous year, representing a decrease of Rs. 208.58 Lakhs (6.90%). The Company maintained steady business operations during the year and continued to focus on enhancing efficiency, customer engagement, and long-term value creation.

2. Operational Profitability:

Profit/Loss before Interest, Depreciation, and Tax:

? 31st March, 2026: Rs. 530.82 Lakhs

? 31st March, 2025: Rs. 353.73 Lakhs

Analysis: The profit before interest, depreciation, and tax (PBDIT) increased to Rs. 530.82 Lakhs as on 31st March, 2026, compared to Rs. 353.73 lakhs as on 31st March, 2025. This represents a growth of Rs. 177.09 lakhs, or 50.06% over the previous period. The significant improvement in PBDIT reflects enhanced operational efficiency, effective cost management, and the Companys continued focus on strengthening profitability and sustainable growth.

3. Depreciation and Amortization:

Depreciation and Amortization for the Y ear:

? 31st March, 2026: Rs. 41.91 Lakhs

? 31st March, 2025: Rs. 40.00 Lakhs

Analysis: Depreciation and amortization expenses increased to Rs. 41.91 Lakhs as on 31st March, 2026, compared to Rs. 40.00 Lakhs as on 31st March, 2025, representing an increase of Rs 1.91 Lakhs (4.78%). The increase is primarily attributable to the addition and utilization of assets during the year. While depreciation and amortization are non-cash expenses impacting reported profitability, the underlying asset investments are expected to support operational efficiency and contribute to the Companys future growth.

4. Profitability after Depreciation:

Net Profit/Loss before Exceptional and Extraordinary Items and Tax:

? 31st March, 2026: Rs. 473.90 Lakhs

? 31st March, 2025: Rs. 279.33 Lakhs

Analysis: The Company recorded a significant increase in net profit before exceptional and extraordinary items and tax, which rose to Rs. 473.90 Lakhs as on 31st March, 2026, compared to Rs. 279.33 Lakhs as on 31st March, 2025. The improvement in profitability was largely driven by the successful commercialization and increased production of products developed through the Companys Research & Development (R&D) initiatives. The Companys continued investment in innovation, product development, and process enhancement has strengthened its manufacturing capabilities, enabled the production of high-value refractory solutions, and improved operational efficiency. Supported by prudent cost management and operational excellence, these R&D-driven initiatives have significantly contributed to the Companys improved financial performance and reinforced its commitment to sustainable long-term growth.

5. Tax Impact:

Current Tax Expense:

? 31st March, 2026: Rs. 117.30 Lakhs

? 31st March, 2025: Rs. 66.02 Lakhs

Analysis: The current tax expense increased to Rs. 117.30 Lakhs as on 31st March, 2026, compared to Rs. 66.02 Lakhs as on 31st March, 2025, representing an increase of Rs. 51.28 Lakhs or 77.67% over the previous year. The increase in tax expense is in line with the growth

in taxable profits during the year and reflects the Companys improved financial performance and profitability.

6. Final Profitability:

Profit/Loss for the Period from Continuing Operations:

? 31st March, 2026: Rs. 352.89 Lakhs

? 31st March, 2025: 209.06 Lakhs

Analysis: The profit from continuing operations increased to Rs. 352.89 Lakhs as on 31st March, 2026 from Rs. 209.06 lakhs as on 31st March, 2025, reflecting a growth of Rs. 143.83 Lakhs or 68.80%. This significant improvement reflects a stronger operational performance and effective management of expenses and taxes.

7. Earnings per Share:

Basic and Diluted Earnings per Equity Share:

? 31st March, 2026: 19.72 per share

? 31st March, 2025: 11.68 per share

Analysis: The basic and diluted earnings per share increased by 8.04 per share or approximately 68.84%. This growth reflects improved profitability and operational performance, contributing positively to shareholder value.

SUMMARY AND CONCLUSIONS:

1. Revenue Growth: The Company maintained stable business operations during the year despite a moderation in revenue. The Company continued to focus on strengthening operational efficiency, customer relationships, and sustainable growth initiatives.

2. Operational Efficiency: The improvement in operational profitability reflects effective cost management, better resource utilization, and enhanced operational efficiency.

3. Depreciation Management: Depreciation and amortization expenses witnessed a marginal increase during the year, primarily due to the addition and utilization of assets. The increase

reflects continued investment in operational capabilities and asset enhancement, which is expected to support future efficiency improvements and sustainable growth.

4. Tax Management: The increase in current tax expense is attributable to higher taxable profits during the year, reflecting improved financial performance and effective tax compliance. The Companys tax management remains aligned with its growth and profitability.

5. Final Profitability: he significant increase in profit from continuing operations reflects the Companys strong operational performance and the successful commercialization and increased production of products developed through its Research & Development (R&D) initiatives. Supported by effective cost management and continuous innovation, the Company achieved improved profitability and strengthened its overall financial performance during the year.

6. Earnings per Share: The increase in earnings per share reflects improved profitability and operational efficiency, resulting in enhanced value creation for shareholders. The Companys strong financial performance has positively contributed to shareholder returns.

Overall, the financial performance of the Company for the year ended 31st March, 2026 reflects strong operational efficiency, improved profitability, and effective financial management. Despite a decline in revenue, the Company successfully enhanced its profitability through disciplined cost management, efficient operations, and strategic business initiatives. The Company has demonstrated resilience, sustainable growth potential, and increased value creation for its stakeholders.

MATERIAL DEVELOPMENT IN HUMAN AND OTHER RESOURCES / INDUSTRIAL RELATIONS FRONT:

During the financial year 2025-26, significant focus was placed on strengthening human resources, employee development, and maintaining harmonious industrial relations. Key developments include:

Talent Acquisition and Development: The Company continued to attract and retain capable manpower through skill development, training, and continuous learning initiatives. These efforts supported improvements in operational efficiency, product quality and overall productivity.

Employee Engagement and Retention: The Company promoted a positive workplace culture through effective communication, employee involvement, and welfare initiatives contributing to employee satisfaction, motivation and retention.

Industrial Relations: Industrial relations remained cordial and harmonious throughout the year. The Company maintained transparent communication and constructive engagement with employees, ensuring smooth operations and industrial peace.

Health, Safety and Workplace Environment: The Company continued to prioritize occupational health and safety through adherence to safety practices, employee awareness programs and regular monitoring to maintain a safe and compliant workplace.

Human Resource Outlook

Going forward, the Company will continue to focus on employee skill enhancement, operational capability development, and fostering a culture of continuous improvement to support long-term growth and stakeholder value.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore:

Ratio	FY 2025-26	FY 2024-25	Change %	Reason for change
Current Ratio	8.1	2.42	234.71	Change due to reduction in usage of Bank OD Limit
Debt-Equity Ratio	0.07	0.35	(62.22)	Change due to reduction in usage of Bank OD Limit
Debt Service Coverage Ratio (DSCR)	23.28	3.86	565.75	The increase is due to Exponential increase in profit for the Financial Year compared to repayment of debt
Return On Equity Ratio	0.22	0.17	35.61	--
Inventory T/O Ratio	2.72	4.64		COGS reduces during the year as compared to our avg. inventory, resulting in decreasing inventory turnover ratio.
Trade Receivables T/O Ratio	4.99	0.00	108.37	--
Trade Payables T/O Ratio	0.00	0.00	(0.00)	—
Net Capital T/O Ratio	2.93	4.44	(28.49)	—
Net Profit Ratio	12.54	6.91	103.98	--
Return On Capital Employed	28.65	22.80	28.38	--
Return On Investment	8.05	8.37	(4.63)	--

Disclosure of Accounting Treatment:

The financial statements have been prepared on accrual basis under the historical cost convention, in accordance with the accounting principles generally accepted in India and comply with the Accounting Standards specified under section 133 of The Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 and with the relevant provisions of the Companies Act, 2013, to the extent applicable.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, expenses and disclosure of contingent liabilities on the date of financial statements. The recognition, measurement, classification or disclosures of an item or information in the financial statements are made relying on these estimates. Any revision to accounting estimates is recognized prospectively.