Sparc Electrex Ltd Management Discussions

ANNUAL OVERVIEW, OUTLOOK:

Your Company was originally incorporated under the provisions of The Companies Act, 1956 as Sparc Systems Private Limited on September 14, 1989, with the Registrar of Companies, Maharashtra. In the Financial Year 1994, the Company was converted from Private Limited Company into a Public Limited Company vide Extra-Ordinary General Meeting held on December 03, 1994, and in pursuance of which the private word had been deleted from the name of our Company, effecting the name change to Sparc Systems Limited, and a fresh certificate of incorporation consequent upon change of name was granted by the Registrar of Companies, Maharashtra on January 18, 1994. Sparc Systems Limited was engaged in the business of Software and Hardware Electronic Security Solutions. Its Equity Shares got listed on January 22, 1996, with BSE.

Your Directors are pleased to present the Management Discussion and Analysis Report for the year ended 31st March, 2026.

The Company is engaged principally in the manufacturing and trading of electric power tools, garden tools, cordless tools and related products, as well as metals and metal products. The business is operated through two segments, namely Manufacturing of Electrical Tools & Service and Trading.

During FY 2025-26, the operating environment remained challenging for the Company. The Companys sales declined materially, while fixed and operating costs remained significant, resulting in a substantial loss for the year. The Company has continued to review its product portfolio, cost structure, working-capital requirements and market strategy with a view to restoring sustainable operating performance.

A significant development during the year was the termination of the Trademark License Agreement with Hyundai Corporation Holdings Co. Ltd., Korea for use of the HYUNDAI trademark, which was intimated to BSE on 2 April 2025. Accordingly, the Companys future product and branding strategy is being evaluated with greater emphasis on its own product portfolio, customer relationships, distribution capabilities and prudent cost management.

The Company also faced liquidity and operational constraints during the year owning to the fact that Companys bank account(s) were frozen by the Income Tax Department on 24^th November 2025 in connection with outstanding income-tax demands. Management continues to take appropriate steps to address such matters and improve liquidity and operational stability.

INDUSTRY STRUCTURE AND DEVELOPMENT:

The power tools industry is a dynamic and evolving sector, driven by technological advancements, increasing industrialization, infrastructure development, construction activity and growing demand for efficient and portable tools. In India, the industry is supported by the expansion of manufacturing, construction, automotive, engineering, infrastructure and do-it-yourself (DIY) applications.

The industry is broadly segmented based on the mode of operation into corded electric tools and cordless electric tools, and based on tool type into drilling and fastening tools, sawing and cutting tools, material removal tools, demolition tools, wre nches and other specialized solutions. The increasing adoption of cordless tools, supported by improvements in battery technology, portability and ease of use, is an important trend within the industry.

The global power tools market is dominated by a few major international players, such as Stanley Black & Decker, Robert Bosch GmbH, Makita Corporation, and Techtronic Industries (TTI). These companies compete on brand reputation, product innovation, and extensive distribution networks. In India, both international and domestic players are active, with global giants establishing a strong presence.

In India, the market comprises both multinational and domestic manufacturers and distributors. The growing focus on infrastructure development, manufacturing capacity, construction activity and industrial automation is expected to support demand for power tools. At the same time, manufacturers are increasingly focusing on cordless solutions, improved ergonomics, product durability and application-specific tools to cater to evolving customer requirements.

Overall, the Indian power tools industry presents opportunities for growth, supported by increasing mechanization, rising demand for efficient tools and the gradual shift from conventional hand tools towards technologically advanced power tools.

GLOBAL ECONOMIC ENVIRONMENT:

The global economy during FY 2025-26 continued to operate amid elevated geopolitical tensions, trade-policy uncertainty, changing tariff regimes, financial-market volatility and uneven growth across major economies. The International Monetary Funds July 2026 World Economic Outlook Update projected global growth of 3.0% in calendar year 2026 and 3.4% in 2027, while noting that the outlook remained uneven and sensitive to geopolitical and financial-market developments.

The global outlook has direct relevance to manufacturing and engineering businesses because changes in commodity prices, freight costs, exchange rates, tariffs and supply-chain conditions can affect input costs and availability. For power-tool businesses, the pace of industrial investment, construction activity, automotive production and consumer spending also influences demand.

The Company therefore continues to monitor international developments, procurement costs, customer demand and competitive pricing closely and intends to maintain flexibility in sourcing, inventory and product positioning.

INDIAN ECONOMIC ENVIRONMENT:

The power-tools industry comprises corded and cordless electric tools and a broad range of applications including drilling and fastening, sawing and cutting, grinding and material removal, demolition, and related accessories. The market is characterised by rapid technological change, strong brand competition, evolving distribution channels and increasing demand for convenient, portable and efficient tools.

Independent market research published by Grand View Research estimated Indias power-tools market at approximately US$1.73 billion in 2025 and projected it to reach approximately US$4.97 billion by 2033, implying a CAGR of about 14.4% for 2026-2033. The same source identified drills as the largest and fastest-growing product segment in its India outlook. These figures represent external market estimates and should not be interpreted as Company-specific forecasts.

The industry continues to move toward cordless platforms, lithium-ion battery systems, brushless motors, improved ergonomics, higher energy efficiency and digitally enabled tools. E-commerce and specialized online marketplaces are also broadening customer access, while professional users continue to emphasize durability, service support, spare availability and total cost of ownership.

INDUSTRY OPPORTUNITIES AND CHALLENGES:

• Infrastructure and construction activity: Continued investment in roads, railways, buildings, power, logistics and urban infrastructure can support demand for professional power tools.

• Industrial and automotive demand: Manufacturing, engineering, automotive and maintenance activities provide recurring applications for drilling, cutting, grinding, fastening and material-removal tools.

• Cordless technology: The shift toward battery-operated tools creates opportunities for new product categories, improved mobility and higher-value product offerings.

• E-commerce and wider distribution: Digital channels can expand reach beyond traditional markets and improve access to customers in smaller cities and towns.

• Import dependence and cost pressure: Dependence on imported components and finished goods can expose the industry to foreign-exchange movements, freight costs, tariffs and supply disruptions.

• Intense competition: International brands, domestic manufacturers and low-cost products create pricing pressure and make product differentiation, service and quality increasingly important.

• Technology and sustainability: Battery safety, recycling, energy efficiency, product life-cycle management and compliance with evolving environmental requirements are becoming increasingly important.

OUTLOOK ON OPPORTUNITIES AND CHALLANGES:

The Management believes that the Indian power-tools market continues to offer long-term opportunities because of infrastructure development, industrialization, growth in repair and maintenance activity and increasing adoption of power tools by professional as well as semi-professional users. However, the Companys near-term focus is expected to remain on rebuilding sales, rationalizing the product mix, controlling operating costs and improving working-capital discipline.

Following the termination of the HYUNDAI trademark arrangement in April 2025, the Company has an opportunity to reassess its product and branding strategy. A more focused portfolio, disciplined procurement, stronger customer engagement, effective after-sales support and selective use of digital distribution can support the Companys efforts to improve competitiveness.

The Management will continue to evaluate opportunities based on expected margins, capital requirements, working-capital intensity and execution capability rather than pursuing growth at the expense of financial discipline.

Several trends are shaping the development of the power tools industry, particularly in India:

Technological Advancements:

- Cordless Dominance: The shift towards cordless tools is a defining trend. Innovations in lithium-ion batteries and brushless motors are enhancing tool efficiency, power, and runtime, making cordless tools the preferred choice for both professionals and DIY enthusiasts.

- Smart and Connected Tools: Manufacturers are integrating IoT (Internet of Things) and Bluetooth connectivity into their tools. This enables features like tool tracking, performance diagnostics, and app-based management, improving efficiency and security for businesses.

- Ergonomics and Safety: There is a growing focus on designing lightweight, ergonomic tools to reduce user fatigue and improve safety, which is a key consideration for professional users.

Growth Drivers:

- Infrastructure Boom: Rapid infrastructure development in emerging economies like India is the most significant driver. Large-scale government projects in roads, railways, and urban development are creating a massive demand for a wide range of power tools.

- Rise of the Industrial Sector: The expansion of manufacturing, automotive, and other industrial sectors is fueling the need for high-quality power tools for assembly, production, and maintenance.

- DIY and Home Renovation: The increasing trend of home improvement projects, especially post-pandemic, has expanded the consumer base beyond professionals. This segment is particularly driving sales of compact and cordless tools.

- E-commerce Expansion: The growing reach of e-commerce platforms is making power tools more accessible to a wider customer base, including those in smaller towns and cities.

Challenges and Opportunities (with an Indian context):

- Cost Competitiveness: India faces a cost disadvantage compared to countries like China, primarily due to higher raw material costs and import duties on key components.

- Dependence on Imports: The Indian power tools market is heavily reliant on imports for high-value components, which can affect production costs and supply chain stability.

- Export Potential: Despite these challenges, reports from NITI Aayog highlight Indias immense potential to become a global leader in tools manufacturing. A strategic roadmap is being developed to address structural gaps, promote R&D, and create "plug-and-play" industrial clusters to boost exports and generate jobs.

- Sustainability: Manufacturers are increasingly focusing on sustainability by using eco-friendly materials and designing tools that are easier to repair, aligning with a growing global trend.

OUTLOOK ON THREATS, RISKS AND CONCERNS:

The power tool industry, while experiencing growth, faces a multifaceted landscape of threats, risks, and concerns that require

strategic attention from manufacturers, distributors, and stakeholders. These can be broadly categorized as follows:

Economic and Market Volatility:

- Raw Material Price Fluctuations: The prices of key raw materials like steel, aluminum, copper, and rare earth metals (e.g., Neodymium for motor magnets) are subject to significant global volatility. This can directly impact production costs, squeeze profit margins, or force price increases that affect demand.

- Global Economic Slowdown/Recession: A general economic downturn can lead to reduced consumer spending on nonessential items (affecting DIY segment) and a slowdown in construction and manufacturing, thereby decreasing demand from industrial sectors.

- Geopolitical Uncertainties and Trade Policies: Geopolitical tensions, trade wars, and protectionist policies can disrupt global supply chains, increase import/export costs, and create market access challenges.

- Intensifying Competition and Pricing Pressure: The market is highly competitive with both established global players and emerging local manufacturers. This often leads to intense pricing pressure, particularly in commoditized product segments.

- Supply Chain Disruptions: Events like pandemics, natural disasters, or logistical issues can severely impact the availability of components and finished goods, leading to production delays and lost sales.

Technological and Innovation Risks:

- Pace of Technological Change: The rapid evolution of battery technology, motor efficiency, and smart features (IoT integration) means companies must continuously invest in R&D to stay competitive. Falling behind on innovation can lead to obsolescence.

- Cyber Security Threats for Smart Tools: As power tools become more connected and "smart," they become potential targets for cyber-attacks. Risks include data breaches, unauthorized access, operational disruptions, and reputational damage if connected tools are compromised.

- Obsolescence of Older Technologies: The swift shift towards cordless and battery-powered tools, alongside advancements in battery management systems, can render older corded or less efficient models obsolete, requiring strategic inventory management and phase-out plans.

Regulatory and Compliance Concerns:

- Stringent Environmental Regulations: Growing global emphasis on sustainability leads to stricter regulations on emissions (for engine-powered tools), battery disposal, recyclability, and the use of hazardous materials. Compliance can involve significant investment in new product development and waste management.

- Product Safety Standards: Power tools are subject to rigorous safety standards worldwide. Non-compliance can lead to product recalls, fines, legal liabilities, and damage to brand reputation. Manufacturers must stay abreast of evolving standards in different regions.

- Battery Regulations: New regulations concerning battery design, removability, recyclability, and chemical content (especially for Lithium-ion batteries) are emerging, which can impact product design and manufacturing processes.

- Trade Policies and Tariffs: Changes in trade policies and the imposition of tariffs on imported components or finished goods can significantly affect costs and market competitiveness.

Operational and Business Risks:

- Talent Shortage and Skills Gap: A lack of skilled labor for manufacturing, R&D, and specialized technical roles can hinder growth and innovation.

- Sustainability Challenges (ESG): Beyond regulations, theres increasing pressure from consumers and investors for sustainable practices. The disposal of Lithium-ion and Ni-Cd batteries is a major concern due to their toxic components and the need for robust recycling infrastructure.

- Quality Control and Product Defects: Ensuring consistent quality across a wide range of products is crucial. Product defects can lead to safety incidents, costly recalls, and severe reputational damage.

- Intellectual Property Protection: Protecting proprietary designs and technologies from infringement, especially in competitive global markets, is an ongoing concern.

Emerging Threats:

- AI-Driven Fraud and Counterfeiting: While not directly impacting product manufacturing, the increasing sophistication of AI can be leveraged by bad actors for sophisticated counterfeiting operations, or for bypassing quality control and safety standards in counterfeit products, posing a significant risk to consumer safety and brand integrity.

- Shifting Consumer Behavior: Rapid changes in consumer preferences, such as the demand for personalized products, subscription models, or the increased reliance on online sales channels, require businesses to be agile and adapt their sales and marketing strategies.

Addressing these threats and risks requires a proactive approach, including robust supply chain management, continuous innovation, strong R&D investment, a keen eye on regulatory developments, and a commitment to sustainability and product safety.

INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. The scope of the Internal Audit is decided by the Audit Committee and the Board. To maintain its objectivity and independence, the Board has appointed an Internal Auditor, which reports to the Audit Committee of the Board on a periodic basis.

The Internal Auditor monitors and evaluates the efficacy and adequacy of Internal control Systems in the Company, its compliance with operating systems, accounting procedures and policies for various functions of the Company. Based on the report of Internal Auditor, management undertakes corrective action wherever required and thereby strengthens the control further.

The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information.

SEGMENT-WISE PERFORMANCE:

The Company operates in two segments which comprises of Manufacturing of Electrical Tools & Service and Trading. During the year, the revenue from operations amounted Rs. 28.29 lakhs. The revenue from Trading of Steel Items stood at Rs.0.20 lakhs as compared to Rs.133.98 lakhs in the previous year. Further, the revenue from Manufacturing of Electronic Equipments stood at Rs.28.09 lakhs as compared to Rs.232.12 lakhs in the previous year. The substantial decline in revenue was mainly attributable to lower business activity in both the steel trading and electronic equipment manufacturing segments during the year under review.

FINANCIAL PERFORMANCE:

Summary of the Companys financial performance for F.Y. 2025-26 as compared with previous financial year is given below:

During the financial year the total revenue from the operation of the Company was 28.29 lakhs as compared to 366.10 lakhs in previous year, which was almost 92% down in comparison with previous year. The total operating expenses for the year 519.25 lakhs in comparison to 518.14 lakhs in previous year. Due to lower revenue generation the company has incurred loss of (446.18) lakhs as compared to profit of 9.78 lakhs in previous year.

The deterioration in profitability was primarily attributable to the sharp fall in sales and the Companys inability to absorb its operating cost base at the reduced level of activity. The Managements immediate priorities are therefore restoration of sales volumes, product and customer rationalisation, cost control, improved working-capital management and resolution of outstanding statutory/liquidity matters.

The management of the Company is very optimistic regarding performance of the Company in future and are taking effective steps to improve the performance of the Company through growth in revenue, managing cost, strategic marketing, increasing brand awareness and brand equity through advertisement campaign.

PERFORMANCE OF THE BOARD AND COMMITTEES:

During the year under review, the performance of the Board & Committees and Individual Director(s) based on the below parameters was satisfactory:

a) Most of the Directors attended the Board meeting;

b) The remunerations if payable to executive Directors are strictly as per the company and industry policy.

c) The Independent Directors are entitled to receive sitting fees. However no sitting fees were paid during the year.

d) The Independent Directors contributed in the Board and committee deliberation and business and operation of the company.

e) Risk Management Policy was implemented at all critical levels and monitored by the Internal Auditor, who reports to the Board and Audit committee.

HUMAN RESOURCES:

Your Company firmly believes that its human resources are the key enablers for the growth of the Company and are an important asset. Hence, the success of the Company is closely aligned to the goals of the human resources of the Company. Employee relations during the period under review continued to be healthy, cordial and harmonious at all levels and your Company is committed to maintain good relations with the employees

KEY FINANCIAL RATIOS:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended, the Company is required to give details of significant changes (changes of 25% or more as compared to immediately previous financial year) in financial ratios are as follows:

CAUTIONARY STATEMENT:

The above Management Discussion and Analysis contains certain forward-looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding a fluctuation in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation etc. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future or update any forward-looking statements made from time to time on behalf of the Company.