Star Delta Transformers Ltd Management Discussions

Your Directors have pleasure in presenting the Management Discussion and Analysis report for the Year ended on March 31^st, 2026.

Cautionary Statement:

The statements in the "Management Discussion and Analysis Report" describe your Companys objectives, projections, estimates and expectations which may be "forward-looking statements" within the meaning of the applicable laws and regulations. The actual results could differ materially from those expressed or implied, depending upon the economic and climatic conditions, government policies, taxation and other laws and other incidental factors.

a) INDUSTRY STRUCTURE, DEVELOPMENT

India continues to be the fastest-growing large economy in the world. According to the World Banks Global Economic Prospects report (June 2026), the Indian economy is estimated to have grown by approximately 7.7% in FY26, and its growth is projected at 6.6% for FY27, comfortably outpacing the global growth rate, which the World Bank expects to slow to around 2.5% in 2026 amid weaker global trade and elevated energy prices. This continued outperformance underscores Indias resilience and its growing weight in the global economic order.

India remains one of the most dynamic and fast-growing transformer markets in the world, driven by the countrys ambitious expansion and modernisation of its power sector. Industry estimates (Mordor Intelligence) place the India transformer market at approximately USD 3.25 billion in 2026, on track to reach approximately USD 4.82 billion by 2031, growing at a CAGR of around 8.2%. Market-size estimates vary meaningfully across research houses depending on scope and methodology, but the direction is consistent: robust, above-global-average growth driven by electrification, capacity addition and replacement demand. Indias power sector peak demand has grown from around 130 GW in 2014 to about 243 GW in 2024, and is projected to exceed 400 GW by 2030 (Ministry of Power, Annual Report 2025), directly driving transformer offtake.

The India transformer market continues to be shaped by expanding infrastructure, increasing industrial activity, and evolving energy requirements. Transformers remain critical components in power generation, transmission and distribution, and the market spans power transformers, distribution transformers, instrument transformers and specialty transformers. Key demand drivers include continued expansion of the electrical grid, rising electricity demand from urbanisation and industrial growth, the Make in India campaign, and sustained investment in grid modernisation. The focus on smart grid technology, renewable energy integration and infrastructure upgrades continues to create opportunities for advanced, high-efficiency transformer technologies. Utilities continue to invest heavily in power grid infrastructure, with high-capacity power transformers in demand for large-scale projects and renewable-integration-ready transformers increasingly specified. Programmes such as the Smart Cities Mission and rural electrification schemes continue to support demand across sectors. Transformers with advanced features such as on-load tap changers (OLTC) and improved cooling technologies remain central to addressing grid loss-reduction and stability requirements.

Government policy continues to shape the market. The Energy Conservation Act (2002), Minimum Energy Performance Standards (MEPS), and the Bureau of Energy Efficiencys (BEE) standards and labelling programmes continue to mandate energy-efficient transformer production, while the Perform, Achieve and Trade (PAT) scheme continues to incentivise energy efficiency among large industries. Infrastructure programmes including the Smart Cities Mission, the Green Energy Corridor and EV-charging infrastructure continue to generate demand for smart, efficient transformers.

Indias power grid continues to undergo large-scale expansion. In March 2026, the Central Electricity Authority (CEA) released its Transmission Plan for integration of over 900 GW of non-fossil fuel generation capacity by 2035-36, envisaging an estimated investment of approximately 7.93 lakh crore to add around 1,37,500 circuit kilometres of transmission lines and about 8,27,600 MVA of substation transformation capacity between FY27 and FY36. Each of these substations will require multiple transformers, and existing infrastructure continues to be upgraded as older units are replaced with higher-capacity, more efficient ones to reduce technical losses. The Revamped Distribution Sector Scheme (RDSS) continues to allocate substantial funding to strengthen distribution networks, including transformer augmentation and installation of new high-efficiency, low-loss units. Collectively, these initiatives continue to sustain strong underlying demand for the Companys products.

The Union Budget 2026-27, presented on 1st February 2026, increased public capital expenditure by around 9% year-on-year to 12.2 lakh crore for FY27, continuing the Governments emphasis on infrastructure-led growth, alongside measures such as an Infrastructure Risk Guarantee Fund to de-risk private investment in infrastructure. This sustained capex push continues to underpin steady demand for machinery, heavy equipment, EPC activity and, by extension, power transmission and distribution equipment including transformers.

b) OPPORTUNITIES, THREATS AND RISKS

India remains almost entirely dependent on imports for transformer-grade CRGO (cold-rolled grain-oriented) electrical steel. According to the Global Trade Research Initiative (GTRI), India imports close to 90% of its CRGO requirement annual consumption is estimated at 4,00,000-4,50,000 tonnes against domestic production of only about 40,000-50,000 tonnes, sourced mainly from China, Japan, South Korea and Russia. This concentration continues to make the supply chain vulnerable to disruption. Notably, in June 2026 the Directorate General of Trade Remedies (DGTR) initiated an anti-dumping investigation into CRGO and amorphous-metal imports from these four countries, following a complaint by the countrys principal domestic producer. Industry commentators have cautioned that any resulting duties could raise transformer input costs across the sector without materially reducing Indias import dependence, given the scale of the domestic supply gap a live risk the Company continues to monitor closely.

Copper prices have remained volatile and elevated through the current cycle. Global benchmark (LME) copper prices touched record levels through late 2025 and early 2026 briefly exceeding USD 14,500 per tonne intraday in January 2026 (IEA) after first crossing USD 12,000 per tonne in December 2025 and are expected to remain in a broadly elevated USD 10,000-11,000 per tonne range through 2026 (Goldman Sachs Research), driven by structurally rising demand from grid infrastructure, electric vehicles and data centres against constrained mine supply. While copper is globally traded, this volatility continues to make procurement at stable prices a challenge for manufacturers executing long-term supply contracts.

Beyond raw materials, transformers require numerous engineered components bushings, tap changers, insulation structures (pressboard), cooling equipment (radiators, pumps, fans) and control devices many of which have their own concentrated global supply chains; high-voltage bushings, for example, continue to be sourced from only a handful of manufacturers worldwide. Industry-wide, these combined raw-material and component pressures, layered on a rapid surge in orders, have kept transformer lead times and prices elevated: reported industry data indicates global transformer prices have risen by roughly 45-95% between 2019 and 2026, with lead times for large, high-voltage units stretching to as long as three years in some cases.

Shipping large transformers remains a logistical challenge in itself. These units often weigh hundreds of tons and require specialised transport (multi-axle trucks, rail transport and heavy-lift vessels). Cross-border transportation can face delays from customs and permit issues, particularly where route infrastructure is inadequate, and logistics costs have risen, impacting delivered cost to customers.

Meeting diverse international standards (IEC, IEEE/ANSI, etc.) remains a supply-chain consideration, as transformers built for different markets may require different design variants, settings or accessories, adding complexity and occasionally causing certification-related delays. Trade tensions and tariffs including the CRGO anti-dumping investigation noted above continue to be a live cost risk for the sector.

Manufacturers and utilities are increasingly building resilience into procurement qualifying multiple suppliers, maintaining safety stocks, ordering critical spares well in advance, and in some cases exploring strategic transformer reserves or standardised designs to ease emergency replacement. From the manufacturing side, continued investment in capacity and supply agreements is under way to relieve bottlenecks.

In conclusion, demand is not the limiting factor for the transformer industry the supply chain remains the critical challenge. Structural constraints (concentrated CRGO sourcing, volatile copper prices, long manufacturing times for bespoke large units, and the emerging CRGO trade-remedy risk) will remain points of attention. This continues to prompt closer collaboration between manufacturers, suppliers and clients to forecast needs and streamline delivery from raw material to energised asset in the field.

c) SEGMENT WISE PERFORMANCE OR PRODUCT-WISE PERFORMANCE

The company operates broadly in the following segments:

(i) Manufacturing of Transformers

(ii) Solar Power

(i) Manufacturing Division: Company has a very wide range of distribution and power transformers varying from Single Phase Transformers, 3 phase Transformers, Power Transformers, Extra High Voltage Transformers, Solar/Wind Transformers, Special Purpose Transformers catering to various Electricity Boards of Madhya Pradesh, Chhattisgarh, Maharashtra, Orissa, Rajasthan, Andhra Pradesh etc. The Company supplies through direct orders from Discoms and also through major private contractor companies like L&T, BHEL, Bajaj Electricals, Genus Infra Power Ltd., Blue Star Ltd., Vindhya Telelinks Ltd., Angelique International Company Ltd., Bharat Electricals, Sangli, Fedder Lloyd Ltd., KEI Industries Ltd., EPC Division, BLA Power, BGR Energy, KEC International Industries, Hydro Power Corporation, Madhya Pradesh Power Transmission Company Limited etc.

With a vast experience of more than 45 years and reliable after-sales service, the Company has become most trusted in Central India.

(ii) Solar: Company has set up a 500 KWp PV On-grid Solar Power Plant in Gagorni village, Rajgarh district of Madhya Pradesh. The plant was commissioned on 12th October 2012 under the REC (Renewable Energy Certificate) Mechanism with an annual generation capacity of 7.5 lakh units. The Company has future plans to set up additional plants for expansion.

d) OUTLOOK

The transformer market in India continues to be on a strong growth trajectory, underpinned by sustained government capital expenditure on grid transmission and distribution infrastructure, the CEAs long-term transmission and non-fossil integration plan, and continued RDSS-led distribution modernisation. The Company expects healthy demand to continue in the coming years, even as input-cost volatility in CRGO steel and copper, along with global lead-time pressures, remain factors to be managed closely.

e) INTERNAL CONTROL SYSTEM & THEIR ADEQUACY

The company has adequate internal control systems commensurate with the size of its operations. The Audit Committee periodically reviews the implementation of management policies to ensure that transactions have been accurately recorded and promptly reported.

a) Companys Financial and Operational Performance

The key highlights of the Audited Standalone financial Result for the Financial Year ended March 31^st, 2026 are as under:-

Particulars	Financial Year	Financial Year
	2024-25	2025-26
(i) Revenue From Operation	14186.43	17,306.15
(ii) Other Income	134.87	128.13
(iii) Total Revenue (i) +(ii)	14,321.30	17,434.28
(iv) Total Expenses	12891.24	15,829.84
(v) Profit/loss before tax (iv)-(v)	1430.06	1,604.44
(vi) Current Tax	372.89	410.26
(vii) Deferred tax	(5.61)	0.43
(viii) Profit/loss after tax (vi)-(vii)-(viii)	1062.78	1,193.74
Earnings per Share ( ):-	35.42	39.79
Basic:
Diluted:	35.42	39.79

Key Financial Ratios:

Particulars	Year ended 31st March, 2026	Year ended 31st March, 2025	Variation
1. Current Ratio (Total current assets/Current Liabilities)	5.91	10.77	-45.09%
2. Net Debt Equity Ratio (Net Debt/Average Equity)	0.04	(0.09)	-147.04%
3. Debt Service Coverage Ratio	17.52	21.97	-20.28%
4. Return on Equity (%) (Profit after Tax (PAT)/Average Equity)	13%	13%	0.00%
5. Inventory Turnover Ratio (in days) (Average Inventory / Sale of Products)	0.19	0.36	-46.57%
6. Debtors Turnover Ratio in days) (Average Trade Receivables/Turnover in Days)	0.31	0.27	14.02%
7. Trade Payables Turnover Ratio (in days) (Purchase of Goods/Average Trade Paybles)	34.40	21.51	59.93%
8. Net Capital Turnover Ratio (Working Capital/Turnover)	1.97	1.84	7.18%
9. Net Profit Ratio (Net Profit After Tax/Turnover)	6.90%	7.49%	-7.91%
10. Return on Capital Employed (EBIT/Average Capital Employed)	15.42%	17.00%	-9.27%

Current ratio: - The current ratio measures a companys ability to pay its short-term liabilities with its short-term assets. A higher current ratio is desirable so that the Company is better able to withstand unexpected fluctuations in business and economic conditions. Star Delta Transformers Limited has a Current ratio of 5.91. Return on equity: - ROE measures the ability of a firm to generate profits from its shareholders investments in the company. In other words, the return on equity ratio shows how much profit each rupee of common stockholders equity generates. Star Delta Transformers Limited has a ROE of 13%. (Higher is better) Debt to equity ratio: - It is a good metric to check out the capital structure along with its performance. Star Delta Transformers Limited has a Debt to Equity ratio of 0.04 which means that the company has low proportion of debt in its capital.

f) HUMAN RESOURCES & INDUSTRIAL RELATION:

The company has maintained very harmonious & cordial Industrial relations. There is continuous emphasis on development of human resources through training. We believe whatever we achieved from where we started our journey long back is the result of efforts of our team. So, we consistently aim to provide a sustainable environment for learning right from the stage of recruitment to retention. Total permanent employees as on 31.03.2026 were 75 (Seventy Five) excluding Directors.