STEL Holdings Ltd Management Discussions

STEL Holdings Limited ("STEL" or "the Company"), a part of the RPG and RP-Sanjiv Goenka (RPSG) Group, is a Core Investment Company ("CIC") engaged in creating long-term value through strategic investments in a diversified portfolio of quoted and unquoted equity securities. As an investment holding company, STEL plays a pivotal role in supporting the long-term growth of Group companies through disciplined capital allocation, prudent portfolio management and a governance-led investment approach.

The Companys investment philosophy is founded on preserving capital while delivering sustainable long-term value through investments in fundamentally strong businesses with sound governance, resilient business models and attractive growth prospects. Backed by the strength, legacy and diversified presence of the RPG and RPSG Group across multiple sectors of the Indian economy, STEL remains well positioned to benefit from long-term structural growth opportunities while maintaining a prudent and balanced investment strategy.

This Management Discussion and Analysis Report provides an overview of the macroeconomic and industry environment, the Companys operating and financial performance during the financial year, key developments across its investment portfolio, principal risks and opportunities, the effectiveness of its internal control framework, and its outlook for sustainable long-term value creation. The Report should be read together with the Companys Audited Financial Statements and the accompanying Notes forming part of this Annual Report.

The global economy continued to navigate a challenging and evolving landscape during 2025 and the early part of 2026. Persistent geopolitical tensions, supply chain realignments, elevated trade protectionism and divergent monetary policy responses across major economies contributed to heightened uncertainty in global financial markets. At the same time, rapid advancements in artificial intelligence, digital technologies, semiconductor manufacturing and clean energy continued to reshape global investment priorities. Although global Foreign Direct Investment (FDI) remained subdued, reflecting geopolitical and macroeconomic uncertainties, long-term capital continued to gravitate towards economies demonstrating structural resilience, policy stability and sustainable growth potential.

Against this backdrop, India reinforced its position as one of the worlds fastest-growing major economies. According to the Economic Survey 2025-26, Indias real GDP is estimated to grow by approximately 7.4% during FY 2025-26, supported by resilient domestic consumption, sustained public capital expenditure, improving private sector investment, robust services sector performance and strengthening manufacturing activity. Macroeconomic stability, supported by moderating inflation, a resilient banking system and continued structural reforms, has further enhanced Indias attractiveness as a long-term investment destination.

The continued emphasis on infrastructure development, manufacturing competitiveness, digital transformation, renewable energy and domestic consumption presents significant opportunities across multiple sectors of the economy. These structural growth drivers, coupled with favourable demographic trends and an expanding formal economy, are expected to support sustainable value creation over the medium to long term.

As a Core Investment Company, STEL is strategically positioned to participate in Indias long-term growth through its diversified investment portfolio comprising quoted and unquoted equity investments within the RPG and RP-Sanjiv Goenka (RPSG) Group. The Companys investment strategy is centred on disciplined capital allocation, prudent portfolio management and long-term value creation through investments in fundamentally strong businesses operating across diverse sectors of the economy.

Looking ahead, the Company remains committed to maintaining a balanced and selective investment approach. Investment decisions continue to be guided by rigorous evaluation of business fundamentals, financial strength, governance standards, capital efficiency and long-term sustainability of the investee companies. While remaining mindful of evolving global and domestic economic developments, the Company believes that its diversified investment portfolio, strong governance framework and long-term investment philosophy position it well to capitalise on emerging opportunities and deliver sustainable value for its shareholders.

Source: Economic Survey 2025-26.

Indias long-term economic fundamentals continue to provide a favourable environment for disciplined investment. Structural reforms, rising domestic consumption, increasing formalisation of the economy, digital transformation, infrastructure development and the accelerating transition towards clean energy are expected to create sustainable value across multiple sectors.

Given its diversified investment portfolio, the Company remains well positioned to benefit from long-term growth opportunities arising from:

Indias Consumption-led Growth: Rising disposable incomes, urbanisation and premiumisation trends continue to support long-term growth across consumer-oriented businesses, retail and allied sectors.
Energy Transition and Infrastructure Development: Continued investments in renewable energy, power infrastructure, transmission networks and sustainable technologies present attractive long-term opportunities across the energy ecosystem.
Manufacturing-led Expansion: Government initiatives such as Production Linked Incentive (PLI) schemes, supply chain diversification and the "China Plus One" strategy continue to strengthen Indias manufacturing competitiveness across sectors including automotive components, tyres, specialty materials and industrial products.
Digital Transformation: Increasing adoption of digital technologies, automation, artificial intelligence and data analytics is expected to improve operational efficiency and enhance long-term competitiveness across several portfolio companies.
Disciplined Capital Allocation: The Company remains committed to identifying fundamentally strong businesses with robust governance standards, resilient business models and sustainable earnings potential, enabling long-term value creation for shareholders.

As a Core Investment Company, the Companys financial performance is influenced primarily by the operating performance, profitability and market valuation of its investee companies. Accordingly, the Company continuously monitors developments across the economic, regulatory and business environment to effectively manage potential risks.

The principal risks include:

Macroeconomic Risks: Economic slowdown, inflationary pressures, interest rate movements, exchange rate volatility and adverse global economic conditions may affect business performance and investment valuations.
Market Risks: Volatility in equity markets may impact the fair value of the Companys investment portfolio and influence investment returns.

Sector-specific Risks: Changes in business conditions, competitive intensity, technology adoption or regulatory developments in sectors where investee companies operate may affect portfolio performance.
Regulatory Risks: Amendments to taxation laws, corporate regulations, securities market regulations or policies governing Core Investment Companies may influence investment decisions and financial performance.
Geopolitical Risks: Global geopolitical developments, supply chain disruptions and international trade uncertainties may indirectly affect domestic economic activity and capital markets.
Liquidity and Capital Allocation Risks: Maintaining an optimal balance between long-term strategic investments and liquidity continues to remain an important consideration in capital allocation decisions.

The Company follows a prudent investment philosophy supported by continuous portfolio monitoring, disciplined capital allocation and a strong governance framework to mitigate these risks.

India continues to offer one of the most attractive long-term investment opportunities among major global economies, supported by favourable demographics, structural reforms, increasing domestic consumption, infrastructure development and sustained economic growth.

Against this backdrop, the Company remains committed to its long-term investment philosophy of creating sustainable shareholder value through disciplined capital allocation and prudent portfolio management. The investment portfolio will continue to be evaluated based on business fundamentals, financial resilience, governance standards, capital efficiency and long-term growth prospects.

While short-term market volatility may continue in response to evolving global and domestic developments, the Company believes that its diversified investment portfolio, strong financial position and governance-led investment approach provide a solid foundation to capitalise on long-term growth opportunities.

STEL operates as a Core Investment Company (CIC) and derives its income primarily from dividends, interest and investment-related returns. Since the Company operates in a single line of business, there are no separate reportable business segments in accordance with the applicable Indian Accounting Standards.

The Company has established an adequate internal control framework commensurate with the nature, size and complexity of its operations. The internal control systems are designed to safeguard assets, ensure reliability of financial reporting, promote operational efficiency and ensure compliance with applicable laws, regulations and internal policies.

The framework comprises:

• Well-defined policies, delegation of authority and operating procedures.
• Robust internal financial controls over financial reporting.
• Risk-based internal audit conducted by an independent Internal Auditor.
• Periodic review of internal audit findings by the Audit Committee together with monitoring of corrective actions.

• Continuous evaluation of the effectiveness of internal controls, governance processes and statutory compliance.
• Regular reporting of significant observations and implementation status to the Audit Committee and the Board of Directors.

Based on the reviews carried out during the year, the Board believes that the Companys internal control systems remain adequate and are operating effectively.

Risk management forms an integral part of the Companys governance framework and supports informed decision-making, capital preservation and sustainable value creation.

Although the constitution of a Risk Management Committee is presently not applicable to the Company under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has established appropriate processes for identifying, assessing, monitoring and mitigating key business risks.

The Companys enterprise-wide risk assessment covers, among others:

• Strategic risks
• Investment and market risks
• Macroeconomic risks
• Sector-specific risks
• Regulatory and compliance risks
• Liquidity risks
• Information technology and cyber risks
• ESG-related risks
• Human capital risks

The Board and the Audit Committee periodically review the Companys risk profile and mitigation measures to ensure that emerging risks are appropriately identified and managed.

The Company recognises that its employees are fundamental to sustaining operational excellence and delivering long-term value.

As on March 31, 2026, the Company had three employees. Despite its lean organisational structure, the Company continues to foster a culture of integrity, accountability, continuous learning and professional development. The Company remains committed to providing a collaborative work environment, clearly defined responsibilities and opportunities for capability enhancement while ensuring high standards of governance and ethical conduct.

Indias strong macroeconomic fundamentals, structural reforms, expanding domestic consumption and sustained infrastructure investments continue to support a positive long-term outlook for the economy and capital markets.

With a diversified portfolio of strategic investments, a disciplined investment philosophy and a robust governance framework, STEL remains well positioned to benefit from Indias long-term growth story. The Company will continue to focus on prudent capital allocation, active portfolio oversight and sustainable value creation while maintaining financial resilience amid evolving market conditions.

1. Financial Highlights - Revenue - ? 2,743 lakh - Dividend Income - ? 2,553 lakh - PAT - ? 1,986 lakh - Net Worth - ? 1609 crore - Market Value of Investments - ? 1,710 crore
2. Key Performance Highlights (new call-out box)

• Revenue grew by 25.2%
• Dividend income increased by 25.0%
• PAT increased by 25.1%
• EPS increased from 8.60 to 10.76
• Debt-free balance sheet maintained
• Diversified long-term investment portfolio
• Strong liquidity position

3. Capital Allocation Philosophy
   long-term value creation, financial discipline, governance standards, sustainable returns, prudent risk management.

FY 2025-26 was characterised by healthy growth in investment income, reflecting the strong operating performance of the Companys investee entities and the continued benefits of its long-term investment strategy. The Companys disciplined investment approach, prudent capital allocation and focus on high-quality businesses enabled it to deliver improved financial performance while maintaining a strong balance sheet and a conservative capital structure.

The financial performance of the Company for FY 2025-26 compared with FY 2024-25 is summarised below:

The Company reported total revenue of 2,743.21 lakh on both a standalone and consolidated basis during FY 2025-26, registering a growth of 25.22% over the previous financial year. The increase was primarily attributable to higher dividend income received from strategic investments.

Dividend income increased by 25% to 2,553.18 lakh in both Standalone and Consolidated results, driven by improved profitability and higher dividend declarations by investee companies.

EBITDA increased by 25.47% to 2,669.44 lakh on a standalone basis and 2,668.63 lakh on a consolidated basis. The improvement was broadly aligned with the growth in investment income, resulting in continued operational efficiency and stable operating margins.

Profit After Tax increased to 1,986.44 lakh (Standalone) and 1,985.41 lakh (Consolidated), representing a year-on-year growth of approximately 25.12%. Consequently, Earnings Per Share (EPS) improved from 8.60 to 10.76, reflecting enhanced profitability during the year.

Overall, the Companys financial performance demonstrates the resilience of its investment portfolio and the effectiveness of its long-term investment strategy.

The following table provides a summary of the companys financial performance and position for the fiscal years ending 2026 and 2025.

The Company continued to maintain a strong capital base supported by a debt-free balance sheet and a diversified portfolio of strategic investments.

Net Worth stood at 1,609.60 crore on a standalone basis compared with 1,753.25 crore in the previous year. The reduction primarily reflects changes in the fair valuation of investments recognised in accordance with applicable accounting standards and does not affect the Companys underlying liquidity or financial strength.

The market value of the Companys investment portfolio remained substantial at 1,710.02 crore as at 31 March 2026, providing a strong asset base for long-term value creation.

Equity Share Capital remained unchanged at 18.45 crore, reflecting the stability of the Companys capital structure.

The Company continues to maintain a diversified investment portfolio across sectors including power, infrastructure, manufacturing, carbon black, tyres, pharmaceuticals, consumer businesses and financial services. Investment decisions continue to be guided by rigorous evaluation of business fundamentals, governance standards, capital efficiency and long-term growth potential.

The key financial ratios have been computed in accordance with applicable regulatory requirements. Significant movements in ratios compared with the previous year are explained below.

The Current Ratio increased significantly to 27.79 from 1.092 in the previous year. This increase was primarily due to a substantial reduction in current liabilities following settlement of the outstanding balance relating to the PCBL share warrant transaction completed during the previous financial year. The movement represents a one-time event and is not indicative of the Companys normal operating cycle.

The Operating Profit Ratio remained broadly stable during the year, reflecting consistent cost management and operating efficiency. Growth in operating profit remained proportionate to the increase in total income.

The Net Profit Ratio remained largely unchanged compared with the previous year, demonstrating stable profitability despite the increase in overall income.

Return on Net Worth improved by 36.27%, primarily driven by higher profit after tax during the year.

ROCE improved by 36.79%, reflecting higher earnings before interest and tax generated from the Companys investment portfolio.

Return on Investment increased by 20.00%, primarily due to higher dividend income generated from strategic investments during FY 2025-26.

Considering the nature of the Companys operations as a Core Investment Company:

• Debtors Turnover Ratio is not applicable as the Company does not have trade receivables.
• Inventory Turnover Ratio is not applicable since the Company does not maintain inventories.
• Interest Coverage Ratio and Debt-Equity Ratio are not applicable as the Company does not have borrowings during the year.

Please be advised that this document contains forward-looking statements regarding our future expectations and business outlook. These statements are based on current assumptions and are subject to risks and uncertainties; therefore, actual outcomes may differ from what we have projected. We cannot guarantee that these expectations will be met. Important variables that could affect our performance include the operational success of our investee companies, changes in Indias economic and political environment, and potential modifications to tax laws.