Sunita Tools Ltd Management Discussions

COMPANY OVERVIEW

Sunita Tools Limited has built its manufacturing foundation over 4 decades in precision engineering, mould bases, ground plates and complex CNC machining. The Companys products support a wide range of manufacturing industries, including automotive, pharmaceuticals, electronics, consumer goods and other engineering sectors.

FY2025-26 was a significant year in the Companys evolution. Alongside strengthening the established mould-base and precision-engineering business, the Group accelerated its strategic expansion into aerospace and defence manufacturing. The strategy is to leverage existing competencies in precision machining, large-component manufacturing, process control and engineering to participate in higher-value and technologically demanding sectors.

Managements objective is to build a diversified precision engineering, aerospace and defence manufacturing platform while maintaining a strong focus on quality, customer service, regulatory compliance, capital discipline and execution.

FY2025-26 - A YEAR OF TRANSFORMATION

The year was characterised by investment in manufacturing capacity, specialised machinery, working capital and new business verticals. These initiatives were undertaken to strengthen the Companys existing operations and create the foundation for future participation in aerospace and defence opportunities.

Expansion of precision-manufacturing capacity through advanced CNC and specialised machines.

Development of manufacturing capabilities for 155mm empty artillery shell cases, subject to applicable approvals, qualification and regulatory requirements.

Expansion of specialised aerospace and defence capabilities through Group entities.

Creation of an international platform, including the United States presence and acquisition of New Mould Innovations (NMI), Kentucky, USA.

Continued market development across India, the Middle East, the United States and Europe.

Scouting more acquisitions across the globe.

Third Generation of promoters have joined the business

Engaging Deloitte TTL to review operational,regulatory, statutory complainces.

Engaging Consultants to implement AS9100D IN VASAI CNC Factory.

REVIEW OF OPERATIONS

Standalone:

The Total Income of the Company stood at 4708.60lakhs for the year ended March 31, 2026 as against 3014.83 lakhs in the previous year. The Company made a net profit of 650.66 lakhs for the year ended March 31, 2026 as compared to the net profit of 509.12 lakhs in the previous year.

Consolidated:

The Consolidated Total Income of the Company stood at 4794.95 lakhs for the year ended March 31, 2026 as against 3071.11 lakhs in the previous year. The Company made a net profit of 618.91 lakhs for the year ended March 31, 2026 as compared to the net profit of 512.52 lakhs in the previous year.

Metric	FY2025-26	FY2024-25	Movement
Revenue from operations	47.31 cr	30.08 cr	57%
Profit Before Tax	7.91 cr	6.85 cr	15%
Profit After Tax	6.19 cr	5.13 cr	21%
EPS (basic)	10.02	8.59	Higher

Balance Sheet Expansion and Capacity Creation

The balance sheet expanded substantially as the Company invested in fixed assets, capital work-in-progress and working capital.

Tangible fixed assets stood at approximately 23.88 crore and capital work-in-progress at approximately 19.93 crore as at 31 March 2026. Inventories were approximately 24.97 crore and trade receivables approximately 28.12 crore.

Operating cash flow remained negative during the year, primarily reflecting the working-capital absorption associated with the expansion in receivables, inventory and other operating assets. Management recognises that improving conversion of accounting profits into operating cash flows is an important priority and continues to focus on receivable collections, inventory optimisation, customer payment terms and disciplined working-capital deployment, The diligent exercise for that Has started and will be visible in the coming months and FY.

EXPANSION OF MANUFACTURING CAPABILITIES

During FY2025-26, the Company strengthened its manufacturing infrastructure through the addition of a few advanced CNC and specialized machines of varying sizes and capabilities, including large machining centers, and other precision-manufacturing assets.

These investments enhance the Companys ability to manufacture larger, more complex and higher-precision components and are intended to support both the legacy precision-engineering business and emerging aerospace and defence applications.

AEROSPACE AND DEFENCE - STRATEGIC GROWTH VERTICAL

The Companys diversification into aerospace and defence was one of the most important strategic developments of FY2025-26. Existing capabilities in precision machining, metallurgy, process control and large-component manufacturing provide a foundation for specialised aerospace and defence manufacturing.

The Group is pursuing this opportunity through a combination of internal capacity creation, specialised subsidiaries, customer qualification, strategic relationships and international market development. Management views this vertical as a long-term growth opportunity, while recognising the sectors stringent requirements for licensing, quality, traceability, qualification and regulatory compliance.

155mm Empty Artillery Shell Manufacturing Initiative

During FY2025-26, the Company progressed with the establishment of manufacturing capability for 155mm M107 empty artillery shell cases. Line 1 at Faridabad has been installed and is designed for approximately 120,000 shells per annum. The Company has also planned Line 2 with an envisaged capacity of approximately 240,000 shells per annum, with procurement under execution as disclosed in the Companys investor presentation.

The Company also entered into an interim sales arrangement during FY2025-26 relating to 155mm M107 empty shell cases. Commercial production and supply under such arrangements remain subject to applicable regulatory approvals, licences, prototype/product qualification, customer approvals and other contractual conditions. The Company therefore continues to treat the programme as a capability-development and commercialisation initiative subject to these conditions.

Aerospace Subsidiaries and Specialized Manufacturing

The Groups aerospace and defence strategy is also supported through Sunita having about 4 decades of precision machining experience and skill. These businesses are intended to develop specialised capabilities in aerospace and defence components, air-engineering applications, precision machined parts, and high-precision machining for aerospace, defence applications.

The longer-term objective is to build an integrated manufacturing ecosystem in which large-format machining, precision engineering and specialised aerospace capabilities complement one another, Accordingly implementation of AS9100D in our CNC machining facility has been planned

INTERNATIONAL BUSINESS DEVELOPMENT

The Companys strategy increasingly includes international business development. During the year, the Group continued developing market relationships in Saudi Arabia, Bahrain, Kuwait, the UAE and the United States, with the objective of diversifying the customer base and participating in global engineering and manufacturing supply chains.

The Group also established a United States presence through Sunita Defence Inc., with Chicago as its U.S. base, and completed its first U.S. acquisition, New Mould Innovations (NMI), Kentucky. NMI is positioned as a manufacturing platform in specialised cartridges and aerospace-grade grease applications. Management views the U.S. presence as a platform for customer development, manufacturing relationships and future strategic opportunities.This company has promising future and yet almost 90% of its potential is untapped which will be tapped during the coming years.

SUBSEQUENT DEVELOPMENTS AFTER 31 MARCH 2026

The following developments occurred after the close of FY2025-26 and are presented separately so that they are not construed as operating achievements of the financial year ended 31 March 2026.

Strong Q1 FY2026-27 Business Update

As disclosed by the Company on 24 July 2026, consolidated net sales value for the quarter ended 30 June 2026 was 18.64 crore compared with 4.14 crore in the corresponding quarter of the previous year, representing approximately 350% year-on-year growth. The Company also announced the addition of two large-size precision machines to support demand in the legacy business.

Polish Defence Technology Collaboration

On 30 July 2026, the Company disclosed that it had entered into a Memorandum of Understanding with a Polish defence manufacturing company engaged in research, design, development and manufacture of ISR drones, loitering ammunition and smart flying ammunition. The proposed collaboration is intended to explore strategic cooperation and advanced defence technology opportunities and remains subject to definitive arrangements, regulatory approvals and commercial execution.

Further Defence Business Development

The Company has continued to evaluate additional international defence opportunities after year-end. Any letter of intent, proposal, tender participation or commercial discussion is inherently subject to due diligence, definitive contracts, regulatory approvals, end-user requirements and successful execution, and should not be regarded as firm revenue unless and until the relevant conditions are satisfied.

INDUSTRY OVERVIEW

Indian Manufacturing and Precision Engineering

India continues to strengthen its position as a global manufacturing destination, supported by domestic capital expenditure, infrastructure investment, localisation initiatives and supply-chain diversification. The continuing China+1 trend creates opportunities for Indian manufacturers capable of delivering quality, precision, scale and reliable lead times.

Aerospace and Defence

Indias aerospace and defence manufacturing ecosystem continues to expand, supported by Make in India, Aatmanirbhar Bharat, localisation of defence procurement and growing participation by private-sector manufacturers. The opportunity is accompanied by high entry barriers, including stringent technical qualification, certification, traceability, regulatory approvals and long customer-development cycles.

OPPORTUNITIES

Growth in demand for precision-engineered and large-format components.

China+1 and diversification of global manufacturing supply chains.

Localisation of aerospace and defence manufacturing in India.

Potential commercialisation of artillery-shell manufacturing capacity, subject to approvals and qualification.

Expansion of specialised aerospace capabilities through subsidiaries.

International customer development through the Companys U.S., Middle East and European initiatives.

Selective strategic collaborations and acquisitions where technically, commercially and financially appropriate.

Greater automation, digital manufacturing, AI-enabled inspection and predictive quality systems.

RISKS AND THREATS

Execution risk associated with rapid capacity expansion and new business verticals.

Delays in regulatory approvals, licences, customer qualification or product validation.

Working-capital intensity, receivable collection and inventory management.

Raw-material price volatility and supply-chain disruption.

Foreign-exchange, geopolitical and export-control risks in international markets.

Integration and execution risks relating to subsidiaries and overseas acquisitions.

Cybersecurity, data protection and intellectual-property risks.

RISK MANAGEMENT

The Company has a Risk Management Framework designed to identify, assess, monitor and mitigate material financial, operational, regulatory, technological and strategic risks. The Board and senior management periodically review major risks affecting the Companys businesses and take appropriate mitigation measures.

As the Group expands into regulated sectors and international markets, the risk-management framework will continue to evolve in line with the increasing scale and complexity of operations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains internal-control systems commensurate with the size, scale and complexity of its operations. These systems are intended to support appropriate authorisation of transactions, safeguarding of assets, reliability of financial reporting, efficient utilisation of resources and compliance with applicable laws and regulations.

The Internal Audit function is carried out by an independent firm of Chartered Accountants. Internal-audit observations and recommendations are reviewed by Management and the Audit Committee, and corrective measures are implemented where required.

HUMAN RESOURCES

The Company considers its people central to its growth strategy. The transition towards advanced precision, aerospace and defence manufacturing requires specialised talent across production engineering, quality assurance, machining, metallurgy, regulatory compliance, international business development and programme management.

The Group continues to focus on attracting, developing and retaining skilled employees while promoting accountability, technical excellence, continuous learning and a strong safety and quality culture.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Ratio	31-Mar-26	31-Mar-25	Difference	Management explanation
Current Ratio	1.46	3.67	-60.17%	Decline reflects the significant increase in current liabilities associated with the Companys expansion and working-capital requirements.
Debt Equity Ratio	0.60	0.09	590.82%	Increase reflects higher borrowings raised during the expansion phase relative to the previous year.
Debt Service Coverage Ratio	20.64	19.87	3.88%	No material change; the ratio remained strong based on the reported computation.
Return on Equity Ratio	0.17	0.14	23.86%	Movement remained below the 25% disclosure threshold.
Inventory Turnover	2.66	1.91	39.01%	Increase reflects higher business activity and movement in inventory during the year.
Trade Receivable Turnover Ratio	2.68	2.14	25.01%	Increase reflects the change in revenue and average receivables during the year.
Trade Payable Turnover Ratio	3.35	7.45	-55.08%	Decline reflects the significant increase in trade payables and purchases associated with the expansion in operations.
Net Profit Ratio	0.14	0.17	-18.49%	Movement remained below the 25% disclosure threshold.
Return on Capital Employed	0.11	0.15	-29.87%	Decline reflects the substantial increase in capital employed ahead of full utilisation of the expanded capacity.
Return on Investment	0.02	0.01	98.42%	Increase reflects the movement in returns relative to the investment base during the year.

OUTLOOK

The outlook for Sunita Tools should be viewed against the backdrop of the transformation underway across the Group. The legacy mould-base and precision-engineering businesses remain the operating foundation, while investments in advanced machinery, aerospace capabilities, defence manufacturing and international expansion are increasing the Companys addressable market.

Managements priorities are to improve utilisation of newly created capacities, convert qualified opportunities into executable business, obtain required regulatory and customer approvals, strengthen working-capital efficiency, develop international customers and scale the aerospace and defence verticals in a disciplined manner.

The Companys objective is not merely to increase manufacturing volumes, but to progressively move towards higher-value, higher-precision and technologically more sophisticated manufacturing. Subject to successful execution, regulatory compliance, capital discipline and market conditions, Management believes the Group is positioned to enter its next phase as an Indian-headquartered, globally connected precision engineering, aerospace and defence manufacturing enterprise.

SAFE HARBOUR

Certain statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, strategies or outlook may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to economic conditions, government policies, geopolitical developments, regulatory approvals, customer qualification, raw-material availability and prices, foreign-exchange movements, competitive conditions, technological developments, execution risks and other factors affecting the Companys operations.

Readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise such statements except as may be required under applicable laws and regulations.