Supreme Power Equipment Ltd Management Discussions

1. Company Overview

Supreme Power Equipment Limited is a Tamil Nadu-headquartered manufacturer of power and distribution transformers, serving Indias generation, transmission, distribution and renewable energy sectors. The Company was incorporated as Supreme Power Equipment Private Limited in 2005, and was listed on the NSE Emerge platform on 29 December 2023. Over more than three decades it has supplied in excess of 20,800 transformer units to more than 880 customers across over 35 end-use sectors, and manufactures nine classes of transformers - power, distribution, energy efficient, generator, windmill, solar, inverter duty, converter and rectifier, and isolation transformers - together with transformer tanks and accessories. Manufacturing is carried out at two facilities in Tamil Nadu: the Thirumazhisaipal plant, which produces power and distribution transformers of up to 25 MVA and 132 kV, and the Kannur plant commissioned during the year under review, which extends capability to 200 MVA and 220 kV. Together the two facilities provide an installed capacity of approximately 9,000 MVA per annum. The Company holds ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications, is empanelled with state utilities including TANGEDCO, KSEB, KPTCL and TNPOCL, and to date has not recorded a field failure on any transformer it has supplied. As reported in the Companys audited financial results for FY2025-26, which were approved by the Board on 27 May, 2026 and filed with the National Stock Exchange, consolidated results include Danya Electric Company, a partnership firm in which the Company holds a 90% interest.

Management Discussion and Analysis

1. Company Overview

Supreme Power Equipment Limited is a Tamil Nadu-headquartered manufacturer of power and distribution transformers, serving Indias generation, transmission, distribution and renewable energy sectors. The Company was incorporated as Supreme Power Equipment Private Limited in 2005, and was listed on the NSE Emerge platform on 29 December 2023. Over more than three decades it has supplied in excess of 20,800 transformer units to more than 880 customers across over 35 end-use sectors, and manufactures nine classes of transformers - power, distribution, energy efficient, generator, windmill, solar, inverter duty, converter and rectifier, and isolation transformers - together with transformer tanks and accessories. Manufacturing is carried out at two facilities in Tamil Nadu: the Thirumazhisaipal plant, which produces power and distribution transformers of up to 25 MVA and 132 kV, and the Kannur plant commissioned during the year under review, which extends capability to 200 MVA and 220 kV. Together the two facilities provide an installed capacity of approximately 9,000 MVA per annum. The Company holds ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications, is empanelled with state utilities including TANGEDCO, KSEB, KPTCL and TNPOCL, and to date has not recorded a field failure on any transformer it has supplied. As reported in the Companys audited financial results for FY2025-26, which were approved by the Board on 27 May, 2026 and filed with the National Stock Exchange, consolidated results include Danya Electric Company, a partnership firm in which the Company holds a 90% interest.

The year in brief

FY2025-26 was defined by the commissioning of the Kannur facility, which raised installed capacity from 2,500 MVA to approximately 9,000 MVA and lifted manufacturing capability from 50 MVA / 132 kV to 200 MVA / 220 kV. As per the audited FY2025-26 financial results filed with the National Stock Exchange, consolidated total income grew 21.78% to Rs.182.10 Crore, EBITDA grew 14.52% to Rs.33.29 Crore and profit after tax grew 9.89% to Rs.20.44 Crore. As disclosed at the H2 and FY2025-26 earnings conference call held in June 2026, the consolidated order book stood at Rs.588.17 Crore as on May 27, 2026.

2. Economic Overview

2.1 Global economy

The global economy entered FY2025-26 in a more settled position than had been feared at the start of the year, with the International Monetary Fund, in its World Economic Outlook update, projecting world output growth of around 3.0% in 2025 and 3.1% in 2026 - an upward revision reflecting lower effective tariff rates than initially assumed, improved financial conditions and fiscal expansion in several major economies. Growth nevertheless remains below the pre-pandemic average, and the composition of risk has shifted rather than diminished. Trade policy uncertainty, geopolitical friction in West Asia, volatility in crude oil prices and the pace at which major central banks unwind restrictive policy continue to shape the outlook. For capital goods manufacturers, the more consequential global development has been the tightening of supply in Specialised electrical materials and equipment as grid investment accelerates simultaneously across the United States, Europe, the Middle East and Asia. Lead times for transformers, high-voltage equipment and grain-oriented electrical steel have lengthened worldwide, which supports pricing but places a premium on procurement discipline.

2.2 Indian economy

India remained the fastest-growing major economy through the year. According to the First Advance Estimates released by the National Statistics Office, Ministry of Statistics and Programme Implementation, in January 2026, real GDP growth for FY2025-26 stood at 7.4%, ahead of the 6.3-6.8% range projected at the start of the year and above the 6.5% recorded in FY2024-25, with subsequent revisions placing growth marginally higher still. Growth was supported by resilient private consumption, a continued expansion in gross fixed capital formation and sustained public capital expenditure. As per the Reserve Bank of Indias Monetary Policy Statement of June 2026, real GDP growth of 6.6% is projected for FY2026-27 with CPI inflation of 5.1% the policy repo rate having been held at 5.25% with a neutral stance; the same review placed manufacturing capacity utilisation at 75.2% in the fourth quarter of FY2025-26, above its long-term average of about 74% The moderation projected for FY2026-27 reflects base effects and external volatility rather than domestic weakness.

For the Company, the relevant feature of the Indian macro picture is not the headline growth rate but its composition. Public and quasi-public capital expenditure on infrastructure- and within it, power infrastructure - has been the most consistent element of Indian demand for several years, and is underwritten by multi-year central schemes rather than by annual budget cycles. That gives equipment manufacturers a visibility that is unusual in the broader capital goods sector.

3. Industry Structure and Developments

3.1 Indias power sector

According to the Centre for Research on Energy and Clean Air, in its April 2026 review of Indias power sector for the fourth quarter of FY2025-26, the countrys installed generation capacity reached approximately 533 GW by March 2026, with non-fossil sources accounting for around 53% of the total - a threshold crossed well ahead of the original commitment date. Capacity addition in FY2025-26 was the highest in the countrys history: on Central Electricity Authority data, 52,537 MW was added up to 31 January 2026, of which approximately 43 GW came from renewable sources, taking total non-fossil capacity to about 272 GW. As per the Central Electricity Authoritys Long-Term National Resource Adequacy Plan (2026-27 to 2035-36) of March 2026, read with the CREA review referred to above, solar accounts for the largest share of the renewable build-out at roughly 140-150 GW, followed by wind at about 55 GW and hydro at about 51 GW.

Demand has grown at least as quickly as supply. As recorded in the same Long-Term National Resource Adequacy Plan, peak electricity demand rose from 190 GW in FY2020-21 to 250 GW in FY2024-25, a compound annual growth rate of 7.06% and well above the long-term historical average of 4-5%. The Central Electricity Authoritys National Generation Adequacy Plan for 2026-27 to 2035-36, released in March 2026 alongside the midterm review of the 20th Electric Power Survey, projects peak demand rising to 459 GW and electricity requirement to 3,365 BU by 2035-36, with installed capacity more than doubling from about 520 GW in January 2026 to 1,121 GW over the same period. A structural shift in the shape of demand is also underway, with peak load increasingly occurring during solar generation hours rather than in the evening, which raises the importance of grid flexibility, storage and transformation capacity at the distribution end.

3.2 Transmission: the defining opportunity

As announced by the Ministry of Power, Government of India, the National Electricity Plan (Transmission) released in October 2024 sets out an investment opportunity of over Rs.9,15,000 Crore in the transmission sector up to 2032. Per the Ministry, the plan is designed to build a network capable of supporting 500 GW of non-fossil capacity by 2030 and over 600 GW by 2032. In physical terms the Plan, prepared by the Central Electricity Authority, envisages the addition of approximately 1,91,000 circuit kilometres of transmission lines and more than 1,274 GVA of transformation capacity by FY2032, expanding the national network from roughly 5 lakh circuit kilometres in early 2026 to about 6.48 lakh circuit kilometres. On an analysis of the Plan data for the 2027-32 period published by InVed in July 2026, the substantial majority of the investment identified for that period is directed at the Inter-State Transmission System, with the balance at intra-state networks.

Execution is already visible in procurement. According to a Kotak Neo research report of May 2026 on Indias transmission capital expenditure cycle, Power Grid Corporation of India recorded capital expenditure of Rs.35,540 Crore in FY2025-26, exceeding its revised target, and has planned capital expenditure of Rs.1.08 lakh Crore between FY2026 and FY2028 against an estimated business pipeline of Rs.3.06 lakh Crore through FY2032. State transmission utilities are running parallel programmes. The significance for transformer manufacturers is that transformation capacity - measured in MVA and GVA - is the single largest equipment line item in a transmission build-out, and the plans 1,274 GVA target represents demand of a different order from anything the industry has previously absorbed.

3.3 Distribution: reform-linked demand

On the distribution side, as set out by the Ministry of Power, Government of India, the Revamped Distribution Sector Scheme launched in July 2021 carries a total outlay of Rs.3,03,758 Crore, including gross budgetary support of Rs.97,631 Crore, over the five years from FY2021-22 to FY2025-26, with the objectives of reducing aggregate technical and commercial losses to a pan-India range of 12-15% and closing the gap between average cost of supply and average revenue realised. Because the scheme is reforms-linked and results-linked, and because distribution companies procure distribution transformers directly as part of network strengthening, it creates creditworthy and repeatable demand for manufacturers empanelled with state utilities. Separately, the Bureau of Energy Efficiencys upgraded star-labelling requirements for distribution transformers, effective from 1 January 2025, have raised the efficiency threshold across the segment and, on the Global Trade Research Initiatives assessment, pushed the industry towards higher-grade core material and better design.

3.4 Renewable energy and evacuation infrastructure

Indias renewable programme is now large enough that grid connection, rather than generation, is the binding constraint. Each gigawatt of solar or wind capacity requires inverter duty, solar or windmill transformers at the generation end, step-up transformers at the pooling substation and reinforced transformation capacity along the evacuation corridor. The record renewable addition of approximately 43 GW in FY2025-26 reported by the Central Electricity Authority therefore translates, on its own, into a substantial and recurring transformer requirement. The move towards hybrid and storage-linked projects, and towards green energy open access for commercial and industrial consumers, adds further specialised transformer demand.

3.5 New categories of demand

A set of load categories that were immaterial a decade ago are now shaping equipment procurement. As per CBRE Groups India data centre report for 2026, the countrys data centre stock crossed approximately 1.7 GW in 2025 following a supply addition of 440 MW, and total capacity across major cities is expected to rise by about 30% during 2026 on roughly 500 MW of fresh supply, with cumulative investment commitments in the sector reaching about USD 126 billion by the end of 2025. Looking further out, Wood Mackenzie, in its India data centre market outlook of July 2026, places operational capacity at 12 GW by 2030. Data centres require high reliability, high-quality power and dedicated transformation infrastructure, and Tamil Nadu, Telangana, Maharashtra, Andhra Pradesh and Uttar Pradesh are expected to lead investment - markets in which the Company already has an established presence. Railway electrification, electric vehicle charging infrastructure, green hydrogen electrolysers and industrial corridor development add further, and largely uncorrelated, demand.

3.6 The Indian transformer industry

Against this backdrop, Mordor Intelligence estimates the Indian transformer market at approximately USD 3.25 billion in 2026 and forecasts it to reach about USD 4.82 billion by 2031 at a compound annual growth rate of roughly 8.2%; on the same estimates, distribution transformers accounted for about 59% of the market in 2025 and power utilities for about 47% of revenue, with the commercial segment growing fastest. The industry is fragmented, with a small group of large multinational and domestic manufacturers competing in the extra-high-voltage segment and a long tail of regional manufacturers in distribution. The principal structural barrier to entry in the higher-rated segments is not capital but qualification: utility vendor approvals, type test certification at accredited laboratories and a demonstrated field track record typically take years to establish. This is where the Companys zero-field-failure record, its existing utility empanellments and its investment in in-house testing infrastructure carry disproportionate value.

The most significant industry-level constraint remains raw material. Cold-rolled grain-oriented electrical steel, the core material for transformers, is substantially imported: domestic production has historically met only around 10-12% of Indian demand, and the Global Trade Research Initiative has assessed the shortfall at close to 30%. Domestic capacity is being built - on capacity announcements reported in the trade press, JSW JFE Electrical Steel is targeting 350,000 tonnes per annum by FY2028 - but the transition to self-reliance will take several years, and in the interim availability, Bureau of Indian Standards licensing timelines for foreign suppliers, and price volatility in CRGO steel, copper and transformer oil remain the principal cost risks for the sector.

4. Opportunities and Threats

Opportunities

• A committed national transmission investment programme of over Rs.9.15 lakh Crore to 2032 under the Ministry of Powers National Electricity Plan (Transmission), of which transformation capacity is a core component, provides a demand runway that extends well beyond a normal capital goods cycle.
• The Companys new capability of up to 200 MVA and 220 kV opens an addressable market - transmission-class utility and industrial projects - that was previously closed to it, at a point when that market is expanding fastest.
• Renewable evacuation requirements create recurring demand for inverter duty, solar and windmill transformers, a segment in which the Company already has supply credentials with leading developers.
• Data centres and other mission-critical industrial loads represent a new, high-specification customer class which, on CBRE Groups assessment, is concentrated in states where the Company is already established.
• Distribution-side demand under the Ministry of Powers Revamped Distribution Sector Scheme and under utility replacement cycles remains steady and reform-backed, providing a base load of orders that balances the lumpiness of large power transformer contracts.
• Upgraded credit ratings improve access to working capital and bank guarantee limits, which is a practical constraint on bidding capacity for larger tenders.

Threats and challenges

• Availability and pricing of CRGO electrical steel, copper and transformer oil, given the continued import dependence assessed by the Global Trade Research Initiative and the concentration of approved suppliers.
• Competitive intensity in the higher-rated segment, where established multinational and large domestic manufacturers hold long-standing utility approvals and greater balance sheet depth.
• Execution and qualification risk in the 200 MVA class, where type testing, first-article approvals and customer confidence must be built order by order.
• Working capital intensity: transformer manufacturing carries long receivable cycles, particularly with state utilities, and larger orders lengthen both inventory holding and execution timelines.
• Tender-driven pricing pressure and liquidated damages exposure on delayed execution.
• Concentration of demand in a small number of large customers and in the southern region, notwithstanding the geographic widening achieved during the year.
• Sector-level ordering can be uneven year to year even where the multi-year pipeline is intact since, as Kotak Neo has observed, right-of-way, land acquisition and clearance timelines shift award schedules.

5. Business Review for FY2025-26

5.1 Commissioning of the Kannur facility

The defining operational event of the year was the commencement of commercial production at the Companys new manufacturing facility at Kannur, Tamil Nadu, built at an investment of approximately Rs.100 Crore. The facility extends manufacturing capability to transformers of up to 200 MVA and 220 kV and, together with the existing Thirumazhisaipal, takes combined installed capacity to approximately 9,000 MVA per annum from 2,500 MVA previously. The Thirumazhisaipal facility continues to manufacture power and distribution transformers of up to 25 MVA and 132 kV, allowing the two plants to serve different segments of the order book without competing for the same production slots.

Particulars	Earlier	Current
Annual installed capacity	2,500 MVA	Approximately 9,000 MVA
Transformer rating	Up to 50 MVA	Up to 200 MVA
Voltage class	Up to 132 kV	Up to 220 kV
Primary market	Distribution	Distribution and transmission
Addressable projects	Small and mid-sized	Large infrastructure projects

At the H2 and FY2025-26 earnings conference call held in June 2026, management indicated that the new facility is expected to reach optimal utilisation of approximately 90% over a two to three year period, and that peak revenue potential from the combined installed base is of the order of Rs.550 Crore. The commissioning also broadens the Companys participation in transmission infrastructure, utility projects, industrial developments and data centre applications.

5.2 Order inflow and order book

Order inflow during FY2025-26 was healthy and broadly distributed through the year, with orders of over Rs.437 Crore secured across customer segments. Notable wins included orders aggregating Rs.113.61 Crore from Kerala State Electricity Board, TNPdCL and Danya Electric Company; an order of Rs.60.90 Crore from a Navratna public sector enterprise for inverter duty transformers; multiple high-value transformer orders from EPC companies in Karnataka and Telangana; and continued inflows from renewable energy projects requiring specialised transformer solutions.

The consolidated order book stood at Rs.588.17 Crore as on 27 May, 2026, comprising approximately 72% power transformers, 20% distribution transformers and 7-8% inverter duty transformers - a composition that reflects the shift in the Companys product mix following the capacity expansion. Order momentum has continued into the current financial year, with further transformer orders from EPC and utility customers in Karnataka and Telangana announced through disclosures filed with the National Stock Exchange under Regulation 30 of the SEBI (LODR) Regulations, 2015 between April and July 2026.

5.3 Markets and customers

The Company serves five broad customer categories: state electricity utilities, EPC contractors, renewable energy developers, industrial manufacturing companies and public sector undertakings. During the year it deepened relationships across all five and widened its geographic footprint beyond Tamil Nadu into Kerala, Karnataka and Telangana. State empanellments with TANGEDCO, KSEB, KPTCL and TNPdCL provide direct access to utility tenders, while EPC relationships give access to project-linked demand where speed of delivery and technical flexibility matter more than lowest price.

5.4 Quality, certification and recognition

Quality systems remain the foundation of the Companys customer proposition. Every transformer passes through stage-wise quality checks from design validation and raw material inspection through to routine and type testing before dispatch, supported by in-house testing facilities. The Company holds ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certification. No power transformer supplied by the Company has recorded a field failure to date. During the year, on March 20th, 2026, CRISIL upgraded the Companys long-term rating to BBB/Stable and its short-term rating to A3+, and the Company was a recipient of the MSME Ratna Award 2025.

6. Product-wise Performance

The Company operates in a single reportable business segment - the manufacture and supply of transformers and related equipment - and accordingly segment reporting under Ind AS 108 is presented on that basis. Within that single segment the product portfolio spans nine transformer classes, and cumulative units supplied to date are set out below.

Product class	Cumulative units supplied	Primary application
Energy efficient transformers	9,750+	Loss reduction across networks
Windmill transformers	1,150+	Wind power evacuation
Power transformers	450+	Bulk transmission up to 200 MVA / 220 kV
Solar transformers	360+	Grid-connected solar
Converter and rectifier transformers	180+	Industrial AC-DC conversion
Generator transformers	150+	Generation to transmission
Isolation transformers	120+	Protection of sensitive equipment
Distribution transformers and tanks and accessories	Included in aggregate of 20,800+ units	Last mile distribution and equipment supply

The order book composition disclosed at the FY2025-26 earnings conference call - approximately 72% power transformers against 20% distribution transformers - indicates that the revenue mix will shift materially towards higher-rated equipment over the coming two years.

7. Financial Performance

7.1 Statement of profit and loss

Consolidated revenue for FY2025-26 grew 22.1% to Rs.181.6 Crore from Rs.148.7 Crore, and total income grew 21.78% to Rs.182.1 Crore. EBITDA increased 14.5% to Rs.33.3 Crore and profit before tax rose to Rs.28.5 Crore from Rs.26.1 Crore. Reported net profit after minority interest was Rs.20.4 Crore against Rs.18.6 Crore, and earnings per share improved to Rs.8.2 from Rs.7.4.

Profitability grew more slowly than revenue, and the reasons are structural rather than operational. Depreciation rose sharply to Rs.1.7 Crore from Rs.0.5 Crore, and finance costs to Rs.3.0 Crore from Rs.2.5 Crore, in both cases as a direct consequence of the new facility being capitalised and the borrowings raised to fund it. Employee costs increased to Rs.4.5 Crore from Rs.3.3 Crore as the Company recruited for the second plant, and other expenses rose to Rs.8.9 Crore from Rs.5.4 Crore. Raw material cost as a proportion of revenue was broadly stable. In effect, FY2025-26 carried a full year of expansion cost against a partial year of expansion revenue, and the margin compression this produced should be read in that light.

2025-26

Particulars (Rs. in Crore)	FY24	FY25	FY26
Revenues	113.5	148.7	181.6
Other income	0.1	0.8	0.5
Total income	113.6	149.5	182.1
Raw material expenses	81.4	111.8	135.4
Employee costs	2.4	3.3	4.5
Other expenses	6.5	5.4	8.9
Total expenditure	90.3	120.5	148.8
EBITDA	23.3	29.1	33.3
Finance costs	3.2	2.5	3.0
Depreciation	0.4	0.5	1.7
Profit before tax	19.7	26.1	28.5
Tax	5.4	7.1	7.8
Net profit	14.3	18.9	20.7
Minority interest	0.3	0.3	0.2
Reported net profit	14.0	18.6	20.4
Earnings per share (Rs.)	7.1	7.4	8.2

These figures are drawn from the Companys consolidated financial highlights and are to be reconciled with the audited financial statements before publication.

7.2 Balance sheet

Net worth grew to Rs.112.9 Crore from Rs.92.5 Crore, entirely through retained earnings, with reserves rising to Rs.87.9 Crore from Rs.67.5 Crore on an unchanged equity base of Rs.25.0 Crore. Total assets expanded to Rs.261.4 Crore from Rs.157.8 Crore, an increase of 65.7%, driven principally by fixed assets which rose to Rs.119.7 Crore from Rs.64.0 Crore as the Kannur facility was capitalised.

Funding for the expansion came from a combination of internal accruals and borrowings. Non-current borrowings increased to Rs.33.1 Crore from Rs.9.1 Crore and current borrowings to Rs.16.9 Crore from Rs.9.7 Crore, taking total debt to Rs.50.0 Crore and the debt-equity ratio to 0.42 times from 0.20 times. This remains a conservative level of gearing for a manufacturer that has just completed a capacity expansion of this magnitude. Inventories rose to Rs.62.1 Crore from Rs.31.5 Crore, reflecting both the larger order book and the longer material cycle associated with higher-rated transformers, while trade payables increased to Rs.62.2 Crore from Rs.31.5 Crore. Trade receivables were broadly stable at Rs.46.8 Crore against Rs.45.2 Crore despite revenue growth of 22%, and, as disclosed at the FY2025-26 earnings conference call, receivable days improved to 94 days - a meaningful operational achievement in a sector where collection cycles with state utilities are typically extended.

7.3 Cash flow

Cash generated from operations was Rs.25.9 Crore against Rs.37.68 Crore in FY2024-25, the reduction reflecting the working capital absorbed by higher inventory levels. Cash used in investing activities rose to Rs.57.1 Crore from Rs.39.42 Crore as capital expenditure on the new facility peaked, and cash from financing activities was Rs.35.2 Crore against Rs.47 Crore. Net cash flow for the year was positive at Rs.3.9 Crore and the closing cash and bank balance improved to Rs.9.7 Crore from Rs.5.8 Crore. The Company therefore funded the largest capital programme in its history while remaining cash flow positive at the net level.

7.4 Key financial ratios

Details of significant changes in key financial ratios, in accordance with Schedule V of the SEBI (LODR) Regulations, 2015, together with explanations for changes of 25% or more, are set out below.

Ratio	FY26	FY25	Change	Explanation for change of 25% or more
Debtors turnover (times)	3.95	2.68	+47%	Improvement driven by stronger collections and a broader customer base; receivables remained flat while revenue grew 22%.
Inventory turnover (times)	2.89	4.32	-33%	Inventory built up to support the enlarged order book and the longer material cycle of higher-rated transformers produced at the new facility.
Debt Service Coverage Ratio (in times)	2.48	8.62	-71.28%	Decrease is due to a sharp rise in debt service obligations (interest plus principal repayments up ~287%) during the year, while earnings available for debt service greenly marginally (~11%).
Current ratio (times)	1.28	1.69	-24%	-
Debt-equity ratio (times)	0.42	0.20	+110%	Term borrowings drawn to part-fund capital expenditure of approximately Rs.100 Crore on the new Kannur manufacturing facility.
Operating profit margin (%)	18.3	19.6	-1.3 pp	-
Net profit margin (%)	11.2	12.5	-1.3 pp	-
Return on Equity Ratio (%)	17	20	-15.50 pp	-

The Companys key financial ratios for FY2026 reflect the impact of a planned capital investment cycle. The debtors turnover ratio improved 47% to 3.95 times, driven by stronger collections even as revenue grew 22% Inventory turnover moderated 33% to 2.89 times, reflecting strategic inventory build to support an enlarged order book. The debt-equity ratio rose 110% to 0.42 times following term borrowing drawdowns for capital expenditure, while the DSCR declined 71.28% to 2.48 times.

8. Outlook

The Company enters FY2026-27 with an order book of Rs.588.17 Crore and installed capacity that is substantially under-utilised. At the FY2025-26 earnings conference call, management guided to consolidated revenue of Rs.275-300 Crore for FY2026-27, with a further step-up expected in FY2027-28, and to EBITDA margins being maintained in the range of 15-18%, with the slightly better realisation available on larger transformers offset by the higher overhead and skilled manpower costs those units carry.

Three factors will determine whether that guidance is met. The first is ramp-up at Kannur: the plant is expected to reach approximately 90% utilisation over two to three years, and the pace of that curve is the single largest variable in the medium-term revenue picture. The second is qualification in the higher-rated segment, where each new voltage class and customer requires type testing and approval before repeat business follows. The third is raw material availability and pricing, particularly CRGO steel, where, on the Global Trade Research Initiatives assessment, the industry remains import-dependent. Against these, the demand environment is as supportive as it has been at any point in the Companys history, and the multi-year nature of the national transmission programme means that the opportunity is not contingent on any single years ordering.

Over the longer term, the Board believes the combination of expanded capacity, a widened product range, a diversified customer base and improved credit standing positions the Company to participate meaningfully in Indias power infrastructure build-out while creating sustainable value for shareholders.

9. Risks and Concerns

Risk	Mitigation
Raw material availability and price volatility - CRGO steel, copper and transformer oil	Long-term supplier relationships and forward booking of critical materials; price variation clauses in longer-tenure contracts where commercially feasible; material booked ahead of production for the near-term order book.
Execution risk in the 200 MVA / 220 kV class	Recruitment of experienced design and production personnel; in-house testing infrastructure at the new facility; phased entry beginning with ratings adjacent to established capability.
Working capital and receivable cycle, particularly with state utilities	Active collections management, which reduced receivable days to 94; balanced order book between utility, EPC and private industrial customers; enhanced working capital limits supported by improved credit ratings.
Customer and geographic concentration	Widening of the customer base across five categories and expansion beyond Tamil Nadu into Kerala, Karnataka and Telangana; continued pursuit of vendor approvals with additional utilities.
Competitive intensity and tender-based pricing	Differentiation on delivery reliability and quality record rather than price; selective bidding discipline; product mix weighted towards specialised and higher-rated units.
Capacity under-utilisation during ramp-up	Two-plant configuration allowing distribution and power transformer production to run in parallel; order book weighted towards power transformers to load the new facility.
Regulatory and standards change, including efficiency labelling	Continued investment in design and testing capability; ISO-certified quality management systems; early adoption of higher-grade core material.

10. Internal Control Systems and Their Adequacy

The Company maintains internal control systems commensurate with the nature, size and complexity of its operations. These systems are designed to provide reasonable assurance regarding the safeguarding of assets against unauthorised use or disposal, the accuracy and completeness of accounting records, compliance with applicable statutes and internal policies, and the reliability of financial reporting. Standard operating procedures cover procurement, production, quality assurance, dispatch, sales and collection, with defined authority levels for approval.

The internal audit function reviews the adequacy and effectiveness of these controls on a periodic basis. Internal audit observations, together with management responses and the status of corrective actions, are reported to the Audit Committee of the Board, which reviews them and monitors implementation. Per the outcome of the Board meeting dated 27 May, 2026 filed with the National Stock Exchange, the Board has appointed M/s. Jeevan & Associates as internal auditor and M/s. N. Sivashankaran & Co. as cost auditor for FY2026-27. With the commissioning of the second manufacturing facility, the control framework has been extended to cover the additional location, including inventory controls, plant-level authorisation limits and fixed asset records.

11. Human Resources and Industrial Relations

The Company regards its people as central to its ability to deliver engineered products to specification and on schedule. Employee costs increased to Rs.4.5 Crore in FY2025-26 from Rs.3.3 Crore, reflecting recruitment for the new manufacturing facility across design, production, testing and quality functions. The higher-rated transformer segment requires a deeper pool of skilled and experienced technical personnel, and attracting and retaining that talent - in a market where demand for transformer design and testing skills is rising across the industry - is an operational priority and a recognised cost pressure.

The Company invests in structured on-the-job training, particularly in coil winding, core assembly, tanking and testing, where quality outcomes depend directly on skill. Occupational health and safety is managed under an ISO 45001:2018 certified framework. Industrial relations remained cordial throughout the year. The Board records its appreciation of the commitment shown by employees at both facilities during a year in which a new plant was commissioned alongside the execution of a growing order book.

12. Environment, Health and Safety

Environmental management is certified to ISO 14001:2015 and occupational health and safety to ISO 45001:2018. The Companys products themselves contribute to environmental outcomes: energy efficient transformers reduce technical losses across distribution networks, and solar, windmill and inverter duty transformers enable the evacuation and integration of renewable generation. Manufacturing operations focus on responsible handling and disposal of transformer oil and process waste, controlled consumption of energy and water, and safe working practices supported by training, protective equipment and periodic audit. The Company also undertakes corporate social responsibility activities in the communities around its facilities, as detailed elsewhere in this Annual Report.

Disclosure of Accounting Treatment:

The financial statements of the Company have been prepared in accordance with the applicable Accounting Standards (AS) and the provisions of the Companies Act, 2013. The Company has not followed any accounting treatment different from that prescribed under the applicable Accounting Standards during the financial year 2025-26.

13. Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions in India and the markets in which the Company operates, changes in government regulations and tax laws, the availability and price of raw materials, demand and supply conditions in the power sector, litigation, industrial relations and other incidental factors. The Company undertakes no obligation to publicly indicate or revise