Suraj Products Ltd Management Discussions

1. ECONOMIC AND BUSINESS ENVIRONMENT

The Indian economy continued to demonstrate resilience during FY 2025-26, supported by infrastructure expenditure, construction activity and domestic consumption. These factors continued to support demand for steel and other basic industrialmaterials. For the Company, the operating environment remained influenced by steel price movements, raw-material costs, energy costs and overall demand conditions. The Company continued to focus on operational efficiency and prudent cost management.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian steel industry remains an important contributor to infrastructure, construction, manufacturing and economic development. Domestic steel demand continues to be supported by investment in roads, railways, housing, industrial projects and other infrastructure. Sponge Iron and Pig Iron are important metallic inputs for secondary steel manufacturing, along with steel scrap. The Company operates in this secondary steel value chain and manufactures Sponge Iron, Pig Iron, MS Billets and TMT Bars. The Company operates as a single business segment comprising Sponge Iron, Pig Iron, MS Billets and TMT Bars. The Company is progressively transitioning from a predominantly merchant Sponge Iron operation towards a more integrated steel manufacturing model, providing opportunities to improve product mix, capacity utilisation and value addition.

3. OPPORTUNITIES

continued Government expenditure on infrastructure and related projects;

growth in construction, housing, roads, railways and other steel-intensive sectors;

expansion of manufacturing and industrial activity in India;

growing demand for finished and value-added steel products; and

greater value addition through an integrated product portfolio.

The Company will continue to evaluate opportunities for improving utilisation of its facilities, optimising its product mix and strengthening its position in the domestic steel value chain.

4. THREATS AND CHALLENGES

The steel industry is cyclical and is exposed to fluctuations in selling prices and input costs. The principal challenges include volatility in steel prices; availability and cost of iron ore, coal and other raw materials; power and fuel costs; freight and logistics costs; competition; regulatory changes; and fluctuations in domestic and international demand. Operational risks such as equipment breakdowns, interruption of utilities and unforeseen production disruptions may also affect operating performance. The Company monitors these factors and takes appropriate measures to mitigate their impact.

5. OPERATIONAL PERFORMANCE

During FY 2025-26, the Company continued to focus on operational efficiency, production volumes and downstream value addition. Production during the year was as follows:

Product	FY 2025-26 (MT)	FY 2024-25 (MT)	Change
Sponge Iron	37,981	38,423	(1.1%)
Pig Iron	20,202	25,323	(20.2%)
MS Billets	71,242	69,276	+2.8%
TMT Bars	62,861	57,740	+8.9%

Production of MS Billets and TMT Bars increased during the year, while production of Sponge Iron and Pig Iron was lower than the previous year. The Company will continue to focus on capacity utilisation, operating efficiency and an appropriate product mix in response to market conditions.

6. FINANCIAL PERFORMANCE

Particulars	FY 2025-26 ( lakh)	FY 2024-25 ( lakh)	Change
Net Sales	30,378.67	32,637.27	(6.9%)
EBITDA	3,236.61	3,771.57	(14.2%)
Profit Before Tax	2,429.48	2,762.08	(12.0%)
Profit After Tax	1,884.79	2,143.39	(12.1%)
EPS ( )	16.53	18.80	(12.1%)

Net Sales during FY 2025-26 were 30,378.67 lakh compared with 32,637.27 lakh in the previous year. EBITDA stood at 3,236.61 lakh compared with 3,771.57 lakh. Profit Before Tax was 2,429.48 lakh and Profit After Tax was 1,884.79 lakh, compared with 2,762.08 lakh and 2,143.39 lakh respectively in the previous year. EBITDA for FY 2025-26 represents Profit Before Tax of 2,429.48 lakh, after adding back depreciation of 708.09 lakh and interest of 99.04 lakh. The lower profitability during the year was primarily attributable to lower per-tonne price realisation.

7. KEY FINANCIAL RATIOS

The following key financial ratios provide an overview of the Companys operating and financial performance. The ratios are based on the standalone financial statements. Significant changes have been explained below.

Ratio	FY 2025-26	FY 2024-25	Change
Debtors Turnover	24.52	29.59	(17.15%)
Inventory Turnover	6.85	7.20	(4.83%)
Interest Coverage Ratio	25.53	13.22	93.10%
Current Ratio	8.63	4.08	111.46%
Debt Equity Ratio	0.03	0.13	75.20%
Net Capital Turnover Ratio	3.57	4.81	(25.91%)
Operating Profit Margin	7.92%	8.99%	(11.90%)
Net Profit Margin	6.20%	6.57%	(5.53%)
Return on Net Worth	11.95%	15.32%	(21.98%)

Return on Net Worth: Return on Net Worth declined from 15.32% to 11.95%, primarily due to lower profitability during the year. The lower profitability was mainly attributable to lower per-tonne price realisation.

Net Capital Turnover Ratio: The Net Capital Turnover Ratio declined from 4.81 times to 3.57 times, primarily due to an increase in working capital during the year.

Interest Coverage Ratio: The Interest Coverage Ratio improved from 13.22 times to 25.53 times, primarily due to a significant reduction in finance costs during the year.

Debt Equity Ratio: The Debt Equity Ratio improved from 0.13 times to 0.03 times, primarily due to reduction in borrowings and increase in shareholders equity arising from profits retained during the year. Current Ratio: The Current Ratio improved from 4.08 times to 8.63 times, primarily due to a significant reduction in short-term borrowings during the year.

8. OUTLOOK

The Company remains cautiously optimistic about the medium-term prospects for domestic steel demand. Continued investment in infrastructure, construction, housing and manufacturing is expected to support demand for steel products. The Company will focus on improving operational efficiency, increasing the contribution of downstream products, optimising product mix and responding appropriately to market conditions. The Company will continue to pursue opportunities for sustainable growth while maintaining financial discipline.

9. RISKS AND CONCERNS

Raw materials: Availability and prices of iron ore, coal and other inputs may affect margins. Procurement and inventory are monitored closely.

Steel prices: Selling prices are cyclical and affected by domestic and international demand-supply conditions. Market conditions are monitored to optimise product mix and sales.

Energy: Power and fuel costs can materially affect production costs. Consumption and operating efficiency are monitored.

Demand: A slowdown in infrastructure, construction or industrial activity may affect demand. The Company maintains a diversified product portfolio within its steel business.

Operations: Equipment breakdowns and interruption of utilities can affect production. Preventive maintenance and operational controls are used to reduce disruption.

Regulatory: Changes in environmental, labour, taxation, mining and other regulations may affect operations and compliance costs. The Company monitors applicable requirements. The above risks are reviewed by the management from time to time and appropriate measures are taken to mitigate their potential impact.

10. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal control systems commensurate with its size, scale and nature of operations. The controls are designed to provide reasonable assurance regarding safeguarding of assets, proper authorisation and recording of transactions, reliability of financial reporting and compliance with applicable laws and Company policies. The internal control framework is reviewed periodically by the management and the Audit Committee. The Company believes that its internal financial controls are adequate and operating effectively.

11. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company recognises its employees as an important contributor to its operational performance. During FY 2025-26, the Company continued to focus on employee engagement, operational discipline, workplace safety and employee welfare. No Loss Time Injury was reported during the year. Industrial relations remained cordial throughout the year. The Company continues to emphasise safe working practices and appropriate employee training. The Company continues to focus on workplace safety through regular inspection of plant conditions and safety training for employees.

12. CAUTIONARY STATEMENT

This Management Discussion and Analysis contains statements that may be regarded as forward-looking. Such statements are subject to risks and uncertainties and actual results may differ materially from those expressed or implied. Factors that may affect the Companys performance include changes in economic conditions, steel demand and prices, availability and cost of raw materials and energy, Government policies, regulatory changes, market conditions and other risks associated with the Companys business.