Surat Trade & Merchantile Ltd Management Discussions

FOR THE YEAR ENDED 31ST MARCH, 2026

INDUSTRY STRUCTURE AND DEVELOPMENTS

INDIAN ECONOMIC OVERVIEW

Indias economy grew by a better-than-expected 7.8% in the March quarter from a year earlier, belying fears of the West Asia war hurting the economy, lifting FY26 growth to 7.7%. Growth was supported by solid expansion in investment and private consumption. The numbers suggest that the economy weathered the impact of the West Asia conflict in the final quarter.

India is expected to become the worlds third-largest economy by 2031, according to the latest International Monetary Fund (IMF) data, even as it is projected to rank fourth by 2027. Despite slipping to sixth place in 2025 due to a stronger dollar and GDP base year revision, it remains among the fastest-growing major economies.

Further, the Reserve Bank of India in June 26, lowered its GDP forecast for FY27 to 6.6% from the 6.9%, estimated in April 26, citing elevated energy and other commodity prices, as well as continued supply disruptions arising from the conflict in West Asia, which are likely to weigh on economic activity. According to the IMFs latest World Economic Outlook, growth is expected to remain steady at 6.5% in 2027-28.

According to IMF global growth is forecast at 3.1% in 2026 and 3.2% in 2027, slower than the 3.4% recorded in 2025. This moderation largely reflects disruptions from the West Asia conflict, partly offset by recent strong data and lower tariff rates. The risks remain tilted to the downside due to geopolitical tensions, trade conflicts and financial pressures, though upside potential exists from artificial intelligence-led growth, reforms and easing trade tensions.

Indias steady inflation trajectory and rising per capita income are fueling higher investible surpluses, which in turn are expanding the retail and domestic institutional participation in financial markets.

Despite a challenging global environment marked by geopolitical tensions and inflationary pressures, Indias economy is expected to remain resilient in 2026-27, supported by strong domestic demand, healthy balance sheets, and sustained public investment.

INDUSTRY SCENARIO

Geopolitical uncertainties, central bank bullion buying, and shifting supply-demand dynamics have heightened the importance of Gold and Silver both as safe-haven assets and industrial components.

The growing integration of domestic market switch global bullion hubs ensures better price discovery and risk-management capabilities for the Companys trading operations. The Indian financial sector continues to experience exponential growth driven by rising retail participation and wealth creation. This strong macroeconomic foundation provides a conducive environment for both commodity trading and financial asset management.

The asset management and especially alternative investment landscapes are experiencing exponential growth in India. Rising financial literacy and a generational shift in wealth management are directing massive domestic capital into various Mutual Funds and Alternative Investment Funds (AIFs).

The AIF sector, in particular, has become a preferred route for high-net-worth individuals (HNIs) seeking alpha-generating and diversified investment avenues. This paradigm shift supports the Companys strategy of deploying surplus capital into professionally managed portfolios and specialized funds to achieve optimal risk- adjusted returns.

The duration of the Strait of Hormuz disruption remains the single most consequential variable for Indias external and price outlook. Should normalization occur soon, the conditions for a broad-based recovery, supported by strong services exports and sustained investment commitments, are in place.

Given the inherent volatility of commodity markets and financial securities, the Company remains committed to robust risk management practices. Our exposure is continuously monitored against predefined limits. The Company utilizes robust hedging mechanisms?including derivatives ?to safeguard its physical inventory against adverse price movements.

FINANCIAL HIGHLIGHTS

The Audited Financial Statements of your Company as on 31st March 2026, are prepared in accordance with the relevant applicable Indian Accounting Standards ("Ind AS") and Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") and the provisions of the Companies Act, 2013 ("Act").

Your Companys financial performance for the year ended 31st March 2026 is summarized below:

(Rs. in Lakhs)

Particulars	2025-26	2024-25
Revenue from Operations	11134.58	6863.70
Other income	1378.56	1482.44
Total Income	12513.14	8346.14
Operating Profit / EBITDA (including other income)	1471.76	996.35
Less: Finance Costs	15.18	16.11
Profit before Depreciation and Amortisation Expenses	1456.58	980.24
Less: Depreciation and Amortisation Expenses	57.23	51.65
Profit before tax	1399.35	928.59

REVIEW OF OPERATIONS AND FINANCIAL PERFORMANCE

During FY25-26, your Company delivered a robust performance. Revenue from operations was Rs. 11134.58 Lakhs compared to Rs. 6863.70 Lakhs in the previous fiscal year.

During FY25-26, Profit before tax rose to Rs. 1399.35 Lakhs from Rs.928.59 Lakhs in the previous year.

Your Company operates primarily in commodity trading and other related activities. During FY25-26, it remained the biggest operational driver of the Company. The Company achieved an income from commodity trading of Rs 10625.33 Lakhs as compared to Rs 6863.70 Lakhs during FY24-25.

Your Company successfully leveraged the ongoing fluctuations and volatility in global commodity markets to maximize profitability with prudent hedging strategies.

During the year under review, the Company actively participated in the trading of metals, in particular gold and silver. Business volume increased substantially as yields improved compared to the previous year. There was significant volatility in commodity prices in the international as well as domestic market through the year, which materially increased during the Iran war at the end of FY26 owing to supply chain disruption, attacks on energy infrastructure in the Middle East etc. This volatility however enabled the Company to improve returns while minimizing risk owing to its strategic hedging practices using derivatives on recognized exchanges.

The Companys profit was also boosted by the sale of artworks in FY25-26.

The Company deploys its surplus liquidity into a curated portfolio of financial instruments to maximize risk-adjusted returns and ensure capital preservation.

For this purpose, the Company maintains a diversified portfolio of investments in equities, debt, including in various mutual funds and AIFs. This, we believe is important in a volatile, uncertain environment.

Total earnings from investment activities, which comprises of dividends and realized/unrealized gains and income from investment in AIF etc., declined at Rs.1378.56 Lakhs during FY25-26 compared to Rs 1482.44 Lakhs in the previous year. This was primarily on account of lower returns in the listed financial markets. Equity and Debt portfolios were influenced by monetary policies, currency movements, U.S. trade policies, fluctuating oil prices due to escalating geopolitical tensions, foreign portfolio outflows, currency concerns, perceived risks to corporate earnings and economic growth etc.

During FY 25-26, the income from AIF investment increased to Rs. 924.40 Lakhs as compared to Rs.805.51 Lakhs in FY24-25. The total asset value under AIFs at the end of FY25-26 also increased to Rs. 9542.07 Lakhs as compared to Rs. 7745.77 Lakhs for FY24-25.

During FY25-26, total income (excluding AIF) from investment activities, including dividends and realized/ unrealized gains etc. declined at Rs.454.16 Lakhs compared to Rs 676.93 Lakhs earned in the previous year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains an adequate system of internal controls aligned with the requirements of Section 134(5) (e) of the Act and commensurate with the size and the nature of its commodity trading business. This ensures that all transactions are authorized, recorded, and reported correctly. The scope includes regular internal audits, strict adherence to exchange margin requirements, and comprehensive tracking of physical-to-derivative position reconciliations.

The Audit Committee, composed of professionally qualified Directors, plays a pivotal role in ensuring the integrity of financial and operational controls. It actively engages with the Statutory Auditors, Internal Auditors and Management to oversee and strengthen the Internal Control environment.

The certification provided in the CEO and CFO certification section of the Annual Report discusses the adequacy of our Internal Control System and procedures.

RESOURCES AND LIQUIDITY

Our principal sources of liquidity are cash and cash equivalents, investments and the cash flow that we generate from our operations. We understand that liquidity in the Balance Sheet has to balance between earning adequate returns and the need to cover financial and business requirements. We continue to be debt-free and maintain adequate liquidity to meet our operational requirements.

There was no outstanding term loan at the beginning or at the end of financial year 2025-26. No fresh Term Loan was availed by the Company during the year. The Company has not availed any working capital facility from Banks during the year.

The Company continues to demonstrate disciplined capital management.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

There are no material developments in human resources/ industrial relations front during the year under review.

Number of Employees as on 31.03.2026

1. Male: 22

2. Female: 03

3. Others: 0

OPPORTUNITIES, THREATS, RISKS AND CONCERNS:

The growing acceptance of gold and silver as essential safe- haven assets, combined with the expansion of organized commodity exchanges, presents significant scaling opportunities in physical and derivative trading. Furthermore, our exposure to AIFs offers access to high-growth private market investment opportunities not available through standard public equities.

Commodities are inherently volatile and risky assets; however, the Company employs a robust risk management framework to mitigate potential losses arising from price volatility and other market risks during its relatively short trading horizon. This includes hedging, product diversification where possible, etc. The Companys risk management policies and procedures are reviewed and updated periodically to adapt to changing market dynamics. While we perceive risks in the commodity business to be low, the following risks may be noted:

1. Mark-market risk: while the transaction is open, due to volatility in the prices, additional margin or mark-to- market funds may be required which would impact the yield.

2. Exchange counter party risk: When we sell a commodity on an exchange platform, the counter party is an Exchange (MCX/NCDEX). Yet, these exchanges are highly regulated by SEBI, so we do not see material risk of default, However, if there is settlement failure at the exchange level and if it is unable to honour the pay-out against the sale transaction it would impact returns.

The portfolio of AIFs and Mutual Funds is exposed to market risk. The Company mitigates this by diversifying across fund managers, asset classes, and keeping a stringent vigil on the risk-management and valuation frameworks of the respective funds.

According to RBI, a prolonged West Asia conflict represents a key downside risk to Indias economic outlook, even as it projected a lower Gross Domestic Product (GDP) growth of 6.6% for 2026-27. The impact of the conflict likely remains contained in the near term but warned that an escalation could derail Indias growth trajectory.

There is high uncertainty in the assumptions made for projections of both inflation and growth on account of several reasons - the duration of the conflict and the disruption in supply chains, the intensity and geographical spread of monsoons and their impact on energy, food and other commodity prices.

The evolving West Asia crisis represents both a significant supply shock and a potential demand shock. However, most high-frequency indicators up to April 2026 suggest that domestic demand and overall economic activity in India have remained relatively resilient so far, with emerging signs of stress.

The Company will continue to leverage its robust hedging strategies to mitigate raw material price risks. Our treasury and investment activities will focus on generating risk- adjusted yields while navigating market volatility.

SEGMENT-WISE ANALYSIS OR PERFORMANCE

The Company primarily operates in a single reportable business segment, which is Commodity Trading and other commodity-related activities. In addition to its core trading operations, the Company actively manages its surplus funds through strategic investments in Mutual Funds and Alternative Investment Funds (AIFs).

Pursuant to Accounting Standard 17 on Segment Reporting / Ind AS 108, since the Companys non-trading investment activities do not meet the quantitative thresholds to be treated as a separate reportable segment, the entire business operations of the Company are considered as a single operating segment.

Detailed financial information pertaining to the Companys revenue from these operations and its investments is provided in the Notes to the Financial Statements forming part of this Annual Report.

BUSINESS OUTLOOK

Going forward, Indias growth outlook remains positive, though the West Asia conflict and the attendant risks of elevated energy prices, supply chain disruptions, financial market volatility, uncertainty surrounding global trade policies and weather-related disruptions could pose headwinds to growth and inflation in the short run.

One needs to keep an eye on the evolving geopolitical situation in West Asia and its implications for the Indian macroeconomic outlook, especially the growth - inflation dynamics.

Gold is expected to sustain its appeal as a safe-haven asset, primarily driven by institutional and central bank buying, along with shifting global monetary policies. Silver is anticipated to exhibit a dual advantage; retaining its status as a precious metal hedge while benefiting from its growing industrial demand (e.g., electronics and green energy).

Over the longer term, trade growth is expected to be supported by the Free Trade Agreements (FTAs). The World Bank highlighted that Indias FTAs with the EU and the United Kingdom could boost consumption and real incomes across all income groups.

To be sure, economists expect the impact of the war to start showing up in economic data over the coming months. The Government seems committed to power ahead with its Reform Express, implementing decisive policy measures to ensure positive economic momentum amid global challenges.

Driven by sustained domestic consumption, significant infrastructure capital expenditure, and supportive monetary policies by the Reserve Bank of India (RBI), the nation is looking to be one of the fastest-growing major economies globally.

The Company remains optimistic about the long-term prospects of commodity trading, despite the inherent volatility, increased demand, potential price increases, or regulatory changes.

KEY FINANCIAL RATIOS

As required under Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended, the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, is as under:

Sr. No.	Particulars	FY 2025-26	FY 2024-25	% variance	Reason for variance
1.	Current Ratio (times)	39.76	92.75	-57.13%	Decrease in Inventory
2.	Operating Profit Margin Ratio	2.51	2.04	0.47%	Increase in turnover and better spread
3.	Net Profit Margin Ratio (%)	10.16	16.99	-40.20%	Decrease due to higher turnover and lower return
4.	Return on Net Worth (%)	6.43	4.33	48.50%	Increase in PBT due to sale of Art & Artifacts
5.	Inventory Turnover (times)	11.84	4.26	177.93%	Higher turnover during the year and Nil Inventory at year end

Note: The Debtors Turnover Ratio, Interest Coverage Ratio and Debt-Equity Ratio are not applicable to the Company, as the Company does not have any trade receivables, borrowings or debt.

	By order of the Board
	For and on behalf of Surat Trade and Mercantile Limited
	Alok P. Shah	Paresh V. Chothani
	DIN: 00218180	DIN: 00218632
Place: Surat	Managing Director	Whole-Time Director
Date: 12th August, 2026