Titagarh Rail Systems Ltd Management Discussions

1. Overview: Indian Railways as the Backbone of National Infrastructure

Indias railway sector continued to witness sustained policy support and capital investment during FY 2025-26, reinforcing its position as a key driver of the countrys infrastructure-led economic growth. Supported by the Governments continued emphasis on modernisation, capacity augmentation, safety enhancement and indigenous manufacturing under the Make in India and Atmanirbhar Bharat initiatives, the railway ecosystem continues to offer significant long-term opportunities for rolling stock manufacturers.

Indian Railways remains one of the worlds largest rail networks and continues to play a critical role in passenger mobility and freight logistics. Continued investments in Dedicated Freight Corridors (DFCs), metro rail systems, Vande Bharat trains, station redevelopment and advanced signalling technologies are expected to sustain demand for modern rolling stock and railway systems.

The Union Budget for FY 2026-27 provided the Ministry of Railways with a record Gross Budgetary Support of approximately Rs.2.78 lakh crore, compared with approximately Rs.2.52 lakh crore in the previous year, reflecting the Governments continued commitment towards railway infrastructure, rolling stock, safety and network expansion.

2. Freight Rail Segment

Freight transportation continues to remain the principal source of revenue for Indian Railways. During FY 202526, freight loading reached approximately 1.67 billion tonnes , supported by continued infrastructure expansion and improved network efficiency.

The commissioning of the Eastern and Western Dedicated Freight Corridors has significantly enhanced freight movement capacity and operational efficiency. The Governments long-term objective of increasing rails share in freight transportation is expected to support sustained demand for freight wagons.

3. Passenger Rolling Stock and High-Speed Rail Developments

The passenger rolling stock segment continued to witness strong momentum during FY 2025-26 with the expansion of Vande Bharat, Amrit Bharat , metro rail and regional rapid transit projects. The commercial introduction of the Vande Bharat Sleeper train marked another important milestone in Indias railway modernisation programme.

The continued expansion of metro rail systems across major cities and ongoing investments in regional rapid transit infrastructure are expected to generate sustained demand for passenger coaches, propulsion systems and Train Control and Management Systems (TCMS).

4. Urban Transit and Metro Rail Segment

Indias metro and regional-rail ecosystem expanded meaningfully through FY26. The countrys operational metro network have spread across more than 20 cities.

5. Safety and Technology Modernisation

Indian Railways continues to prioritise safety-led modernisation through the implementation of Kavach, indigenous train protection systems, electronic interlocking, digital inspection technologies and digital signalling infrastructure. Government data indicates that the continued deployment of these technologies has contributed to further improvements in railway safety during FY 2025-26.

6. Make in India, Self-Reliance (Atmanirbhar Bharat) and Private-Sector Participation

Union Budgets have reinforced indigenous rolling-stock manufacturing as a strategic priority, both to reduce import dependence for critical sub-systems (propulsion, traction motors, converters, train-control systems) and to build export capability. During FY26, the Ministry of Railways continued to encourage local value-addition in signalling, TCMS and metro-coach manufacturing, while also formalising a Wagon Leasing Company (WLC) framework intended to bring private capital into wagon ownership and fleet management a scheme under which Titagarh received registration approval in February 2026, unleashing and reopening leasing and maintenance revenue stream beyond outright wagon sale, an expected game changer.

7. Positioning of Titagarh Rail Systems Limited ("Titagarh/ TRSL") within the Industry

Against this backdrop, Titagarh Rail Systems Limited is well positioned to capitalise on the sectors long-term growth opportunities. The Company remains the only private sector manufacturer in India with integrated capabilities across Freight Rail Systems and Passenger Rail Systems, covering freight wagons, metro coaches, Vande Bharat coaches, propulsion systems, Train Control and Management Systems (TCMS), steel castings and other railway components.

During the year, the Company further strengthened its strategic positioning through registration as a Wagon Leasing Company, continued progress in the Ramkrishna Titagarh Rail Wheels joint venture, the proposed maintenance joint venture for Vande Bharat trains and a technology transfer arrangement for advanced TCMS solutions, reinforcing its transformation into an integrated rail mobility solutions provider globally.

8. Outlook

The long-term outlook for the Indian rail sector remains favourable, supported by sustained Government investment in railway infrastructure, increasing emphasis on passenger rail

modernisation, expansion of metro and regional rapid transit networks, and continued focus on indigenous manufacturing under the Atmanirbhar Bharat and Make in India initiatives. These structural drivers are expected to generate sustained demand across freight rolling stock, passenger coaches, metro systems and railway technologies.

With a diversified order book, expanding manufacturing capabilities, continued investments in technology and backward integration, and a balanced presence across freight and passenger rail businesses, the Company believes it is well positioned to create sustainable longterm value for its stakeholders while remaining focused on operational excellence, prudent capital allocation and disciplined execution.

OPPORTUNITIES AND THREATS Opportunities

The Indian railway sector continues to benefit from sustained policy support, infrastructure investment and technological advancement, creating long-term opportunities across freight and passenger rail systems. The principal opportunities for the Company include:

?€? Rail Infrastructure Investment:

Continued Government investment in railway infrastructure, including rolling stock, signalling, dedicated freight corridors and station modernisation, is expected to support sustained demand for the Companys products and services.

?€? Passenger Mobility:

Expansion of Vande Bharat, Amrit Bharat, metro rail and regional rapid transit projects is expected to drive demand for passenger coaches, propulsion systems and Train Control and Management Systems (TCMS).

?€? Freight Growth:

Increasing rail freight capacity, supported by Dedicated Freight Corridors and the Governments objective of enhancing rails share in freight transportation, is expected to sustain demand for freight wagons.

?€? Business Diversification:

The Companys initiatives in wagon leasing, maintenance services and domestic forged wheel manufacturing are expected to diversify revenue streams, strengthen supply chain resilience and enhance operational efficiency. The Company has hived off its Shipbuilding division into its wholly owned subsidiary, enabling the Company to focus on its core railway systems business while allowing TNSL to pursue growth opportunities in the shipbuilding sector.

?€? Technology and Localisation:

Greater adoption of indigenous railway technologies, advanced signalling systems and digital train control

solutions provides opportunities to expand the Companys value-added product portfolio.

?€? Export Potential:

Growing recognition of Indian-manufactured rolling stock as a cost-competitive, quality-assured alternative in South Asian, African and South-East Asian markets offers a longer-term avenue for revenue diversification beyond the domestic public-sector customer base.

Threats

Alongside these opportunities, the industry and the Company are exposed to external threats that could affect the pace or profitability of growth. These industry-level threats are summarised briefly;.

« Budgetary and policy dependence, and the possibility that spending priorities shift away from conventional rolling- stock procurement toward other heads such as the highspeed rail programme.

« Sector-wide supply-chain disruption, particularly in forged wheels and select imported inputs, which has already constrained industry-wide production schedules during FY26.

« Tender-driven, price-competitive procurement, which can compress margins across the industry during periods of raw-material cost inflation.

?€? Technology and specification risk, as Indian Railways periodically revises technical standards (wheel/axle specifications, Kavach versions), requiring continuous reinvestment in design and certification by manufacturers.

?€? Macroeconomic and interest-rate sensitivity, given the capital-intensive nature of rolling-stock manufacturing and its dependence on both public capital expenditure cycles and input-cost trends.

RISKS AND CONCERNS

The Company has instituted a structured risk-management framework to identify, assess and mitigate risks that could affect its business, financial condition or results of operations. Risk oversight is integrated into the Companys governance framework, with periodic review by the Board of Directors and the Risk Management Committee.

The key risks and the Companys mitigation measures are summarised below:

1. Customer Concentration Risk

A significant proportion of the Companys revenue is derived from Indian Railways, metro rail corporations, DFCCIL and other government or public-sector-linked entities. Any slowdown in public capital expenditure, delay in project sanctioning, or change in procurement policy could have a disproportionate impact on order inflow relative to a business with a more diversified private-sector customer base. The Company seeks to mitigate this through expansion into wagon leasing, exports and, over time, a larger share of private-sector and international customers.

2. Input Availability and Wheelset Supply Risk

The Indian rolling-stock industry has faced an industrywide shortage of forged wheels during FY26 and also on account of technical calibrations i.e. wheel specifications, which can challenge existing inventory with technical specifications change. The Companys joint venture, Ramkrishna Titagarh Rail Wheels Limited, is intended to progressively reduce this dependence by building a large- scale domestic forged-wheel facility, with initial supply commitments to Indian Railways scheduled from FY27.

3. Working Capital and Receivables Risk

Extended payment cycles from public-sector customers can elongate the Companys working-capital cycle, particularly during periods of rapid scale-up in the passenger rail business. Prolonged receivable cycles could constrain the Companys liquidity and increase reliance on external financing.

4. Execution and Scale-Up Risk

The Companys strategic shift toward a larger share of Passenger Rail Systems revenue involves scaling up coach and metro production meaningfully from a smaller historical base. During FY26, actual passenger coach dispatches (63 units) in compared to previous years dispatch of (12 units) reflects ramp up in production.

5. Raw Material and Input Cost Risk

The Companys cost structure is exposed to fluctuations in the price of steel and other specialty inputs used in wagon and coach manufacturing. Where contracts do not carry adequate price-variation clauses, sustained increases in input costs could compress margins, particularly on fixed-price orders won through competitive tender.

6. Policy and Budgetary Dependence

Demand for the Companys products is closely linked to the scale and pace of the Ministry of Railways annual capital expenditure programme and to metro/urban-transit budgets of state governments and city authorities.

7. Competitive Intensity

Railway and metro procurement in India is conducted principally through competitive tendering, which can result in aggressive pricing, particularly for standardised wagon types where technical differentiation is limited. Sustained pricing pressure in tender- driven segments could affect realisations and margins over time.

8. Geopolitical and Import-Dependence Risk

Certain critical inputs and components used across the industry including forged wheels and select technology subsystems continue to be sourced internationally. Geopolitical developments, government restrictions, or logistics disruptions affecting these supply routes could create operational risk for manufacturers, including the Company, until domestic capacity for these inputs is fully established.

9. Foreign Operations and Currency Risk

The Company has historically maintained certain overseas operations and associate investments. During FY26, the Company completed a full exit from its Italian associate,

Titagarh Firema S.p.A., following a comprehensive provisioning of its exposure, reflecting the financial and operational risks that can arise from managing overseas manufacturing operations, including currency fluctuation, differing regulatory regimes and demand-cycle mismatches. The Companys exit is expected to reduce this category of risk going forward. Currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companys exposure to the risk of changes in foreign exchange rates relates primarily to the Companys operating activities and borrowings. Such foreign currency exposures are primarily hedged by the Company through use of foreign currency forward contracts. The Company has a treasury team which continuously monitors the foreign exchange fluctuations on a continuous basis and advises the management on any material adverse effect on the Company of any material movements in interest rate management measures to be taken.

10. Regulatory and Compliance Risk

The Companys products are subject to stringent design, safety and quality certification requirements set by Indian Railways, metro authorities and, where applicable, international standards bodies. Changes in technical specifications including evolving Kavach versions, axle-load norms or emission and safety standards require continuous investment in design upgrades, testing and certification, and any delay in obtaining requisite approvals could affect the timely execution of orders.

The risks set out above are not exhaustive. Additional risks not presently known, or currently considered immaterial, may also adversely affect the Companys business, financial condition and results of operations. This section should be read together with the Industry Structure and Developments section and the Companys audited financial statements for the year ended 31 March 2026.

The Company continually reviews its risk management framework to respond to changes in the business environment. While the risks outlined above may influence future performance, the Company believes that its diversified business portfolio, integrated manufacturing capabilities, strong governance practices and disciplined risk management framework position it to effectively manage these risks while pursuing sustainable growth.

SEGMENT-WISE / PRODUCT-WISE PERFORMANCE

The Companys operations are organised into two continuing reportable business segments, Freight Rail Systems and Passenger Rail Systems. Following the transfer of the Shipbuilding & Maritime Systems business to the Companys wholly owned subsidiary, Titagarh Naval Systems Limited ("TNSL"), effective 1 January 2026, this business is now presented as a discontinued operation for FY 2025-26 and is discussed separately below for continuity with prior-year reporting.

1. Freight Rail Systems

The Freight Rail Systems (FRS) segment comprising freight wagons, steel castings, bogies and ancillary freight rolling- stock products remained the Companys largest segment by revenue,. Segment revenue stood at Rs.2,604.25 crore for the year. Wagon dispatches for the full year stood at 7,019 units, and the segment continued to account for the majority of the Companys near-term deliverable pipeline, with approximately 6,500 wagons pending delivery to Indian Railways and private customers as of 31 March 2026, scheduled largely for FY27.

The segment delivered several strategic milestones during the year, including the supply of specialised BRNA flat wagons and hopper wagons to the Dedicated Freight Corridor Corporation of India Limited (DFCCIL), and the Companys first-ever order for the design, manufacture, supply, testing and commissioning of Rail Borne Maintenance Vehicles (RBMV) for Indian Railways, a diversification into railway maintenance-equipment manufacturing. The Company also completed a foundry capacity upgrade to 50,000 metric tonnes per annum, enabling near-complete backward integration for steel castings used in wagon manufacturing. The Company has the capacity of 12,000 wagons per annum (1,000 wagons per month) and the same can be attained depending upon orders and execution plans.

2. Passenger Rail Systems

The Passenger Rail Systems (PRS) segment comprising metro coaches, Vande Bharat and other high-speed coach- sets and propulsion electrical components systems was the standout performer of FY26 and the Companys principal growth engine. Segment revenue rose to Rs.539.33 crore, up approximately 109-111% over Rs.255.55 crore in FY25, marking the segments highest-ever annual turnover. Coach dispatches increased to 63 units for the full year from 12 units in FY25, while traction motor dispatches for the full year rose to 891 units from 636 units in the corresponding period of FY25. Segment profitability improved meaningfully as scale increased, with the segment recording a particularly strong 19% EBIT margin in the fourth quarter, aided by execution progress on a Bengaluru Metro contract;

As at 31 March 2026, the Passenger Rail Systems segment represented approximately 77% of the Companys standalone order book, reflecting its growing significance to the Companys future revenue pipeline. To support the planned production ramp-up, the Company is strengthening its manufacturing capabilities through the development of an integrated facility at Uttarpara, including a 1.6 km test track, strategic technology collaboration with ABB for TCMS, and investments in backward integration, including an underdevelopment aluminium metro-coach manufacturing line.

3. Shipbuilding & Maritime Systems (Discontinued Operation)

Effective 1 January 2026, the Company transferred this business in its entirety to its wholly-owned subsidiary, Titagarh Naval Systems Limited (TNSL), via a slump sale a step intended to sharpen the Companys focus on its core rail manufacturing operations while continuing to build shipbuilding capability at arms length through a dedicated subsidiary. TNSL is separately setting up a brownfield shipyard at Falta, West Bengal, and has secured government support of approximately Rs.169 crore under the Shipbuilding Financial Assistance Scheme; production at the new yard is expected to commence during FY27.

4. Standalone Financial Summary to be read with published financial statements and notes.

Particulars (Standalone)	FY 2025-26	FY 2024-25
Revenue from Operations	Rs.3,143.58 crore	Rs.3,747.38 crore
Freight Rail Systems	Rs.2,604.25 crore	Rs.3,491.83 crore*
Passenger Rail Systems	Rs.539.33 crore	Rs.255.55 crore*
Profit Before Tax	Rs.237.64 crore	Rs.154.63 crore
Net Profit / (Loss) for the year	Rs.150.70 crore	Rs.76.97 crore
Basic EPS (continuing operations)	Rs.12.17	Rs.6.73
Total Order Book incl. WOS (standalone)	Rs.14,240 crore	Rs.11,200 crore
Total Order Book incl. share in JVs & Subsidiary	Rs.27,540 crore	Rs.24,526 crore
Dividend recommended	Rs.1.00 per share (50%)	Rs.1.00 per share (50%)

*FY 2024-25 segment figures are as re-presented on a comparable basis following the FY26 discontinuation of the Shipbuilding & Maritime Systems segment and are sourced from published quarterly result commentary; these should be reconciled with the restated segment note in the audited financial statements. Consolidated figures (including subsidiaries and joint ventures) may differ from standalone figures shown above and should be read together with the Companys audited consolidated financial statements.

The figures for the previous year have been restarted as detailed in Note 35 of the financial statements.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place a robust internal control systems and processes commensurate with the size, scale and complexity of its operations, designed to provide reasonable assurance regarding the reliability of financial reporting, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of accounting records, and compliance with applicable laws and regulations.

1. Internal Financial Controls Framework

In line with the requirements of Section 134(5)(e) and Section 143(3)(i) of the Companies Act, 2013 and Regulation 17(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has established a robust Internal Financial Controls (IFC) framework comprising entity-level, process-level and information technology controls across key business processes. The adequacy and operating effectiveness of these controls are periodically assessed, with identified gaps, if any, being addressed under the oversight of the Audit Committee.

2. Statutory and Internal Audit

The Companys statutory audit for FY 2025-26 was conducted by its Joint Statutory Auditors. The Company also has an independent, risk-based internal audit function that reports to the Audit Committee, which periodically reviews audit findings and the status of managements corrective actions.

3. Audit Committee Oversight

The Audit Committee Comprises of Independent Directors, oversees the Companys financial reporting process, the adequacy of internal controls, related-party transactions, and the scope and findings of both statutory and internal audits. It also reviews whistle-blower complaints and monitors the utilisation of funds raised through capitalraising activities undertaken during the year, including the promoter warrant issue in FY26.

4. Risk Management, Compliance and Governance Policies

The Companys internal control environment is supported by a Board-approved Policies ,on risk management, vigil Mechanism / Whistle Blower Policy, Related Party Transaction Policy a Code of Conduct for Prevention of Insider Trading in compliance with SEBI (Prohibition of Insider Trading) Regulations, a, and a Policy for Fair Disclosure of Unpublished Price Sensitive Information.

5. Information Technology and Process Controls

The Company leverages an integrated ERP platform across its operations to strengthen business processes, financial reporting, internal controls and operational efficiency, supported by defined approval hierarchies and system- based controls.

Based on the evaluations carried out during the year and the reports of the internal and statutory auditors, the Board is of the opinion that the Companys internal financial controls were adequate and operating effectively, commensurate with the size and nature of its business during FY 2025-26.

This assessment should be read together with the detailed disclosures on internal financial controls contained in the Boards Report and the Independent Auditors Report forming part of this Annual Report.

HUMAN RESOURCES

The Company recognises its people as a key driver of sustainable growth and continued to invest in talent, capability building and employee engagement to support the expansion of its Freight Rail Systems and Passenger Rail Systems businesses. during FY 2025-26.

1. Workforce and Talent Investment

During FY 2025-26, the Company strengthened its workforce to support capacity expansion and operational growth, particularly in the passenger rail segment. Consolidated employee benefit actions are reflected through talent additions and retention. To align employee interests with long-term value creation, the Company granted ESOPs under its Employee Stock Option Scheme.

2. Skilling, Apprenticeship and Employability Initiatives

The Company continued to invest in workforce development through the National Apprenticeship Promotion Scheme

(NAPS) and vocational training initiatives at its Industrial Training Institute (ITI) established under the Public-Private Partnership model, supporting the development of a skilled talent pipeline for its manufacturing operations.

3. Industrial Relations

Industrial relations remained cordial across all manufacturing locations during the year, supported by continuous employee engagement and established consultative mechanisms.

4. Corporate Social Responsibility and Community Engagement

During the year, the Board approved the incorporation of a dedicated CSR arm i.e a trust to implement the Titagarh Groups Corporate Social Responsibility activities under the name Titagarh Group Foundation in accordance with Section 135 of the Companies Act, 2013 and applicable CSR Rules, with the objective of promoting the cultural and social welfare of underserved communities and economically weaker sections. The Companys CSR engagement spans education, healthcare and skilling initiatives, including support extended through philanthropic organisations, and complements its apprenticeship and ITI programmes described above. Detailed disclosures on CSR activities and spend for the year are provided separately in the Annual Report on CSR Activities annexed to the Boards Report.

5. Recognition

The Companys human-capital and leadership practices received external recognition during the year: Titagarh was featured in the Burgundy Private Hurun India 500 list of Indias leading companies; the Companys Deputy Managing Director was conferred the "Business Leader of the Year" award at the HRD India Awards 2025 in Kolkata for his contribution to mobility innovation and leadership; and a Non-Executive Director of the Company, who also chairs the CSR Committee, was honoured with the Anantya Award by FICCI FLO for her contribution to philanthropy.

The Company believes that a stable, skilled and motivated workforce supported by structured apprenticeship pipelines, competitive employee ownership programmes and a strong safety and compliance culture across its manufacturing plants will remain an important enabler as it scales up its passenger rail, metro and forged-wheel manufacturing capacities over the coming years.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT

TO OPERATIONAL PERFORMANCE

Overview

The Companys financial performance in FY 2025-26 closely mirrored the operational shifts described in the Segment-wise/ Product-wise Performance section above. On a standalone basis, revenue from operations stood at Rs.3,143.58 crore, the profit before tax rose to Rs.237.64 crore and profit after tax rose to Rs.150.70 crore.

Key Financial Ratios

In accordance with Regulation 34(3) read with Schedule

V (Part A) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the table below sets out the Companys key financial ratios for FY 2025-26 as compared

Explanation for Significant (>25%) Changes

Net Profit Margin and Return on Net Worth both increased between FY25 and FY26, representing a change materially in excess of the 25% threshold. This was mainly due to:

?€? The net profit margins has increased from 2.05% to 4.79% on account of exceptional item considered in previous year amounting to Rs.270.25 crore as against Rs.57.58 crore in the current year. After removing the impact of exceptional items the Net margin has gone down in FY 26 due to reduction in overall volume.

?€? Increase in return on net worth is mainly due to increase in profitability as explained above and issue of share warrants during the year under review.

with FY 2024-25, along with explanations for any significant change (i.e., a change of 25% or more) as compared to the immediately preceding financial year.

Forward Looking Statement

The statements in this report describing the Companys policy, strategy, projections, estimation and expectations may appear forward looking statements within the meaning of applicable securities laws or regulations. These statements are based on certain assumptions and expectations of future events and the actual results could materially differ from those expressly mentioned in this Report or implied for various factors including those mentioned in the paragraph "Risks and Concerns" herein above and subsequent developments, information or events

Sources: Union Budget documents (2025-26 and 2026-27) and PIB releases of the Ministry of Railways; PRS Legislative Research, Demand for Grants Analysis Railways; Ministry of Railways press statements and year-end review (December 2025); Indian Infrastructure sector reports; the Companys investor presentations,, transcripts and stock-exchange filings; and contemporaneous business-media coverage (The Economic Times, Business Standard, Business Today, Metro Rail Today, Railway Supply, and others) published through FY2025-26.

Ratio	FY 2025-26	FY 2024-25	% Change	Remarks
Debtors Turnover Ratio (No. of days)	74.98	58.59	27.97%	Variation is mainly due to decrease in revenue during the current year.
Inventory Turnover Ratio (No. of days)	84.40	65.66	28.55%	Variation is mainly due to decrease in consumption during the current year.
Interest Coverage Ratio (times)	5.20	6.81	(23.70%)	No Significant variation (less than 25%). The marginal decline was primarily due to lower earnings before interest and tax (EBIT), despite a reduction in finance costs during the year
Current Ratio (times)	1.73	1.66	4.36%	No significant variation. Computed as Current Assets + Current Liabilities.
Debt-Equity Ratio (times)*	0.15	0.22	(33.24)	Variation due to increase in cash & cash equivalents, issue of share warrants and increase in profitability during the current year.
Operating Profit Margin (%)**	11.63%	13.29%	(12.49%)	No significant variation (less than 25%). The marginal decline was primarily attributable to a decrease in operating profitability during the year.
Net Profit Margin (%)	4.79%	2.05%	133.40%	Variation is due to increase in profitability and decrease in revenue during the current year
Return on Net Worth (%)	6.31%	3.40%	85.35%	Variation is mainly due to increase in profitability and issue of share warrants during the current year

*Debt represents of net debts **Before exceptional items