United Drilling Tools Ltd Management Discussions

Global Economy Overview

The year 2026 unfolded against a global economy that entered the period on a firmer footing than many had anticipated, only to be tested in its initial months by the outbreak of geopolitical conflict in the Middle East. After absorbing successive waves of trade-policy uncertainty and higher borrowing costs over the preceding two years, world output proved notably resilient through much of 2025. The conflict, however, disrupted energy markets, firmed up inflation expectations, and prompted a wholesale re-evaluation of the interest-rate path widely expected at the start of the year. According to the International Monetary Fund (IMF), global GDP growth averaged 3.5% in 2024–25, then moderated to 3.0% in calendar 2026.

On the downside, the war in the Middle East and higher energy prices weigh most heavily on commodity importers and vulnerable emerging economies. On the upside, the technology cycle, driven by investment in and adoption of artificial intelligence (AI), is lifting economies that are well integrated into the global technology value chain.

Growth among the advanced economies remains subdued in 2026, with the United States projected at 2.3%, the euro area at 0.9%, the United Kingdom at 1.0%, Canada at 1.1%, and Japan at 0.6%. Emerging market and developing economies (EMDEs) continue to outperform, expanding by a projected 3.9%, led by China at 4.6% and by a cluster of technology-linked Asian economies. India retains its position as the fastest-growing major economy, underpinned by resilient private consumption and services activity.

The most consequential shift during the year was the interruption of global disinflation. According to the IMF, the global headline inflation is expected to rise to 4.7% in 2026, up from 4.1% in 2025, before easing to 3.9% in 2027. The revision is attributed chie_y to higher energy and food costs: crude oil is assumed to average close to US$89 a barrel in 2026, with energy prices running roughly 25% above their pre-conflict levels.

2026 marked a turning point for real estate, shifting from stagnation to recovery after two years of declining values. Global markets gained momentum as capital improved and development remained limited, with divergence across sectors and regions. Transaction volume reached about US$216 billion in early 2026, up 18% year on year, led by Asia-Pacific at 31%. In the US, commercial real estate investment is expected to grow 16% to US$562 billion, nearing pre-pandemic levels, with slight cap-rate compression. Recovery is uneven: industrial, residential, and data centres lead demand, while office and life-science sectors face challenges. India is the top investment destination; 86% of European and Asia-Pacific investors plan to invest more, followed by Canada (80%) and France (78%). Policy rate movements influence the market; rising yields after conflict slowed recovery, but the cycle remains strong and debt is available.

Outlook

Risks to the global outlook remain tilted to the downside. A longer or wider conflict, greater geopolitical fragmentation, disappointment over AI productivity, or trade tensions could weaken growth and shake markets, with high public debt limiting policy room. Conversely, de-escalation, faster AI gains, and disinflation could lead central banks to ease policy and boostfirecovery.

Indian economy overview

India retained its position as the fastest-growing major economy in FY26. As per the Provisional Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) in June 2026, the Indian economy expanded by 7.7% in real terms in FY2025-26, up from 7.1% in FY2024-25. Nominal GDP rose 8.9% to approximately Rs346.36 lakh crore. Growth momentum held firm throughout the year, with real GDP expanding 7.8% year-on-year in the fourth quarter (January–March 2026), underscoring the resilience of domestic activity amid persistent global trade uncertainty and geopolitical volatility.

The expansion was broad-based across sectors. The services sector, the largest contributor to GDP, grew by an estimated 9.1% during the year, with financial services, real estate, and professional services acting as the key drivers of services-sector growth. Industrial activity remained robust, with manufacturing expanding around 7.0%, while the construction sector, a bellwether for real estate, sustained healthy momentum. Sustained private consumption and elevated government capital expenditure continued to anchor demand.

On the price front, the macro environment became benign. Headline CPI inflation averaged 1.7% from April–December, driven mainly by food-price disinflation, while core inflation stayed subdued, indicating limited demand pressures. This easing allowed the Reserve Bank of India to cut rates: a total of 125 basis points since February 2025, along with liquidity measures, improved monetary transmission. Lower borrowing costs reduced home-loan rates, boosting a_ordability and housing demand.

Fiscal management stayed disciplined with strong tax revenue and controlled spending, supporting capital expenditure and keeping the FY26 deficit at 4.4% of GDP. Infrastructure-led growth benefited the built environment, with the Union Budget 2026-27 increasing public capital expenditure to Rs12.20 lakh crore from Rs11.20 lakh in FY26. Reforms improved the real estate operating environment, like the National Real Estate Policy 2025s single-window clearance system and green incentives. SEBIs reforms, such as reclassifying mutual fund investments in REITs as equities from January 2026, increased transparency and investor participation.

Taken together, a fast-growing economy, moderating inflation, an accommodative interest-rate cycle, rising urbanisation and continued policy support create a constructive demand environment for real estate.

Indian MSME Sector

Indias MSME sector remains key to the economy, contributing about 31.1% to GDP, 35.4% to manufacturing, and 48.58% to exports. Formalisation increased, with over 8.7 crore registrations by June 2026 and nearly 38.9 crore employed. The revised MSME classification from April 2025 allowed enterprises to scale up, supported by measures like doubled collateral-free credit limits and CGTMSE support. In real estate, MSMEs drive demand and employment, especially in Tier-II and Tier-III cities, boosting commercial, industrial, and residential sectors.

Growing exports of the Indian economy

Indias external trade hit a new high in FY 2025-26 despite uneven global conditions. Cumulative exports reached US$ 860.09 billion, up 4.22% from FY2024-25. Services exports led growth, increasing 7.94% to US$ 418.31 billion and boosting the trade surplus to US$ 213.89 billion from US$ 188.84 billion. Merchandise exports grew a modest 0.93% to US$ 441.78 billion, with non-petroleum exports rising 3.62% to US$ 387.88 billion. Engineering, petroleum, and minerals drove merchandise growth. Imports increased 6.47% to US$ 979.40 billion, expanding the trade deficit to US$ 119.30 billion and the merchandise deficit to US$ 333.19 billion. Momentum continues into April 2026 with exports at US$ 80.80 billion, up 13.59% from April 2025.

Outlook

Indias medium-term growth outlook remains among the strongest of major economies. Leading agencies project real GDP growth of about 6.5-6.6% for FY2026-27, with the Reserve Bank of India and the World Bank forecasting 6.6% and the IMF around 6.5%. Despite global growth expected to slow to about 3.0% in 2026, risks mainly stem from external factors like high energy prices, geopolitical tensions, and trade policy changes. Domestically, growth stays robust due to resilient private consumption, low inflation, an accommodative interest rate cycle, government capital spending, and urbanisation. The real estate sector benefits from lower home-loan rates, urban housing demand, rising incomes, household formation, and reforms such as the National Real Estate Policy 2025s single-window clearance and SEBIs REIT reforms, supporting growth into FY2026-27.

Global oil and gas industry

The global oil and gas industry spans three linked segments: upstream exploration and production, midstream transportation and storage, and downstream refining, marketing and petrochemicals. Despite the ongoing energy transition, hydrocarbons continue to meet most global primary energy demand, and the capital committed to sustaining and replacing productive capacity remains among the largest recurring investment flows in the world economy.

The year under review was dominated by an exceptional supply shock. Military action in the Middle East during March 2026 and the consequent closure of the Strait of Hormuz removed a substantial share of Gulf production and export capacity from the market, introducing significant uncertainty into global energy markets. Brent crude rose to approximately USD 117.3 per barrel in April 2026, global inventories were drawn down at a record pace, and refining margins in the Atlantic Basin reached historic highs as product markets tightened. Flows through the Strait began to resume from June 2026, although renewed hostilities in July and early August interrupted the recovery. For the equipment and services segment of the industry, the episode has reinforced a longer-standing conclusion: security of supply depends on sustained investment in wells, wellheads, pressure control and production infrastructure, and that investment cannot be deferred indefinitely without consequence.

The International Energy Agency estimates global oil demand at about 103.5 million barrels per day in 2026, down 1.6 million barrels per day, as the closure of the Strait and higher fuel prices weighed on consumption. Global supply is forecast to decline by 4.3 million barrels per day to about 102 million barrels per day, before rebounding by 8.3 million barrels per day to 110.3 million barrels per day in 2027, with demand expanding by 2.4 million barrels per day over the same period. Refinery crude throughputs stood at 80.9 million barrels per day in July 2026, nearly 5 million barrels per day below year-earlier levels, and are forecast to recover by 3.5 million barrels per day during 2027. Forecasts across agencies remain unusually divergent, with 2026 demand estimates ranging from 102.8 million barrels per day to 105.9 million barrels per day.

For companies serving the upstream value chain, the more directly relevant measure is the oilfield services market, valued at USD 331.91 billion in 2025 and projected to reach USD 623.04 billion by 2035, a compound annual growth rate of 6.50%.

Growth drivers

I. Restoration of disrupted capacity: The projected 8.3 million barrel per day recovery in supply during 2027 requires extensive re-drilling, workover and re-completion activity, together with the replacement of wellhead assemblies, valves and pressure control equipment across affected fields.

II. Energy security as an investment driver: The disruption has strengthened the policy case in importing nations for domestic exploration and production, diversification of supply sources and strategic reserve capacity, each of which translates into drilling and completion demand.

III. Deepwater and frontier basin activity: Operators are reexamining high-impact exploration after several years of capital discipline, encouraged by success in emerging basins such as Guyana and Namibia, and supporting demand for higher-specification equipment.

IV. Natural gas and lique_ed natural gas: Gas retains a central role in the transition fuel mix, sustaining investment in drilling, gathering, and processing across established and new producing regions.

V. Replacement and maintenance cycles: A substantial share of demand for wellheads, gas lift equipment, and well service tools comes from maintaining producing wells rather than new drilling, providing some insulation from exploration cycles.

VI. Technology adoption: Autonomous drilling systems, digital reservoir characterisation and data-led asset management are raising equipment specifications and favouring suppliers able to meet international standards.

Outlook

The near-term outlook mainly depends on how quickly and sustainably Gulf normalization occurs. If transit through the Strait continues, both demand and supply are expected to rebound strongly in 2027, with supply reaching 110.3 million barrels per day and demand around 105.9 million barrels per day. This recovery will likely be accompanied by extensive well restoration, capacity rebuilding, and equipment replacement efforts, positioning the oilfield equipment and services sector to benefit. Key risks include potential renewed hostilities, price fluctuations around any de-escalation, and the possibility that operators delay sanctioning decisions until there is clearer visibility. In the medium term, ongoing natural field declines, energy security concerns, and the expected growth of the oilfield services market to USD 623.04 billion by 2035 support a positive outlook for drilling, completion, and pressure control equipment demand.

Indian Oil and Gas Industry

India is the worlds third-largest consumer of oil and the fourth-largest refining hub, and is expected to account for a substantial share of incremental global oil demand over the coming decade. The sector spans upstream exploration and production, led by Oil and Natural Gas Corporation Limited, Oil India Limited, and private operators; midstream transportation; and a large downstream refining and marketing segment.

The sectors defining structural feature is import dependence. Domestic crude production met 11.4% of petroleum product consumption during April to January of FY 2025-26, implying import dependence of 88.6%, up from 88.3% for the whole of FY 2024-25. The West Asia crisis exposed the consequences of that dependence directly: crude and gas import reliance touched record levels of 89.4% and 50.6%, respectively; lique_ed natural gas deliveries fell by around 10%; and the Government responded by prioritising gas allocation, expanding strategic reserves, and augmenting regasi_cation capacity. Refining nonetheless proved resilient, with petroleum consumption growing 2.7% year on year in the fourth quarter of FY 2025-26.

Growth Drivers

Samudra Manthan: The National O_shore Exploration Scheme, approved with an outlay of Rs84,084 crore to FY 2030-31, is the single most significant development for the domestic upstream equipment industry. It provides Rs43,200 crore for 60 deepwater exploration wells, with Government support of up to 50% of eligible drilling cost or Rs675 crore per well, whichever is lower, alongside Rs2,000 crore for Oil and Gas Manufacturing and Services Zones aimed specifically at localising critical equipment and services.

Rising drilling intensity: Oil India Limited plans to raise drilling activity to 100 wells annually in FY 2026-27 from 74 wells in FY 2025-26, an increase of approximately 35%.

Sustained public sector capital expenditure: Aggregate budgeted investment by oil public sector undertakings rises marginally to Rs1.34 trillion in FY 2026-27 from Rs1.30 trillion, with Oil and Natural Gas Corporation Limited budgeting Rs30,000 crore and Oil India Limited Rs8,653 crore.

Policy and regulatory reform: The Petroleum and Natural Gas Rules, 2025 streamline the regulatory framework to attract investment, while the Open Acreage Licensing Policy continues to open new acreage on a rolling basis.

Energy security imperative: Disruptions to Gulf supply have strengthened the policy commitment to increase domestic production, expand strategic petroleum reserves, and diversify import sources.

Outlook

The outlook for the Indian oil and gas sector is one of rising activity against a persistent structural deficit. Subject to exploration success, Samudra Manthan targets an increase in domestic oil and gas production from approximately 62 million tonnes of oil equivalent to 80 million tonnes annually, and an expansion of the hydrocarbonresourcebasefrom1.6billiontonnesofoilequivalent to 2.2 billion tonnes, with anticipated reserve accretion of more than 600 million tonnes of oil equivalent. Import dependence is nonetheless expected to remain elevated, since demand growth continues to outpace domestic production.

For the domestic oilfield equipment industry, the implications are favourable and specific. A programme of 60 deepwater exploration wells, rising onshore drilling intensity at the national oil companies and a dedicated allocation for localising critical equipment together point to sustained demand for wellhead assemblies, drilling and casing accessories, gas lift systems and well service equipment. The emphasis on indigenous manufacturing under Make in India and Atmanirbhar Bharat further favours established domestic suppliers holding the certifications required by national oil companies. The principal risks are the pace at which scheme funds translate into awarded contracts, volatility in international crude prices, and the moderation in budgeted capital expenditure at certain public sector operators for FY 2026-27.

Company overview

United Drilling Tools Limited (‘UDTL or ‘the Company) is an India-based manufacturer of oilfield equipment and tools serving exploration and production companies in the domestic and international oil and gas industry. Incorporated in 1985, the Company has built a four-decade track record in designing and manufacturing downhole and surface equipment used in drilling, well completion, well servicing, and production operations.

The Company operates manufacturing facilities in Noida, Uttar Pradesh, and Kandla & Mundra, Gujarat, supported by a modern, well-equipped machine shop comprising CNC and special-purpose lathes, milling machines, drilling machines, cylindrical grinders, and a powder coating plant, along with an in-house quality testing department. Its product range includes wireline winches, both open-loop and closed-loop systems for Zone I and Zone II hazardous area classifications, truck-mounted wireline units, open and cased hole logging units, conventional and wireline-retrievable gas lift valves, side pocket and conventional mandrels, interchangeable sleeve and integral blade stabilisers, and connectors together with thread protectors for large outer-diameter casing pipe ranging from 18 to 5/8 inches to 36 inches.

Products are manufactured to American Petroleum Institute (API) License No. 5B-0391, 5CT-0565, 5L-0424, 7-1-0393, 7-2-0851, 19G1-0008 and 19G2-0010 and to ISO 13679:2019, ISO 9001:2005, ISO 45001:2018 and ISO 14001:2015, reflecting the certification standards required by national and international oil companies and oilfield service providers. The Companys wholly owned subsidiary, P Mittal Manufacturing Private Limited, is consolidated into the Companys financial statements, and the Company and its subsidiary together operate within a single reportable business segment, classified as Engineering under Accounting Standard 17 issued by the Institute of Chartered Accountants of India.

Today, the Company supplies both the domestic market, mainly national oil companies and major private operators, and an expanding export market. This year, it secured orders from Brazil, Venezuela, and Nigeria, while continuing to serve its domestic clients, including a repeat order from Vedanta Limited for tubing, pup joints, crossovers, and accessories. Management has stated that growing the Companys presence in export markets, while maintaining margin discipline, remains a key focus for the coming_year.

Our Core Strengths

The Companys position in a technically demanding, specification-driven industry rests on capabilities accumulated over close to four decades of manufacturing for the oil and gas sector.

Established manufacturing track record: Close to 42 years of continuous manufacturing experience in oilfield equipment gives the Company deep process knowledge and application understanding that is difficult for new entrants to replicate.

Diversified and technically differentiated product range: The Companys portfolio spans wireline winches, gas lift valves, mandrels, stabilisers and large-diameter casing connectors, reducing dependence on any single product line and allowing it to address multiple stages of the well life cycle, from drilling through production and well servicing.

Growing international footprint: Recent export orders from Brazil, Venezuela and Nigeria evidence the Companys ability to compete internationally against established global oilfield equipment suppliers, and provide a base from which to reduce reliance on the domestic order cycle alone.

Improving financial discipline: A three-year growth in profit after tax that has consistently outpaced revenue growth, together with a strengthening EBITDA margin, reflects tightening cost control and a more favourable product mix rather than volume alone.

Conservative capital structure: The Companys low reliance on external borrowing provides balance sheet flexibility to fund working capital for a growing and increasingly export-oriented order book.

Our operational excellence

Operational excellence at the Company is built around precision manufacturing, disciplined quality assurance and continuous engagement with the technical requirements of exploration and production customers operating in demanding downhole and surface environments.

Manufacturing capability

The Companys machine shops are equipped with CNC and special-purpose lathes, milling machines, drilling machines, cylindrical grinders and powder coating plant, enabling in-house manufacture of precision-machined components to close tolerances. Connectors and threaded components are cold-rolled, phosphatised and coated, and fitted with thread protectors, consistent with international handling and transport standards for oilfield tubular goods.

Quality assurance

All major product lines are manufactured to recognised American Petroleum Institute specifications, and are produced under an ISO certified quality management system. An in-house quality testing department supports inspection and testing across the manufacturing process, from incoming material through to finished goods, before dispatch to customers.

Engineering and product development

The Company continues to refine its product designs based on field experience and customer feedback. Its integral blade stabilisers, fully heat-treated to a specified hardness and impact strength range, and are available in near-bit and string-type con_gurations for use in highly deviated wells, including sidetracking and _shing operations. This pattern of iterative, field-informed design improvement characterises the Companys approach across its product range.

SWOT Analysis S- Strengths a) The company having strong intellectual property base, proven technology, and superior product quality, the company holds significant potential to expand in the global market. Increasing demand for reliable, affordable, and innovative equipment worldwide presents the company with an attractive opportunity to establish itself as a leading international player. By leveraging its domestic strengths, building strategic global partnerships, and focusing on brand positioning, the company can successfully capture emerging opportunities across geographies.

b) Analysis indicates that the company is likely to experience stronger growth compared to the overall industry in the coming years. This anticipated performance overtakes industry averages, reflecting a favourable outlook for the companys future.

c) In India, labour and overhead costs are much lower compared to the USA and Europe countries, where most of this equipment are currently made. This substantial cost difference gives Indian companies a strong advantage and produce equipment more a_ordably, allowing them to offer more competitive prices. This cost benefit ratio helps Indian manufacturers stand out in the global market.

d) Compared with others in the industry, the companys products feature a high level of patented content. This unique aspect significantly enhances the companys competitive position. The specialized nature of these products sets the company apart from competitors. As a result, the company can leverage its proprietary technology to gain a strong market advantage. This distinctive edge helps secure a leading position in the industry.

e) Currently, the companys products are recognized for their excellent quality. They stand out significantly in the market due to their high level of diversity. This unique quality helps the company distinguish itself from competitors. As a result, the products are supposed as top-tier in their category. This strong market presence underscores the companys reputation for excellence.

f) The market is currently in a healthy state, experiencing rapid growth that presents significant opportunities for businesses. With demand increasing swiftly, companies are benefitingfromafavourableenvironmentwithminimalprice competition. This lack of intense pricing pressures allows firms to focus on enhancing their products and services rather than solely competing on cost. As a result, businesses can invest in innovation and quality improvements without the constant threat of price wars. Overall, the strong and expanding market conditions support sustainable success and profitability for companies operating within it.

g) For new competitors, entering this market is both challenging and costly. This high barrier to entry helps protect the companys competitive position. Consequently, it enhances the companys overall value competitive position and increases its value.

h) Customers prefer the companys products because they serve as effective substitutes for imports. These products are known for their high quality and reliability. Additionally, they are offered at reasonable prices. This combination of attributes makes the company a popular choice among buyers. Overall, the value provided helps build strong customer loyalty.

i) Since the technology is well-tested and approved both domestically and internationally, there is minimal risk of product failure. This established reliability builds customer confidence in the products.

j) The company has built long-standing relationships with its clients. This ongoing trust and loyalty strengthen its market position.

k) As a registered MSME, the company receives price preferences from Indian public sector companies as per government policies in tenders and when purchasing equipment, giving it an advantage over larger and international competitors.

l) A diversified product portfolio helps to cater to the demand of customer at one place.

W- Weakness

a) As a smaller firm in the market, the company faces a slight disadvantage in its competitive position. This smaller scale can limit its market influence and overall impact.

b) Being the company under the SME segment, so lacks the funds and time needed for substantial growth.

c) The companys sales are primarily concentrated on government public sector undertakings (PSUs), with a relatively small customer base. Additionally, its presence in the international market is limited.

d) The company operates on a moderate scale and relies heavily on a tender-based business model. The companys business dynamics are closely tied to securing and winning tenders.

e) Need for continuous upgrades to match advanced drilling solutions offered by multinational players

f) Dependence on certain imported raw materials and components may lead to delays or higher costs.

O- Opportunities

a) Increasing investments in Indias oil & gas exploration and government support for energy security.

b) Rising demand for drilling tools in the Middle East, Africa, and Latin America provides strong export potential.

c) As demand for oil and natural gas continues to rise, there will be an ongoing need for drilling more wells. The company is actively exploring ways to capitalize on these growing opportunities. This proactive approach aims to position the company to benefit from the increasing market demand.

d) The Indian governments initiatives, like "Made in India" and "Atmanirbhar Bharat," are designed to boost local production and increase the competitiveness of Indian industries. In response, the company is working to develop value-added products domestically.

e) Rising international oil prices have led to increased demand for equipment. This flow is driven by the need for more drilling and extraction capabilities.

f) There is minimal business risk for these products due to consistently growing demand and limited competition from just 3-4 major global players. This stable market environment supports steady opportunities for the company.

g) As customers become more cost-conscious and the global perception of Indian products improves, acceptance of Indian products in this field is rising.

h) In addition to the international market, there is a substantial domestic market that is expected to remain healthy increasing trends for _fty years, there will be ongoing demand for oil.

T- Threats

a) Instability in oil-rich regions can disrupt market access and supply chains.

b) Volatile oil prices can impact investment and demand for drilling equipment.

c) New environmental regulations or policy shifts can affect industry operations and costs.

d) Growing adoption of renewable energy sources may reduce demand for traditional oil equipment.

e) Recessions or economic slowdowns can decrease investments in oil exploration and drilling.

f) Rising competition from both domestic and international manufacturers can impact market share and pricing.

g) Interruptions in the supply chain can lead to delays and increased costs for manufacturing and delivery.

Financial review

FY 2025-26 was a year of continued financial recovery, in which growth in profitability comfortably outpaced growth in revenue, reflecting an improving product mix, tighter cost control and greater operating leverage as volumes recovered. Revenue from operations rose 5.69% to Rs181.96 crores from Rs172.16 crores. Full-year EBITDA stood at Rs33.64 crores. Standalone profit after tax rose 25.74% to Rs18.76 crores from Rs14.92 crores, while consolidated profit after tax, which includes the Companys wholly owned subsidiary, rose to Rs18.97 crores from Rs15.03 crores.

P&L analysis Rs ( in crore)

	FY 26	FY25	Growth (Change in %)
Revenue From operations	181.96	172.16	5.69%
Employee Benefits Expense	11.81	13.45	-12.19%
Finance cost	3.54	2.73	29.67%
EBITDA	33.64	26.26	28.10%
PBT	26.59	19.64	35.39%
PAT	18.76	14.92	25.74%
EPS (in Rs)	9.30	7.33	26.88%

Key Financial Ratios

Ratios	FY 26	FY25	% Change	Reason for Change
Trade Receivables Turnover	2.29	2.33	-1.65%
Inventory Turnover Ratio	0.84	0.68	23.26%
Debt Service Coverage Ratio	7.08	6.41	10.45%
Current Ratio	11.81	3.77	213.26%	Increase due to Decrease in Trade payables and short term Borrowings
Debt-Equity Ratio	0.01	0.12	-90.00%	Decrease due to decrease in Borrowings
Operating Profit Margin (%)	16.16	12.76	26.65%	Increase due to improve margins.
Net Profit Ratio	10.39	8.65	20.10%
Return on Equity Ratio	6.98	5.79	20.55%

Analysis of Balance Sheet

Particulars	FY 26	FY25	Growth (Change in %)
Total equity	278.34	263.11	5.79%
Long- term borrowings	0.087	1.12	-92.23%
Short- term borrowings	1.89	30.36	-93.77%
Total non- current assets	88.40	87.40	1.14%
Trade receivables	71.57	87.07	-17.80%
Cash and cash equivalents	1.68	1.56	7.69%
Land	3.82	3.82	0.00%

Risk Management

The Company has a Risk Management Committee, reconstituted by the Board with effect from 21 May 2026, alongside its Audit, Stakeholders Relationship, Nomination and Remuneration, and Corporate Social Responsibility Committees, charged with identifying, assessing, and monitoring risks material to the business. The principal risks to which the Company is exposed, together with the measures adopted to address them, are set out below.

Commodity price and industry cycle risk

Demand for oilfield equipment is closely correlated with global exploration and production activity, which in turn is driven by crude oil and natural gas prices. The extreme price volatility experienced during FY 2025-26, following the closure of the Strait of Hormuz and subsequent partial normalisation, illustrates the degree to which the Companys end markets can be affected by events outside its control. The Company mitigates this exposure through a diversified product range addressing drilling, completion and production applications, and through a geographically diversified order book spanning domestic and export customers.

Foreign exchange risk

As export orders form a growing share of the Companys business, the Company is exposed to movements in foreign exchange rates between when an export order is booked and when payment is received. The Company manages this exposure through pricing and, where appropriate, hedging practices consistent with its risk management policy.

Raw material price risk

The Companys principal raw materials are alloy steel and other specialised metals used to manufacture downhole and surface equipment, whose prices can be volatile. The Company manages this exposure through forward planning of material requirements and, where contract terms permit, price variation provisions.

Competition risk

The Company competes with both larger multinational oilfield service and equipment companies and smaller regional manufacturers. It seeks to differentiate itself through certified, specification-compliant manufacturing, engineering responsiveness and a track record of reliable delivery, rather than through price competition alone.

Regulatory and export compliance risk

Operating across multiple jurisdictions exposes the Company to varying regulatory, safety and export control requirements. The Company manages this through its certified quality systems and by confirming, for each export transaction, that the arrangement is conducted on an arms length basis in the ordinary course of business.

Internal Control Systems and their Adequacy

The Company has in place internal control systems commensurate with the size, scale and complexity of its manufacturing operations, designed to provide reasonable assurance regarding the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of accounting records, and the timely preparation of reliable financial information.

These systems encompass delegation of authority for procurement, production and dispatch; documented standard operating procedures for manufacturing and quality inspection consistent with the Companys ISO certification; budgetary control and periodic management reporting; and defined approval processes for capital expenditure and export transactions.

M/s Grover Lalla & Mehta, Chartered Accountants, have been appointed as the Companys Internal Auditor for FY 2026-27, and the internal audit function reports its findings to the Audit Committee, which reviews the adequacy and effectiveness of the Companys internal control systems on a periodic basis and monitors the implementation of any corrective action recommended. The Board is of the opinion that the internal control systems in place are adequate and were operating effectively during the year under review.

Human Resource and Industrial Relations

The Company recognises that its manufacturing capability, and the precision engineering on which its reputation rests, depends on the skill and experience of its workforce. Employees across design, machining, quality assurance and dispatch are central to the Companys ability to meet the exacting specifications demanded by oilfield equipment customers, both domestic and international.

The Companys workforce spans its manufacturing facilities at Uttar Pradesh & Gujarat, supported by sales, business development and administrative personnel. Given the technical nature of the Companys products, the Company emphasises retaining skilled machinists, quality inspectors, and engineers, along with structured on-the-job training, to maintain manufacturing standards as its order book and export activity expand.

As at 31 March 2026, the Company employed 282. The Company has a policy against sexual harassment at the workplace in line with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, and has constituted an Internal Complaints Committee to address any complaints received. Industrial relations remained cordial throughout the year under review.

Cautionary Statement

Statements in this Management Discussion and Analysis about the Companys goals, projections, and expectations may be forward-looking statements under securities laws. These are based on assumptions about future events, but actual results could differ. Key factors include global and Indian oil and gas prices, exploration activity, geopolitical risks, raw material costs, currency exchange rates, industry competition, and regulatory changes. The Company isnt obligated to update these statements after any new developments.