United Heat Transfer Ltd Management Discussions

Industry Structure and Developments:

United Heat Transfer Limited ("UHTL" or "the Company") operates within a critical segment of the capital goods industry, providing high-performance thermal engineering solutions including Heat Exchangers, Pressure Vessels, Columns and Skids. We proudly serve a diverse range of process industries such as Oil & Gas, Petrochemicals, LNG, Fertilizers, Power, Water Treatment and Pulp & Paper.

FY 2025-26 marks an important inflection point for the Company. Alongside our established process equipment business, we have entered a second and structurally distinct growth vertical — thermal management for digital infrastructure — through the development of Coolant Distribution Units (CDUs) for liquid-cooled data centres. For the first time, UHTL addresses two large and largely uncorrelated global capital expenditure cycles: the energy transition on one side, and the build-out of artificial intelligence computing capacity on the other. Both are thermal engineering problems at their core, and both play directly to the Companys established competencies in heat transfer design, precision fabrication and code-compliant quality systems.

A. Process Equipment — the core business

The capital expenditure cycle across process industries remained constructive through FY 2025-26, both in India and globally. While crude oil prices moderated during the year and tempered sentiment in parts of the upstream segment, investment activity in downstream refining, petrochemicals, gas processing and the energy transition space remained resilient. India continues to strengthen its position as a dependable global manufacturing hub for complex, high-quality process equipment, supported by deep engineering talent, expanding capacities and robust quality control systems.

- Refining and Petrochemicals: India has articulated an ambition to expand domestic refining capacity from approximately 257 MMTPA towards approximately 310 MMTPA by 2030, alongside a petrochemical investment pipeline estimated in excess of US$ 85 billion over the same horizon. Rising petrochemical intensity of refining — crude-to-chemicals configurations in particular — is heat-exchanger-intensive and directly expands our addressable market.

- LNG and Gas Processing: The global LNG industry is passing through the largest wave of liquefaction capacity additions on record, with substantial new trains commissioning between 2025 and 2028 across the US Gulf Coast and the Middle East, including the phased expansion of Qatars North Field programme. Indias own objective of raising the share of natural gas in its primary energy mix to around 15% by 2030 is driving investment in regasification, city gas distribution and gas processing infrastructure — all of which require cryogenic and process heat exchange equipment.

- Hydrogen and Green Ammonia: The global pivot towards hydrogen — particularly Blue and Green Hydrogen — continues to unlock fresh opportunities. According to the International Energy Agency (IEA), global hydrogen demand today stands at approximately 100 million tonnes per annum and could exceed 500 million tonnes by 2050 under accelerated decarbonisation pathways. In India,

the National Green Hydrogen Mission, with an outlay of ?19,744 crore and a target of 5 MMTPA of green hydrogen production capacity by 2030, together with successive SIGHT scheme allocations and aggregated green ammonia demand tenders, is beginning to translate into equipment enquiries for reformers, electrolyser balance-of-plant, ammonia synthesis loops and associated thermal packages.

together with successive SIGHT scheme allocations and aggregated green ammonia demand tenders, is beginning to translate into equipment enquiries for reformers, electrolyser balance-of-plant, ammonia synthesis loops and associated thermal packages.

- Specialty Chemicals and Fertilizers: Demand for exotic and alloy-based equipment continues to grow as global supply chains diversify manufacturing away from single-country dependence. This segment carries higher metallurgical complexity and, correspondingly, higher realisation per tonne.

B. Data Centre Thermal Management — a new addressable market

The rapid scale-up of artificial intelligence has fundamentally changed the thermal engineering problem inside the data centre. A conventional enterprise server rack dissipates in the region of 5 to 15 kW. Current-generation AI accelerator racks built around densely packed GPU platforms dissipate of the order of 120 to 140 kW per rack, and publicly disclosed silicon roadmaps point towards rack-level densities of 250 kW and beyond within the next product cycles. Air cooling becomes technically and economically impractical much beyond approximately 40-50 kW per rack. The consequence is a structural, non-cyclical shift from air cooling to direct-to-chip liquid cooling across new Al-capable data centre capacity.

The Coolant Distribution Unit sits at the heart of this architecture. A CDU hydraulically isolates the facility water system from the technology cooling system serving the IT equipment, and precisely controls the temperature, pressure, flow and chemistry of the coolant delivered to the cold plates. A liquid-to-liquid CDU is, in engineering terms, a close cousin of the equipment UHTL already builds: a high-effectiveness plate heat exchanger, redundant pump sets, filtration, expansion and make-up systems, instrumentation, control panels and leak detection, all integrated onto a compact, pressure-tested, factory-assembled skid. Typical unit capacities range from approximately 300 kW to more than 2 MW in in-row, sidecar and in-rack configurations.

The market context supporting this segment is compelling:

- The lEAs analysis of energy and artificial intelligence estimates that global data centre electricity consumption was approximately 415 TWh in 2024 and could more than double to approximately 945 TWh by 2030 — broadly equivalent to the current total electricity consumption of Japan.

- Aggregate announced capital expenditure by the largest global hyperscale operators for calendar year 2026 is guided at levels materially above calendar 2025, with a substantial share directed towards Al-optimised, liquid-cooling-ready facilities.

- Independent industry estimates place the global data centre liquid cooling market at roughly US$ 5-8 billion in 2025, growing at a compound annual rate in the region of 25-30% to reach US$ 25-30 billion by the early 2030s. Coolant Distribution Units represent one of the largest and most standardised sub-segments of this opportunity.

- In India, installed data centre IT capacity of approximately 1.3-1.5 GW is projected to expand towards 4.5-5 GW by 2030, supported by announced investment commitments exceeding US$ 30 billion from global hyperscalers and domestic operators alike, and reinforced by data localisation requirements and the IndiaAl Mission.

Importantly for a domestic manufacturer, the CDU supply chain today is heavily import-dependent. As Indian data centre operators move to liquid-cooled deployments, a locally engineered, locally serviced and code-compliant CDU offering addresses a genuine gap in lead times, landed cost and after-sales response. Our development programme is being aligned to prevailing industry reference architectures and to the Open Compute Project and ASHRAE technical guidance governing liquid-cooled environments.

UHTL is well-positioned to capitalise on both of these movements, bolstered by our proven engineering capabilities, quality commitment and agile, customer-centric approach.

Opportunities and Threats:

Opportunities:

The twin engines of global decarbonisation and rising conventional energy demand in emerging economies continue to create fertile ground for our core business. The petrochemical, fertilizer, gas processing and hydrogen sectors continue to demonstrate robust Capex investment. Indias push for self-reliance in chemicals and energy, coupled with policy-led initiatives such as the National Green Hydrogen Mission, reinforces long-term demand for engineered thermal equipment.

We see particular strength in the specialty chemical segment, where demand for exotic alloy-based equipment is growing, leading to improved margins. Our capacity expansion at Talegaon enhances our ability to meet larger and more complex project needs, and our design and sales office in Pune keeps us close to key clients and consultants.

Layered on top of this is the data centre opportunity, which we regard as the single most significant addition to our addressable market in the Companys history:

- Genuine capability adjacency: A CDU is a thermal and fluid-handling skid. Heat exchanger selection and thermal sizing, pump and piping design, welding and cleanliness discipline, hydrostatic and performance testing, instrumentation and documentation are all core UHTL competencies. We are extending an existing capability rather than acquiring an unrelated one.

- Shorter cycle, repeat-order business: Unlike bespoke process equipment with long engineering and delivery cycles, CDUs are configured products ordered in volume and repeat batches. This improves capacity utilisation, smooths revenue recognition and reduces dependence on lumpy project awards.

- Import substitution and proximity: The domestic CDU requirement is presently met almost entirely through imports. Local manufacture offers customers materially shorter lead times, lower landed cost and responsive service — a decisive advantage in a market where deployment schedules are aggressive.

- Aftermarket and service annuity: Liquid-cooled infrastructure requires periodic filtration replacement, coolant chemistry management, pump servicing and preventive maintenance, creating a recurring revenue stream alongside equipment sales.

- Diversification of cyclicality: Digital infrastructure capex is driven by compute demand rather than by hydrocarbon prices, providing a natural hedge against the cyclicality of our traditional end markets.

UHTL is aligned to ride both waves, with our solutions being a critical enabler in hydrogen

production, gas processing and process optimisation, and now in the thermal management of high-density computing.

Threats:

- Geopolitical and trade environment: Global trade disruptions, tariff actions and supply chain imbalances remain a key concern for companies with significant import and export exposure. Tariff measures affecting Indian-origin goods in certain export markets during the year, together with duties on steel and aluminium derivative products, have influenced the competitiveness of exports to those geographies. The Company continues to monitor developments closely and to diversify its geographic mix accordingly.

- Raw material price volatility: Prices of stainless steel, nickel-based alloys and copper have remained volatile. Copper is particularly relevant to the data centre cooling business, where it is used extensively in heat transfer surfaces and distribution piping. Adverse movement between order booking and procurement can compress margins on fixed-price contracts.

- Competitive intensity and qualification cycles in the CDU market: The global liquid cooling market is served by established multinational suppliers with entrenched customer relationships, proprietary controls software and prior qualification with silicon and server OEMs. Customer qualification cycles are long and demanding, covering thermal performance, redundancy, controls integration, leak detection, certification and factory witness testing. Entry requires sustained investment and patience.

- Technology evolution risk: Liquid cooling architectures continue to evolve, including single-phase and two-phase direct-to-chip approaches and immersion cooling. A shift in the prevailing architecture could affect product relevance if not tracked and responded to.

- Availability of skilled manpower: As a custom-engineered equipment manufacturer, we are highly dependent on skilled manpower. Attracting and retaining such talent, particularly on the shop floor, continues to be a challenge. To address this, we are focusing on automation, digitization and productivity enhancement across operations.

- Working capital intensity: Growth in order book, entry into a new product line and the associated inventory and development spend increase working capital requirements and demand disciplined cash flow management.

Segment-wise or Product-wise Performance:

Shell & Tube Heat Exchangers remain the cornerstone of our business, contributing approximately 60% of annual revenue. With the expansion of our Talegaon facility, strategically located near a major National Highway, we are better equipped to manufacture large-scale equipment including Vessels and Columns, thereby diversifying our product mix.

We anticipate the Heat Exchanger product line will continue to contribute between 60%-65% of our revenues in the coming year. Our new design and sales office in Pune brings us closer to key clients and reinforces our responsiveness and technical support capabilities.

Pressure Vessels, Columns and Skid packages continue to grow as a proportion of revenue, supported by the additional bay capacity and handling capability at Talegaon, which allows us to bid for heavier and physically larger equipment than was previously feasible.

Coolant Distribution Units for data centre applications constitute a new product line initiated during FY 2025-26. Activity during the year comprised thermal and hydraulic design development, vendor development for pumps, plate heat exchangers, instrumentation and controls, prototype build and in-house performance testing, and early engagement with data centre operators, colocation providers and consulting engineers. The contribution of this segment to FY 2025-26 revenue was not material; it is positioned as an investment for the medium term.

Our track record of on-time delivery — a critical parameter in capital goods procurement — continues to distinguish us globally as a Reliable and Trusted Partner.

Outlook:

Looking ahead, we remain optimistic about sustained Capex activity across sectors such as petrochemicals, fertilizers, gas processing, hydrogen and specialty chemicals. The push for energy security and climate goals is driving new Greenfield and Brownfield project announcements, particularly in developing economies. Indias ambition to expand its refining capacity by 2030, increase gas usage in the energy mix and become a global hydrogen and petrochemicals hub will continue to present new opportunities. Initiatives around coal and lignite gasification and synthetic fuels provide an additional layer of opportunity for thermal solution providers.

In parallel, we expect the data centre thermal management opportunity to develop into a meaningful contributor over the medium term. The transition from air to liquid cooling in Al-capable facilities is, in our assessment, structural rather than cyclical, and the domestic market for locally manufactured Coolant Distribution Units is at an early and formative stage. Our objectives for FY 2026-27 in this vertical are to complete product qualification and certification, secure reference installations with credible operators, and establish the supply chain and service capability required to scale.

With a healthy pipeline, expanded capacity and a broadened product portfolio, UHTL is well-prepared to deliver on the growing and complex demands of the global energy, chemical and digital infrastructure sectors.

Risks and Concerns:

The Company has implemented a structured and proactive Risk Management Framework, enabling the identification, assessment, monitoring and mitigation of key business risks. Our framework is embedded across functions and ensures alignment with operational and strategic objectives.

A dedicated Risk Management Committee of the Board and a robust Internal Audit Department continuously evaluate potential vulnerabilities ranging from operational inefficiencies and compliance risks to market and supply chain risks, in accordance with the Risk Management Policy prepared as per the provisions of the Act and the Listing Regulations. Regular reviews of internal control mechanisms ensure they remain effective and adaptable. Where necessary, corrective actions are promptly initiated to uphold compliance, transparency and business continuity.

During the year under review, the Committee gave particular attention to the following areas:

- Commodity price exposure on fixed-price contracts, addressed through procurement timing, price validity discipline at the quotation stage and, where commercially feasible, escalation clauses.

- Export market and tariff exposure, addressed through diversification of the geographic mix of the order book.

- New product line risk associated with the data centre vertical, including development cost, qualification timelines and warranty exposure, which is being managed through staged investment gates and conservative early-stage commitments.

- Customer and sector concentration within the order book.

- Foreign exchange exposure on export receivables and imported raw material and bought-out components.

- Cyber security and information systems resilience, given increasing digitisation of design and manufacturing operations.

Internal Control Systems and their Adequacy:

UHTLs Internal Control System is designed to provide reasonable assurance regarding the integrity of financial reporting, operational efficiency, regulatory compliance and safeguarding of assets. The system is regularly audited and refined to adapt to changing business dynamics.

Our Internal Audit function evaluates adherence to policies and recommends process improvements. Reports are presented to the Audit Committee, and action plans are implemented across functional areas to strengthen our governance framework. During the year, the scope of internal audit was extended to cover processes associated with the new product development activity, including capitalisation of development expenditure, vendor onboarding and inventory controls for the data centre product line.

Discussion on Financial Performance with Respect to Operational Performance:

This discussion covers the financial results and other developments during the Financial Year 2025-26 in respect of the Company. Published results are as prepared under Indian Accounting Standards (IND AS). Highlights given below are for comparison purposes.

Financial Highlights for Operating Performance of FY 2025-26: (? in Lakhs)

Particulars	FY 2025-26	FY 2024-25
Revenue from Operations	7,287.91	6,681.45
EBITDA	1,145.60	1,245.59
PAT	500.62	530.29

Revenue from Operations grew by ?606.46 Lakhs during FY 2025-26 to reach ?7,287.91 Lakhs, representing growth of approximately 9.1% over the previous year. The growth was achieved on the back of improved capacity utilisation at the expanded Talegaon facility and a healthy opening order book.

EBITDA for the year stood at ?1,145.60 Lakhs as against ?1,245.59 Lakhs in the previous year, and PAT stood at ?500.62 Lakhs as against ?530.29 Lakhs. The EBITDA margin moderated from 18.64% to 15.72% and the net profit margin from 7.94% to 6.87%.

An order book of Rs. 31.10 Crores as of 31st March 2026 (against ?39.00 Crores as of 31st March 2025) ensures visibility for the coming fiscal year, underlining our resilience and market confidence.

Material Developments in Human Resources / Industrial Relations Front, Including Number of People Employed:

At United Heat Transfer Limited, we believe that people are our greatest asset. As of 31st March 2026, the Company employed 177 permanent employees across various functions (130 as of 31st March 2025).

Our HR initiatives focus on acquiring top talent, fostering continuous learning and nurturing leadership. We have embraced digital transformation through e-learning platforms offering domain-specific and behavioral training modules.

During the year, we augmented our engineering bench strength in thermal design, controls and instrumentation to support the data centre product development programme, and invested in cross-functional training to build capability in electrical panel integration, controls programming and cleanliness-critical assembly — disciplines required for the liquid cooling product line.

We actively promote internal mobility, enabling employees to diversify their skill sets and grow within the organization. Our structured performance management system integrates career progression, compensation and recognition to drive motivation and results. A culture of open dialogue, inclusion and transparency ensures that employees feel empowered and aligned with organizational goals. Industrial relations remained cordial throughout the year.

Details of Significant Changes

(i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios, Along with Detailed Explanations thereof, including

Parameters	Numerator	Denominator	2025-26	2024-25	Explanation for Change in Ratio
Debtors Turnover Ratio (times)	Revenue from Operations	Average Debtors	4.12	4.21	No significant change
Inventory Turnover Ratio (times)	Cost of Goods Sold	Average Inventory	1.47	1.75	No significant change
Interest Coverage Ratio (times)	EBIT	Finance Costs	3.60	3.11	No significant change
Current Ratio (times)	Total Current Assets	Total Current Liabilities	2.00	2.36	No significant change
Debt Equity Ratio (times)	Total Debt	Equity	0.30	0.30	No significant change
Operating Profit Margin (%)	EBIT	Revenue from Operations	12.89	15.70	No significant change
Net Profit Margin (%)	Net Profit after Tax	Revenue from Operations	6.87	7.94	No significant change
Return on Net Worth (%)	Net Profit after Tax	Net Worth	7.88	9.06	No significant change

Note: None of the key financial ratios recorded a movement of 25% or more compared to the immediately preceding financial year. Return on Net Worth is computed on the enhanced net worth base following the Companys public issue.

Cautionary Statement:

This Management Discussion and Analysis contains forward-looking statements, which are based on certain assumptions and expectations of future events. Actual results may differ materially from those expressed or implied due to various risks and uncertainties, including but not limited to changes in economic conditions, commodity prices, government policy and regulation, tariff and trade measures, technology developments in end-user industries, and the pace of customer capital expenditure.

Statements regarding the data centre thermal management opportunity, including estimates of market size, growth rates and the Companys prospective participation in that market, are based on published third-party industry sources and internal assessment. They are inherently uncertain and should not be read as a forecast of the Companys revenues or results.

The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements based on subsequent devel opments, information or events.