Zenith Steel Pipes & Industries Ltd Management Discussions

<dhhead-MANAGEMENT DISCUSSION AND ANALYSIS</dhhead-

Pursuant to the amended Regulation 34 read with the Schedule V of the SEBI (listing Obligations and Disclosure Requirements) Regulation, 2015 our directors wish to report as follows:

(a) Indian Economy:

The Indian economy demonstrated resilience during FY 2025-26 despite a complex global environment marked by geopolitical tensions, trade-related uncertainties and volatility in commodity prices. As per the provisional estimates available after the close of FY 2025-26, real GDP growth for the year was placed at around 7.7%, reflecting continued strength in domestic economic activity. Growth was supported by domestic consumption, services activity and continued public investment, while the external environment remained comparatively challenging.

The construction and infrastructure sectors continued to be important contributors to economic activity. During FY 2025-26, construction activity witnessed a relatively moderate pace in certain segments owing to slower awarding and execution of road projects and the impact of an early and extended monsoon. Nevertheless, the sector continued to benefit from government infrastructure spending and a healthy order-book position. The construction sector is expected to recover progressively during FY 2026-27, supported by improved execution and budgetary allocations. The manufacturing and industrial sectors continued to benefit from domestic demand, infrastructure investment and the Governments focus on strengthening domestic manufacturing capabilities. At the same time, businesses remained exposed to fluctuations in input costs, global trade flows and imported competition. These factors continue to require disciplined cost management and efficient working-capital management.

For the Company, the broader economic environment presents opportunities arising from infrastructure development, urbanization, transportation, oil and gas, construction and other steel-consuming sectors. The Company remains focused on improving operational efficiency and responding to market opportunities while maintaining prudent financial and working-capital management.

(b) Industry Structure & Developments:

Structural steel and steel pipes are important components of modern infrastructure and industrial development. Steel pipes find applications across construction, infrastructure, oil and gas, water transmission, engineering, automotive, mining and other industrial activities. Demand is closely linked with infrastructure spending, industrial production, replacement of ageing pipelines and development of urban and industrial projects.

During FY 2025-26, the domestic steel industry experienced healthy underlying demand, although operating conditions remained challenging due to fluctuations in steel prices, elevated raw-material costs, excess global supply and competitive pressure from imports. Industry estimates indicate that domestic steel demand growth remained around 7.5%-7.6% during FY 2025-26. Domestic steel prices were volatile during the year, with prices declining during parts of the year amid supply overhang before recovering towards the end of FY 2025-26.

The steel pipe industry continues to benefit from the long-term requirement for durable and reliable pipeline infrastructure. Demand from oil and gas, water infrastructure, construction and industrial applications remains an important growth driver. Government spending on roads, railways, ports, urban infrastructure and other capital-intensive projects is expected to support

steel consumption over the medium term.

However, the industry remains exposed to raw-material price volatility, imported steel, global oversupply, foreign exchange movements and changes in trade policy. The Company continues to monitor these developments and evaluate its production, sourcing and pricing strategies accordingly.

(c) Opportunities & Threats:

The Companys principal opportunities arise from the continued development of infrastructure, construction, oil and gas, transportation, water supply and industrial projects in India. Growing requirements for pipelines and structural steel, replacement of ageing infrastructure and public investment in infrastructure are expected to support long-term demand for steel products.

The Company also sees opportunities in improving capacity utilisation, strengthening customer relationships, optimizing product mix, improving operational efficiencies and exercising greater discipline over working capital. The expected improvement in construction and infrastructure activity during FY 2026-27 may provide a supportive environment for steel-consuming industries.

The principal threats include volatility in steel and other raw-material prices, competition from domestic and imported products, global steel oversupply, fluctuations in demand, higher logistics costs, foreign exchange movements, changes in government policies and trade measures, and geopolitical developments. Substitution by alternative materials in certain applications may also affect demand. The Company seeks to mitigate these risks through cost control, efficient sourcing, customer diversification and continuous monitoring of market conditions.

d) Segment-wise or Product-wise Performance:

The Company operates in a single reportable segment, namely Pipes. Accordingly, separate segment-wise performance analysis is not applicable for the standalone financial statements.

e) Outlook:

The outlook for FY 2026-27 remains cautiously optimistic. Indias economic growth is expected to remain resilient, supported by domestic demand, infrastructure spending and continued investment in productive capacity. The construction sector is expected to witness a gradual recovery, with industry estimates indicating revenue growth of approximately 6%-8% in FY 2026-27.

Steel demand is also expected to strengthen, with industry estimates indicating growth of approximately 9%-10% in FY 2026-27, supported by higher government capital expenditure in roads, railways and other infrastructure-intensive sectors. At the same time, elevated coking coal and iron ore costs and volatility in steel prices remain key monitorable factors.

Against this backdrop, the Company will continue to focus on improving capacity utilisation, enhancing operational efficiency, strengthening working-capital management, controlling costs and improving profitability. Management remains committed to pursuing sustainable business opportunities while maintaining appropriate risk management and financial discipline.

f) Risks & Concerns:

The Companys operations are exposed to various business, financial, operational and external risks. The major risks and the broad approach towards their mitigation are set out below:

• Raw Material and Steel Price Risk: Volatility in steel, scrap and other input prices can affect margins. The Company monitors market prices and seeks to optimise procurement and pricing decisions.

• Demand Risk: Demand for steel pipes is influenced by infrastructure, construction, oil and gas and industrial activity. Any slowdown in these sectors may affect sales and capacity utilisation.

• Import and Competition Risk: Increased imports and competitive pricing may put pressure on domestic realisations. The Company monitors domestic and international market developments and adapts its commercial strategy accordingly.

• Working Capital and Liquidity Risk: The Companys financial performance is sensitive to the availability and efficient deployment of working capital. Management continues to focus on receivable collection, inventory management and optimisation of cash flows.

• Geopolitical and Supply Chain Risk: Global conflicts, trade restrictions, shipping disruptions and changes in commodity flows may affect availability and cost of materials. Alternate sourcing and continuous monitoring of supply conditions form part of the Companys risk- mitigation approach.

• Regulatory Risk: Changes in taxation, environmental requirements, trade policies, tariffs and other government regulations may affect operations and costs. The Company monitors applicable regulatory developments and takes necessary compliance measures.

g) Internal Control Systems and their adequacy:

The Company has an appropriate internal control framework designed to safeguard its assets, prevent and detect fraud and errors, ensure accuracy and completeness of accounting records, and support compliance with applicable laws and regulations. Internal controls are periodically reviewed for their adequacy and effectiveness.

The Companys internal audit and control processes focus on business operations, financial reporting, statutory compliances, asset protection and risk management. Significant observations and recommendations arising from internal audit and control reviews are placed before the Audit Committee / Board, as applicable, for review and appropriate action.

h) Discussion on Financial Performance with respect to Operational Performance and state of Companys affairs:

The standalone financial performance of the Company for FY 2025-26 reflects a significant reduction in revenue from operations, accompanied by a substantial improvement in profitability. Revenue from operations stood at Rs. 4,997.31 Lakhs as against Rs. 11,909.25 Lakhs in FY 202425, representing a decline of approximately 58.04%. Total income decreased from Rs. 12,925.51 Lakhs in FY 2024-25 to Rs. 7,376.59 Lakhs in FY 2025-26.

Other income increased substantially to Rs. 2,379.28 Lakhs in FY 2025-26 from Rs. 1,016.26 Lakhs in the previous year. Profit before exceptional items and tax increased to Rs. 187.01 Lakhs from Rs. 47.93 Lakhs in FY 2024-25. After considering exceptional items of Rs. 131.07 Lakhs, profit before tax stood at Rs. 318.07 Lakhs.

Profit for the year increased to Rs. 311.09 Lakhs as compared with Rs. 22.51 Lakhs in FY 202425. Total comprehensive income for the year stood at Rs. 310.34 Lakhs compared with Rs. 17.88 Lakhs in the previous year. Basic and diluted EPS for the period from continuing and discontinued

operations improved to Rs. 0.2186 per share from Rs. 0.0158 per share in FY 2024-25.

The Companys financial performance during FY 2025-26 should be viewed in the context of lower operating revenue and the corresponding changes in the scale of business, together with higher other income and improved profitability. Management continues to focus on improving the operating performance of the Company, strengthening liquidity and working-capital management, controlling costs and improving the sustainable contribution from core operations.

Key Financial Ratio

Detailed Explanation of Ratios:

Current Ratio: The Current Ratio measures the Companys ability to meet its short-term obligations. It is calculated by dividing current assets by current liabilities.

Debt Equity Ratio: The Debt Equity Ratio indicates the extent to which the Companys operations are financed through debt in relation to shareholders equity. The negative ratio reflects the Companys negative net equity position.

Debt Coverage Ratio: The Debt Coverage Ratio measures the Companys ability to service its debt obligations from earnings available for debt service.

Return on Equity Ratio: Return on Equity measures the profitability generated in relation to shareholders equity and is calculated using profit or loss after tax against average shareholders equity.

Inventory Turnover Ratio: Inventory Turnover measures how efficiently inventory is utilised and replaced during the year. It is generally calculated with reference to cost of goods sold and average inventory.

Trade Receivables Turnover Ratio: Trade Receivables Turnover measures the efficiency with

which receivables are collected and converted into cash and is calculated with reference to revenue from operations and average trade receivables.

Trade Payable Turnover Ratio: Trade Payable Turnover indicates the rate at which amounts payable to suppliers and other trade creditors are settled in relation to the relevant operating expenditure.

Net Capital Turnover Ratio: Net Capital Turnover measures the efficiency of utilisation of working capital in generating revenue from operations.

Net Profit Ratio: Net Profit Ratio measures the percentage of profit generated from revenue from operations and is calculated by dividing net profit by revenue from operations.

Return on Capital Employed: Return on Capital Employed measures the profitability and efficiency with which the capital employed in the business is utilised.

i) Human Resources Development and Industrial Relations:

The Company recognises its employees as an important component of its business operations and remains focused on developing a capable and productive workforce. Appropriate processes are maintained for employee performance, productivity, training and grievance redressal.

The Company has mechanisms for addressing employee grievances and workplace concerns, including processes relating to prevention of sexual harassment at the workplace. The Company endeavours to maintain a fair, safe and professional working environment and to foster constructive industrial relations.

The Company had approximately 178 employees, including employees engaged on contract basis, as stated in the previous years Management Discussion and Analysis. The factory at Khopoli has remained under lock-out since December 2013 and industrial relations have generally remained cordial at other locations. The current status should be read together with the Companys statutory and financial disclosures.

j) Cautionary Statement:

The Management Discussion and Analysis contains statements describing the Companys objectives, expectations, projections and forward-looking business plans. Such statements are based on managements current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including economic conditions, demand and supply conditions, changes in steel and raw-material prices, competition, government policies and regulations, taxation, interest rates, geopolitical developments, availability of finance, changes in technology and other factors affecting the Companys operations.

The Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise, except as may be required under applicable laws and regulations.