Veljan Denison Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The global hydraulic market was estimated to be in the region of USD 58 billion in 2026 and is anticipated to grow at a CAGR of 4.5% over the next 8 years. Of this, the largest market remains the USA, followed by China. The major factors for the growth of the industry are the demand for material handling equipment, cutting-edge agricultural equipment and growing adoption of hydraulic equipment by various industries. Your company manufactures niche hydraulic pumps, valves and motors which are used in both industrial and mobile systems. It is a leader in a niche silent, heavy duty, high pressure vane pump and motor technology and has gradually been increasing its market presence in other varieties of hydraulic pump and motor technologies.

Geographically, Asia-Pacific remains the strongest demand centre for hydraulic components, supported by high industrial output, infrastructure growth, and capital investments in manufacturing. North America and Europe continue to shift toward smarter, energy-efficient hydraulic solutions, creating opportunities for product lines that offer performance with reduced energy consumption and maintenance. Latin America and Africa present growing, albeit fragmented, opportunities in the agriculture and construction sectors.

OUTLOOK:

Market Growth: The hydraulic sector is experiencing steady growth. This is largely due to increased industrial automation, rising infrastructure projects, and expanding manufacturing sectors worldwide. Further, new product development efforts are gradually allowing your company access to customers in new segments within the hydraulics space. The growth of the Indian infrastructure industry and increased government allocations to the infrastructure sector are positive signs for the demand for the company s products in India. Your company has a strong balance sheet that is capable of flexibly investing in both IP and machinery to tap into this growth. In the past year, the company has developed a number of new products, both within its specialization of twin-lip vane technology where it holds a substantial market share and outside of this within alternative technologies where the company has negligible market presence so as to increase the size of its addressable markets and lay a platform for growth over the coming years. Technological Advancements: Innovations in hydraulic system technologies are enhancing system efficiency and performance. Developments include smart sensors, advanced control systems, and more durable materials, which are making systems more reliable and cost-effective. Your company has been ramping up its technology development efforts in recent years. A number of design improvements to push the operating envelope of existing products are being implemented both through internal R&D efforts and through external partnerships.

Energy Efficiency: There is a strong push towards improving energy efficiency within these systems. Companies are investing in technologies that reduce energy consumption and lower operating costs, such as variable frequency drives and energy-efficient pumps. In both these areas, your company has dedicated R&D resources and is making steady progress.

Sustainability: Environmental regulations and sustainability goals are pushing the industry towards greener technologies. Companies are focusing on reducing emissions, improving recyclability of components, and developing eco-friendly fluids. Your company monitors these trends regularly, ensures that its products are adaptable to the latest fluids, and is not expected to be impacted by these changes in the medium term.

Hybrid Systems: The development of hybrid systems that combine hydraulic, electric technologies could lead to more versatile and

efficient solutions. These systems can offer the benefits of both hydraulic power and the precision of electric drives.

Customization and Flexibility: There will be an increasing demand for customized and flexible solutions to meet specific industrial requirements. Modular and adaptable systems will likely become more common to accommodate a wide range of applications. Your company, with its highly flexible product portfolio incorporating a wide variety of modular customizations is a beneficiary of these trends. Its manufacturing systems, which are designed to handle high mix manufacturing efficiently, give it cost advantages over competitors. The company also maintains a large inventory of intermediate parts to allow for fast deliveries even with its high mix.

OPPORTUNITIES:

Veljan Denison Ltd, with its strong technology base and extensive manufacturing and operational expertise, is located ideally to be a part of the India growth story. It remains a strong brand recognized for high quality products, which allows new products to be developed and accepted by customers. Consistent investment in products and processes, coupled with well priced solutions give it opportunities to actively grow in its enduring customer relationships. Further, the company s trusted brand name, established quality, and strong distribution network will allow for smooth introduction of upgraded products and technologies into the market.

RISKS AND CONCERNS:

Safety Hazards: The hydraulic industry often deals with high pressures, fast-moving components, and heavy machinery. Accidents involving hydraulic systems can result in severe injuries or fatalities if not properly managed. Hydraulic fluid leaks, explosions, and unexpected movements of hydraulic components can all pose significant safety risks.

Fluid Leakage and Environmental Impact: Hydraulic systems use fluids to transmit power. Leaks in hydraulic systems can lead to fluid contamination and spillage, which can have negative environmental consequences. Hydraulic fluids can be harmful to the environment and water sources if not handled and disposed of properly

Maintenance and Inspection: Hydraulic systems require regular maintenance and inspection to ensure they are functioning properly and safely. Neglecting maintenance can lead to equipment failures, unexpected downtime, and safety hazards.

Component Wear and Tear: Hydraulic components like pumps, valves, and hoses undergo wear and tear over time due to the high pressures and forces involved. This can lead to inefficiencies, reduced performance, and increased risk of system failure.

Energy Efficiency: Hydraulic systems have historically been criticized for their energy inefficiency, as hydraulic fluid leaks, internal friction, and pressure losses can reduce overall system efficiency. As environmental concerns and energy costs rise, there is a growing demand for more energy-efficient hydraulic solutions.

Geopolitical Impacts: The prevailing global uncertainty and continuous reorganization of supply chains both in India and in other countries has the potential to impact the company s revenues.

Technology Risks: In today s fast-paced world, technologies are ever evolving. There is always the risk of changing preferences in pumping technologies, novel technologies arriving to displace existing ones, and increasing competition for existing markets especially from copycat products.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has adequate Internal Control Procedures commensurate with the size of the Company.

FINANCIAL PERFORMANCE REVIEW:

The analysis of performance of the Company is given below:

Sales Turnover:

The Comparative position of sales turnover achieved by the Company is as under:

(Rs in Lakhs)

Key Performance Indicators

An analysis of the key indicators as percentage to revenue is given below:

HUMAN RESOURCES / INDUSTRIAL RELATIONS:

A cordial environment prevailed in the manufacturing unit and offices of the Company during the year. The Company has been continuously training its employees in the newer technologies. Industrial relations continued to be cordial. The number employees

as on March 31, 2026 stood at 262.

CAUTIONARY STATEMENT:

Cautionary Statement in this " Management Discussion & Analysis " may be considered being " forward looking statements " within the meaning of applicable securities law so regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.

DISCLOSURE WITH RESPECT TO ACCOUNTING TREATMENT:

The Financial Statements does not contain any treatment, which differs from any standard prescribed in any Accounting Standard.