Aeroflex Industries Ltd Management Discussions

Global Economic Overview

In CY 2024, the global economy experienced moderate growth of 3.3%, indicating a period of relative stability. However, underlying momentum remained subdued. As CY 2025 unfolds, the global environment is undergoing a marked transformation, driven by a reorientation of policy priorities as countries confront escalating geopolitical tensions and increasing economic pressures.

Outlook

In spite of myriad challenges, the global economy has displayed a significant ability to adapt. With inflationary pressures gradually dissipating and monetary policies becoming more accommodative, there is a tempered sense of optimism for the future. The global economy is anticipated to sustain a steady growth rate of 3.3% in both CY 2025 and CY 2026, supported by reduced inflation, improved financial conditions, and persistent demand. One of the primary drivers of this positive outlook is the significant reduction in inflation over the past two years, which has led to a substantial boost in real incomes, as price increases have decelerated more rapidly than wage growth.

(Source: International Monetary Fund January 2025; Global Economic Prospects January 2025, OECD Economic Outlook)

Indian Economic Overview

Indias economic trajectory remains promising, with a projected growth rate of 6.5% for FY 2024-25, a clear indication of its enduring strength amid global economic uncertainties. This projection is supported by robust domestic fundamentals and strategic policy interventions that continue to propel the nations growth. Ongoing structural reforms, technological innovation, and significant infrastructure development fuel the nations economic momentum. Targeted governmental measures further ensure the sustainability of this growth, while steady consumption and improved labour market conditions strengthen the outlook. The economic resilience is primarily driven by strong performance across the agricultural and service sectors, underpinned by stable private consumption and macroeconomic equilibrium.

Outlook

As India prepares for FY 2025-26, the nations economic prospects remain cautiously measured in the face of ongoing geopolitical uncertainties, trade disruptions, and the potential for commodity price fluctuations. On the domestic front, maintaining the momentum of private sector investment, strengthening consumer confidence, and accelerating corporate wage growth will be essential to sustaining GDP growth. Rural demand is expected to rise as agriculture recovers, food inflation stabilises, and macroeconomic conditions remain favourable. To enhance medium-term economic resilience, India must focus on boosting its global competitiveness through structural reforms and deregulation at the grassroots level. Creating a more business-friendly environment will be critical to mitigating external vulnerabilities and ensuring long-term economic viability.

(Source: Economic Survey 2024-25)

Industry Overview

Global Metallic Flexible Hose Market

The global metallic flexible hoses market is undergoing structural shifts due to evolving industrial demand and supply chain realignments. The market is projected to grow from USD 3,363.7 mn in CY 2024 to USD 6,959.0 mn by CY 2035, registering a CAGR of 6.8%.

The global metallic flexible hoses market is likely to witness robust growth over the next decade as expanding industrial operations, rising demand for eco-friendly solutions, advancements in hose technology and growing oil & gas exploration activities in emerging economies continue to fuel market growth.

The Corrugated Hoses segment is expected to maintain its market leadership from FY 2024-25 to FY 2031-32, driven by their versatility in transporting chemicals, gases, steam, and liquids across various industries. Their structure provides resistance to movement, vibration, and thermal expansion, making them ideal for demanding environments. Customisation through diverse materials further enhances their adaptability. Growth in the HVAC and automotive sectors, where these hoses are essential for system flexibility and advanced fluid transfer, is also fuelling market expansion.

(Source: https://www.giiresearch. com/report/anvi1408884-stainless-steel-flexible-hose-market-by-type-by.html)

The oil & gas sector remains the largest end-user segment, while East Asia leads in regional growth, fuelled by Chinas rapid industrial and manufacturing expansion across automotive, construction, and energy sectors. North America and Europe are also witnessing growth, focussing on technological advancements and the increased use of high-performance materials in industries such as aerospace, oil & gas, and chemical processing.

(Source: Report by Future Market Insights)

Industry Trends

IoT & Smart Sensors: Real-time monitoring for pressure, temperature, and flow improves performance and maintenance.

Customisation: Tailored hoses for aerospace, pharma, and F&B sectors to meet specific industry . needs

Sustainability: Use of recyclable materials to reduce environmental impact.

High-Performance Hoses: Rising demand for hoses that handle extreme pressure and temperature.

Material Innovation: Advancements in hose design and materials for durability and efficiency.

Indian Metallic Flexible Hose Market

The Indian metallic flexible hose market expanded from USD 109.0 mn in CY2020 to USD 136.9 mn in CY2024, registering a CAGR of 5.9%. Looking ahead, the market is projected to expand at a steady CAGR of 7.1%, reaching USD 288.0 mn by CY2035. This anticipated growth is primarily attributed to the hoses versatility and increasing application across key industries such as automotive, oil & gas, and chemical processing, where flexibility and durability are essential.

Historically, the demand for stainless steel corrugated flexible flow solutions has been primarily driven by the industrial sector, including manufacturing and

HVAC applications. As industries transition from rubber, PTFE, and polymer hoses to more durable stainless-steel alternatives, demand for these solutions has steadily increased. This shift has established a stable user base within the industrial sector.

Global Metal Bellows Market

The global metal bellows market has witnessed consistent growth, rising from USD 2,234.3 mn in CY 2020 to USD 2,830.5 mn in CY 2024. This momentum is projected to continue, with the market expected to nearly double to USD 5,607.7 mn by CY 2035, reflecting a CAGR of 6.4%.

The markets growth is largely attributed to the increasing demand for metal bellows across sectors such as aerospace, automotive, and energy, where they play a crucial role in thermal management, exhaust systems, and precision industrial applications.

Indian Metal Bellows Market

Indias metal bellows market has shown steady growth from CY 2020 to CY 2024, driven by rapid industrialisation and the adoption of advanced manufacturing technologies. The aerospace, automotive, and energy sectors remain major contributors to this growth, with increasing demand for durable and precise components. Convoluted or formed bellows made from titanium and its alloys are the most widely used, owing to their durability and adaptability across various environments. Aerospace and defence lead in metal bellows consumption, followed by the construction cooling solutions for data centres. Growth is concentrated in industrial hubs, further strengthened by government initiatives promoting domestic manufacturing.

Roll-formed bellows, particularly those made from copper alloys, are gaining popularity due to their application in high-pressure environments. As industrial activity grows, especially in renewable energy and automotive sectors, the demand for metal bellows in India is expected to rise significantly.

(Source: Report by Future Market Insights)

Key Growth Drivers

Industrial Growth in Emerging Economies

Rapid industrialisation in Asia-Pacific, particularly in China and India, is increasing demand for stainless steel and hydraulic hoses across multiple sectors.

Expansion of Oil & Gas Industry

Growing exploration, extraction, and refining activities are driving demand for high-pressure, durable hoses.

Technological Advancements

Innovations in hose materials, corrosion resistance, and pressure tolerance are expanding market applications.

Rising Demand for Energy

Increasing global energy consumption is driving the need for fluid transfer solutions in power generation and renewable energy.

Automotive Industry Growth

The rise of electric vehicles (EVs) has boosted demand for hydraulic hoses in braking systems, cooling, and fluid handling.

Regulatory Compliance

Stringent industry regulations in pharmaceuticals, food & beverage, and chemicals necessitate the use of safe, durable hoses.

Aerospace & Defense Expansion

Increasing investments in these sectors require high-performance hoses for extreme conditions.

Environmental Awareness

Sustainability efforts are promoting the use of long-lasting stainless steel hoses in critical applications.

Indias Manufacturing Transformation: Policies and Market Trends

Government Initiatives^1,2

The Union Budget 2025–26 reinforces Indias manufacturing push with an allocation of INR 1,200 Cr. to the Production Linked Incentive (PLI) Scheme and an additional INR 6,200 Cr. in expanded funding. Aligned with the goals of Atmanirbhar Bharat and Make in India, these initiatives aim to boost domestic manufacturing, reduce import dependency, and drive economic resilience. Complementing this, the National Manufacturing Policy targets increasing manufacturings share of GDP from 16% to 25% by CY 2024–25. The newly introduced National Manufacturing Mission will further support this agenda, with a focus on empowering MSMEs and key industries.

Industry 4.0 and Market Growth³

The global Industry 4.0 market, valued at USD 217.18 Bn in CY 2024, is projected to reach USD 917.17 Bn by CY 2032, expanding at a CAGR of around 20%. In India, Industry 4.0 adoption is accelerating, with the industrial automation market expected to grow from USD 15 Bn in CY 2024 to USD 29 Bn by CY 2029, at a CAGR of 14.26%, driven by increased integration of automation across sectors.

Emerging Demand for Lithium-Ion Batteries in India^4,5

The demand for lithium-ion batteries in India is rapidly growing, driven by government support for electric mobility through the FAME and PLI schemes, and incentives in the Union Budget 2025–26. This push aims to boost EV adoption and domestic battery manufacturing, reducing import dependence. Simultaneously, the expansion of solar power and Battery Energy Storage Systems (BESS) is fuelling demand for lithium-ion batteries in stationary applications. Flexible Flow Solutions with stainless steel corrugation play a vital role in indirectly cooling these batteries, enhancing their performance, efficiency, and lifespan across both mobile and grid-based systems.

Company Overview

Founded in 1998, Aeroflex

Industries Limited (referred to as ‘Aeroflex Industries or ‘the Company) is a leading manufacturer of Metallic Flexible Flow Solutions, catering to the efficient transfer of solids, liquids, and gases. A part of Aeroflex

Enterprises Limited (formerly Sat Industries Limited), the Company operates within Indias organised sector, offering high-performance alternatives to traditional rubber hoses across a wide range of industries. Aeroflex Industries is rapidly advancing in automation and digitisation, with robotic assembly lines and CNC machinery streamlining operations and production. It is also developing specialised products like fire hose assemblies and vacuum hose systems for emerging industries. With a presence in 90+ countries across Asia, Europe, the Americas, and Africa,

Aeroflex Industries is recognised for its superior quality often outperforming Southeast Asian counterparts leading to growing export demand. Its diverse clientele includes global and Indian companies from sectors such as EVs, solar, firefighting, satellites, and semiconductors. The Company operates state-of-the-art manufacturing facilities in Taloja, Navi Mumbai; Lodha Industrial Estate, Palava, Thane; and MIDC, Chakan,

Pune. Aeroflex Industries holds top certifications, including

ISO 9001:2015, ISO 45001:2018, ISO 14001:2015, and TUV NORD Germany accreditation.

Aeroflex Industries innovation is driven by a robust in-house NABL-accredited R&D lab with 16 experts currently developing 58 products using materials like SS, Bronze, Inconel, Monel, and PTFE. The recent integration of Hyd-Air Engineerings expertise has further strengthened its capabilities in sectors like railways and shipbuilding. Backed by an experienced Board of Directors, Aeroflex Industries is well-positioned for sustained growth and global leadership in the metallic flexible hose segment.

Business Performance Summary FY 2024-25

Operational Performance

Aeroflex Industries production capacity increased to 16.5 Mn mtrs, marking a 22.22% growth, with a capacity utilisation of 75.14%. This growth was driven by a strategic shift towards value-added, high-margin products, increased R&D investments, and the attainment of key industry certifications.

The Company expanded into new-age sectors, including

Firefighting, Solar, Robotics, Semiconductors, Aerospace & Satellites, Electric Mobility, and Railways. The acquisition of Hyd-Air Engineering enhanced its fluid control assembly capabilities, enabling integration of higher-margin solutions and strengthening its position in the assembly segment.

Aeroflex Industries is pursuing strategic inorganic growth opportunities across both domestic and global markets during FY 2024–25, with a focussed thrust on the Americas and Europe. The Company augmented its leadership team by onboarding seasoned professionals and expanded its production capacity to support growing demand. A strong emphasis on sustainability further enhanced operational efficiency and reinforced its long-term performance trajectory.

Financial Performance

In FY 2024-25, Aeroflex Industries underwent a significant transformation, achieving strong financial performance despite global economic challenges. Revenue from operations rose to INR 376.23 Cr., up

18.35% from the previous year, while EBITDA reached INR 81.58 Cr., reflecting a 24.26% increase with margins at 21.54%. Profit after tax stood at INR 52.51 Cr., marking a robust year-on-year growth of 25.82%. Exports remained a key growth driver, contributing 75% to total revenue, supported by sustained demand from North and South America and Europe.

Financial Ratios (Standalone)

Particulars of Ratio	Details of Numerator/ Denominator	Ratio as of 31st March 2025	Ratio as of 31st March 2024	% Variance	Comments
Current Ratio	Current Assets/ Current Liabilities	2.89	3.46	(16.43)	N.A
Debt-Equity Ratio	Total Debt/Total Equity	0.002	0.0004	313.04	Debt-equity ratio increased due to fresh vehicle loan availed during the year
Debt Service Coverage Ratio	EBITDA/Interest + Current Debt	283.24	1.08	26,236.65	Debt service coverage ratio increased due to reduction in interest cost as compared to the previous year
Return on Equity Ratio	PAT/Shareholders Equity*100	16.34%	20.49%	(20.26)	N.A
Inventory Turnover Ratio	Sales/Average Inventory	6.31	5.53	14.05	N.A
Trade Receivables	Net Credit Sales/	3.46	3.93	(12.06)	N.A
Turnover Ratio	Average Accounts Receivable
Trade Payables	Net Credit Purchases/	4.07	4.47	(8.97)	N.A
Turnover Ratio	Average Accounts Payable
Net Capital	Income from	2.12	2.82	(24.73)	N.A
Turnover Ratio	Operations/Average Working Capital
Net Profit Ratio	(PAT/Total Income) *100	13.83%	12.98%	6.55	N.A
Return on Capital Employed	{EBIT/Average of (Total Equity + Long- Term Debt)} *100	23.60%	31.33%	(24.67)	N.A

Outlook

Aeroflex Industries is poised for sustained growth, driven bycapacity expansion, innovation in metal bellows, and advancements in assemblies. The acquisition of Hyd-Air Engineering strengthens its high-margin flow control product line and assembly segment. This move is expected to enhance

EBITDA margins and enable entry into high-growth sectors such as EVs, hydrogen, aerospace, and semiconductors. With continued investments in new products, market expansion, and team development, Aeroflex remains focussed on diversifying across industries like oil & gas, solar, robotics, and firefighting solutions, reinforcing its leadership in flexible flow solutions.

Human Resources and Industrial Relations

Under strong leadership, Aeroflex Industries fosters a people-centric culture that balances operational excellence with employee well-being. The Company invests in talent development through internal and external learning programmes, ensuring a skilled and future-ready workforce. Its dedicated Environment, Health, and Safety division runs initiatives to maintain a safe workplace, while the Taloja facility houses an Occupational Healthcare and Wellness Centre with round-the-clock medical support, mental wellness sessions, and a Child Care Centre. These efforts have earned Aeroflex recognition as a Great Place to Work.

As of 31^st March 2025, the Company employed over 550 individuals.

Internal Control Systems and Their Adequacy

A comprehensive and resilient system of internal controls has been established, aimed at protecting all organisational assets from unauthorised use or disposal, while ensuring that every transaction is properly authorised, documented, and acutely reported. To further enhance operational efficiency, the Company has implemented mechanisms designed to optimise resource utilisation, monitor operational activities, and ensure strict adherence to applicable legal standards. The integration of SAP and ERP systems serves to strengthen these controls, providing real-time data insights and facilitating enhanced operational workflows. These internal control systems have been rigorously audited, confirming their adequacy and efficacy.

Cautionary Statement

We wish to emphasise that this report contains ‘forward-looking statements regarding anticipated future events, financial outcomes and operational milestones of

Aeroflex Industries Limited. These statements inherently rely on assumptions and are subject to various risks and uncertainties.

There is a significant risk that these assumptions, predictions, and other ‘forward-looking statements may not accurately reflect future outcomes. We advise readers to exercise caution and refrain from placing undue reliance on ‘forward-looking statements, as several factors could lead to disparities between assumptions and actual future results and events.

Therefore, this document is subject to the disclaimer and is qualified in its entirety by the assumptions, qualifications, and risk factors outlined in Aeroflexs

Annual Report for FY 2024-25, as discussed in the Management Discussion & Analysis.