Akar Auto Industries Ltd Management Discussions

ANNEXURE V

Industry Structure and Developments:

GDP: Indias economy recorded a real GDP growth of 6.5% in FY 2024–25, moderating from 7.2% in the previous fiscal year. Despite the slowdown, India remained one of the fastest-growing major economies globally. The year saw strong momentum in the final quarter, with GDP expanding by 7.4% in Q4, driven by a recovery in rural demand, resilient private consumption, and improved agricultural output supported by a favourable monsoon. Nominal GDP grew by 9.8%, reaching approximately H330.7 lakh crore, reflecting steady economic expansion in value terms. The performance was underpinned by robust growth in the construction, public administration, and financial services sectors, while agriculture and allied activities witnessed a rebound from previous year levels. India is set to overtake Japan as the worlds fourth largest economy in 2025, with a nominal GDP of $4.19 trillion. By 2028, India is projected to surpass Germany, becoming the third-largest economy globally.

Going forward, the Governments capital expenditure thrust—especially in infrastructure, transportation, and digital services—is expected to remain a key driver of economic expansion. This is supported by a streamlined tax regime, GST revenue buoyancy, and higher levels of formalization across industries. In the medium term, Indias growth outlook remains robust, with increasing private sector participation, favourable demographics, and a focus on Make in India and Atmanirbhar Bharat initiatives. Backed by a vibrant democracy, rising income levels, and evolving global partnerships, India is well-positioned to emerge among the worlds top three economic powers over the next decade.

Automobile Industry: The Indian automobile industry in FY 2024-25 was at pace of growth moderated compared to the previous fiscal. Passenger vehicle sales touched approximately 4.3 million units, registering a modest 2% increase over last year, largely driven by the continued strong demand for utility vehicles. The two-wheeler segment performed robustly with sales of 19.6 million units, a growth of 9.1% supported by rural demand and refreshed product launches. The three-wheeler category also achieved its highest ever volume at 7.4 lakh units, up 6.7% year-on-year. Electric vehicles maintained strong traction, with registrations growing by 16.9% to 1.97 million units, driven by increased adoption of passenger EVs and two-wheelers.

The commercial vehicle segment, however, remained under pressure during the year. Domestic sales declined by 1.2% to about 9.57 lakh units, while retail demand remained nearly flat as fleet operators postponed purchases due to constrained infrastructure spending and slower recovery in private sector investments. This weakness was visible particularly in the medium and heavy commercial vehicle categories, which are closely linked to government-led capital expenditure and broader economic activity. Despite this, exports from the segment provided some cushion, recording a healthy 23% growth during the year.

For Akar Auto Industries Limited, these trends had a direct impact. As a company engaged in the manufacture of automotive components, particularly catering to commercial vehicle OEMs, the slowdown in the CV industry translated into softer demand from certain customer segments. Nevertheless, the Company benefited from growth in the passenger vehicle and two-wheeler categories where demand for components remained stable to positive. Further, the increase in exports of commercial vehicles also provided indirect opportunities for Akar Auto through its supply linkages with OEMs serving international markets.

Looking ahead, management believes that while near-term demand in the commercial vehicle segment may remain uneven, medium to long-term fundamentals remain strong, supported by expectations of, renewed government focus on infrastructure, and revival in private sector capital expenditure. The Company continues to strengthen its product portfolio, expand customer reach, and focus on cost efficiencies to ensure sustained growth despite sectoral volatility. With its diversified presence across vehicle segments, Akar Auto Industries is well-positioned to leverage opportunities as the industry gradually regains momentum in FY 2025-26.

Opportunities and Threats:

Opportunities:

The Indian automobile industry stands at a transformational juncture, presenting wide-ranging opportunities across traditional internal combustion engine (ICE) segments as well as electric and sustainable mobility solutions. As of FY 2024–25, India continues to be the fifth-largest automobile market globally, with projections to become the third-largest by 2030, driven by demographic advantages, urbanization, increasing per capita income, and the governments continued emphasis on infrastructure and manufacturing.

One of the most significant opportunities lies in the electric vehicle (EV) space. With the government targeting 30% EV penetration by 2030, the EV ecosystem—spanning batteries, components, and charging infrastructure—is expected to attract substantial investment. The Indian EV market is expected to grow at a CAGR of over 40% in the near term, with its value projected to reach US$ 7.09 billion by 2025. Companies focusing on EV-compatible components and light-weight materials are expected to benefit greatly from this transition.

Another key opportunity lies in exports. With Indian manufacturing gaining global credibility due to its cost-effectiveness, engineering expertise, and quality standards, there is increasing scope to serve global OEMs from India. Component manufacturers with a diversified and agile product portfolio, such as Akar Auto Industries Ltd., are well-positioned to tap into export markets across Africa, the Middle East, Europe, and Latin America. The rise of connected vehicles, automation, digital mobility solutions, and shared mobility platforms are also reshaping the industry landscape, offering technology-driven companies an edge. Furthermore, demand for safety-enhanced, fuel-efficient, and digitally integrated vehicles is pushing suppliers to innovate and upgrade rapidly.

Threats:

Rising competition: Presence of a large number of players in the automobile industry results in intense competition and companies eating into others share, leaving little scope for new players.

Sluggish economy: Macroeconomic uncertainty, recession, unemployment, etc. are the economic factors which will daunt the automobile industry for an extended period.

Prices of raw material items such as steel, Nickel and petroleum products have generally risen in recent past and may significantly rise in the future. This may impact the production cost of the Company, which may adversely affect the sales and profits of the Company. Volatility in fuel prices: For the consumer segment, fluctuations in fuel prices remains the determining factor for growth. Also, government regulations pertaining to the use of alternative fuels like CNG and Shell gas is also affecting the inventories.

Segment-wise or product-wise performance:

The information in this regard is given in Note No. 34 of the Notes forming part of the financial statements.

Outlook:

The Indian automobile industry is poised for steady growth in FY 2024–25, supported by strong domestic demand, improving supply chains, and continued government push on infrastructure and clean mobility. Demand across passenger vehicles, commercial vehicles, and two-wheelers is expected to remain healthy, driven by rising incomes, urbanization, and consumer preference for technologically advanced and safer vehicles.

The electric vehicle (EV) segment will continue to gain momentum, supported by favourable policies, increased investments, and expanding charging infrastructure. Component manufacturers aligned with EV and advanced technology trends will see significant growth opportunities.

While global uncertainties, regulatory changes, and raw material cost fluctuations pose challenges, the overall outlook remains positive. The industry is expected to benefit from a strong economic environment, evolving mobility trends, and Indias growing role as a global manufacturing hub.

Risks and Concerns:

The automotive industry could be materially affected by the general economic conditions and developments in India and around the world and investors reaction to such conditions and developments.

During FY 2024-25, the Company continued to operate in a dynamic and competitive environment, wherein both domestic and global factors influenced demand and margins. One of the key concerns affecting the Companys business performance during the year was the imposition of higher tariffs and duties in certain geographies. These tariff-related challenges had an adverse impact on export competitiveness, cost structures, and overall profitability. With global supply chains undergoing realignment, fluctuations in trade policies, and protectionist measures in some international markets, the Company faced pricing pressure and lower realizations in export-linked businesses.

On the domestic front, the slowdown in commercial vehicle demand also contributed to volume pressures, given the Companys presence in this segment. Additionally, volatility in raw material prices, currency fluctuations, and financing costs remained other important risk factors that required active monitoring. The Company is working on strategies to mitigate the adverse impact. These include diversifying export markets, enhancing value-added product offerings, optimizing supply chain efficiencies, and engaging with customers to pass on part of the increased cost. With a diversified product mix across passenger, two-wheeler, and commercial vehicle segments, the Company aims to balance out risks arising from adverse policy measures and cyclical downturns in specific segments.

Internal Control Systems and their adequacy:

The Company has an adequate system of internal controls in place. It has documented policies and procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations and protecting assets from unauthorised use or losses, compliances with regulations. The Company has continued its efforts to align all its processes and controls with global best practices.

Financial Performance with respect to Operational Performance:

The Company mainly manufactures automobile parts for heavy commercial vehicles as well as passenger vehicles. The Company recorded net revenue from operations of H37,716.18 Lakhs in FY 2024-25, 0.896% higher than H37,381.84 Lakhs in FY 2023-24. The Profit before Tax for FY 2024-25 was H908.50 Lakhs as compared to Profit before Tax of H890.81 Lakhs for FY 2023-24. The Profit after Tax for FY 2024-25 was H645.49 Lakhs as compared to Profit after Tax of H549.22 Lakhs for FY 2023-24.

Material Developments in Human Resources / Industrial Relation:

The Company believes that the success of any organisation depends upon availability of human capital. Our assets are our people who work to innovate beyond and challenge established boundaries. Thus, employees are vital to the Company. We have favourable work environment that encourages innovation and meritocracy. We focus on attracting the best and brightest talent and the meritocracy is the sole criteria for selection. The Company firmly believes that manpower is the most important asset, above all. The Company has good cordial relation with trade union and employees representatives and views these relationships as contributing positively to the success of the business. The total number of employees of the Company as on March 31, 2025 stood at 358.

Key Financial Ratios, Standalone:

Particulars	FY 2024-2025	FY 2023-2024	Explanation
Debtors Turnover Ratio	6.57	7.20	The ratios for the financial year 2024-
Inventory Turnover Ratio	2.44	2.77	25 are Stable as compared to financial
Interest coverage ratio	1.70	1.80	year 2023-24, as the Company has performed well in respect of sales and
Current Ratio	1.11	1.17
Debt Equity Ratio	1.59	1.87	Profit as compared to last year.
Operating Profit Margin	5.84%	5.37%
Net Profit Margin	1.71%	1.47%
Return on Net Worth	12.86%	12.35%

Cautionary Statement:

Statements in the Management Discussion and Analysis describing the Companys objective, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws and 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.

	For and on Behalf of Board
	N K Gupta
Date: 13th August 2025	(Chairman)
Place: Chh. Sambhaji Nagar (Aurangabad)	DIN. 00062268