Andrew Yule & Company Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The global economy in FY 2024-25 remained under pressure due to ongoing geopolitical tensions, particularly like the Russia- Ukraine conflict and instability in the Middle East. These disruptions impacted global supply chains and energy markets. Nevertheless, the global economy demonstrated resilience. A key development was the strategic shift by several countries to reduce dependence on China, creating fresh growth opportunities for emerging economies like India.

India emerged as a significant growth engine in FY 2023-24, registering a GDP growth rate of 8.2% (as per RBI), driven by robust domestic demand, sustained investment activity, and government-led capital expenditure. For the current fiscal, GDP growth is forecast between 6.4% and 6.5%, with the Reserve Bank of India (RBI) recently revising its projection upward to 7.2%, reflecting economic momentum.

On the investment front, Gross Foreign Direct Investment (FDI) inflows in FY 2024-25 rose by 14% to US $81 billion, while net FDI saw a steep decline of approximately 96%, falling to US $353 million, largely due to higher repatriations and outflows. To manage inflationary pressures, the RBI maintained a 6.50% repo rate throughout the year.

Despite these macroeconomic headwinds, India remains firmly on course to becoming the worlds third-largest economy by 2027, underscoring its resilient economic fundamentals and strong growth trajectory.

Sector-Wise Outlook

a) Tea Industry:

The Indian tea industry continues to face challenges from climate variability, rising input costs, and stagnant prices. However, premiumization, export opportunities, and increasing domestic consumption of specialty teas provide a growth path. Sustainable farming practices and irrigation infrastructure are becoming critical to resilience.

b) Engineering Industry:

The engineering industry benefited from the Governments infrastructure push, increasing public investment in roads, railways, and renewable energy. Rising demand for capital goods, localization initiatives, and the “Make in India” program are expected to fuel long-term growth.

c) Electrical Industry:

This sector experienced robust demand, driven by power sector reforms, smart grid development, and increasing investments in renewable energy and transmission infrastructure. Government initiatives like “Power for All” and the Revamped Distribution Sector Scheme (RDSS) continue to support sectoral expansion.

Business Vertical Analysis

a) Tea Division: Enhancing Productivity and Resilience

The Tea Division of Andrew Yule & Co. Ltd. (AYCL) has implemented several strategic initiatives aimed at improving productivity and strengthening resilience to climate-related challenges. Key measures include:

• Expanded Irrigation Coverage: Enhanced water availability to counteract climate stress and support consistent crop health.

• Optimized Field Operations: Focused efforts to improve efficiency and yield, particularly during the critical First Flush season.

• Quality Enhancement: Initiatives to upgrade processing standards and product quality.

• Market Diversification: Active pursuit of new markets through exports and development of value-added tea products. These efforts collectively aim to boost long-term sustainability and profitability ofthe Tea Division.

b) Engineering Division: Driving Growth Through Capacity, Reach, and Quality

AYCLs Engineering Division leveraged robust domestic infrastructure and industrial demand to accelerate growth. Key achievements include:

• Enhanced Capacity Utilization: Improved operational efficiency and output through better resource deployment.

• Process Upgrades: Technological and workflow improvements to support higher productivity and reliability.

• Geographic Expansion: Entry into new regions, broadening the divisions customer base and market presence.

• Order Book Growth: Strengthened pipeline through active business development and increased production capability.

• Quality Advancements & Partnerships: Continuous quality enhancements and strategic collaborations reinforced the divisions market competitiveness.

These initiatives positioned the division for sustained performance and leadership in the engineering sector.

c) Electrical Division (Chennai) Scaling Capacity for a Smarter Energy Future

The Electrical Divisions Chennai Operations (E-CO) marked a milestone year with record production capacity and broader market outreach. Highlights include:

• Record Production Achievement: Attained the highest-ever in-house production capacity, meeting rising demand effectively.

• Pan-India Order Fulfilment: Successfully executed orders across multiple states, expanding geographic footprint.

• Operational Efficiency & Workforce Development: Streamlined processes and invested in employee training to boost productivity and execution speed.

• Digital Integration: Adoption of digital tools and systems to enhance planning, monitoring, and delivery accuracy.

• Future-Ready Positioning: Strategically aligned to support Indias grid modernization, electrification, and renewable energy integration initiatives.

These advancements solidify E-COs role as a driving force in shaping the countrys sustainable energy future.

SWOT ANALYSIS - TEA DIVISION Strengths

• Established Brand and Estate Legacy: Long-standing presence in tea production with loyal buyers and recognized estate names.

• Favourable Agro-Climatic Conditions (in normal years): Regions like Assam are naturally suited for quality tea cultivation.

• Experienced Workforce: Skilled Pluckers and supervisors familiar with estate operations and local agronomic practices.

• Diverse Product Portfolio: Ability to produce orthodox, CTC, green, and specialty teas.

• Infrastructure: Existing processing factories and logistics support within estates.

Weaknesses

• High Dependency on Manual Labour: Limits scalability and exposes the division to labour shortages and wage pressures.

• Low Mechanization Levels: Productivity is affected during labour shortfalls; cost of upgrading is high.

• Weather Sensitivity: Lack of full irrigation coverage exposes the estates to unpredictable climate events.

• Disparity between Costand Realization: Rising input and labour costs are not being offset by a corresponding increase in price realization.

• Financial Constraints: Limited working capital restricts timely procurement of inputs and modernization efforts. Opportunities

• Rising Demand for Specialty and Wellness Teas: Scope to enter premium segments through value addition and organic production.

• Export Market Growth: High demand for Indian teas in global markets, especially with proper certifications.

• Tea Tourism and Estate Branding: Leveraging the estates natural beauty and heritage for diversified revenue streams.

• Government Schemes: Potential to tap subsidies for irrigation, replantation, and machinery upgrades.

• Sustainability Focus: Transitioning to climate-resilient and eco-friendly practices can increase both margins and market access.

Threats

• Adverse Climatic Conditions: Increasing frequency of droughts, storms, and erratic rainfall directly impact crop output.

• Wage Inflation and Labour Migration: Rising wages and worker attrition threaten cost and continuity of operations.

• Price Volatility in Auctions: Dependence on market auctions subjects pricing to fluctuations, limiting predictability.

• Competition from Other Tea-Producing Nations: Countries like Kenya and Sri Lanka offer competitive pricing in export markets.

• Changing Consumer Preferences: Shift toward newer beverage alternatives can affect conventional tea demand. Outlook - Tea Division

The Tea Division expects a challenging yet opportunity-driven year ahead. Adverse weather, rising input costs, and labour shortages may continue to impact production and margins. However, increased focus on irrigation, mechanization, and productivity improvement is likely to stabilize operations.

Growing demand for premium and specialty teas offers strong market potential. The division aims to capitalize on this through estate branding, quality enhancement, and targeted exports. Cost control, timely input procurement, and effective use of government schemes will be key to improving profitability.

Overall, with strategic focus and operational discipline, the division is positioned to navigate current headwinds and strengthen its market presence

SWOT ANALYSIS - ENGINEERING DIVISION Strengths

• Strong Brand Reputation: Industrial fans are well-regarded for performance and reliability.

• High Product Quality: Superior quality compared to peers, crucial for capital goods.

• Certifications: Holds ISO 9001, ISO 14001, and ISO 45001 - enhancing credibility.

• Robust Infrastructure: Facilities match industry standards, supporting high-end manufacturing.

• Blue-Chip Customer Base: Includes major clients like SAIL, Tata Steel, JSW, L&T, NTPC, and Ultratech.

• Scalability: Scope to enhance capacity from 300 to 400 impellers per year with modest capex.

Weaknesses

• Pricing Constraints: Highly competitive, price-sensitive market limits profit margins.

• Low Aftermarket Share: Fragmented market dominated by low-cost, small-scale manufacturers.

• Dependence on Large Orders: Vulnerability to cyclical demand from core sectors like steel and cement. Opportunities

• Capacity Expansion: Planned facility upgrades can add ~100 fans annually, with ?20-30 crore additional revenue potential.

• WPC Projects: Growing environmental focus opens new business avenues in Water Pollution Control.

• Infrastructure Growth: Increased investments in steel, cement, and utilities to boost demand.

• Technology Upgrade: New test bed, high-capacity motor, and advanced design software to improve capability and customer satisfaction.

• Customization Potential: Enhanced R&D allows development of higher-capacity, tailored fan solutions.

Threats

• Intense Competition: Cut-throat pricing by small, unorganized players erodes market share.

• Raw Material Volatility: Fluctuations in input costs can affect margins.

• Project Delays: Delays in infrastructure and industrial projects may impact order flow.

• Dependence on Capex Cycles: Demand is linked to capital investment trends in core industries.

Outlook - Engineering Division

The Engineering Division is well-positioned to capitalize on the rising demand from infrastructure development and industrial growth, particularly in the steel and cement sectors. From FY 2025-26, the division will also intensify its focus on Water Pollution Control (WPC) projects, aligning with national priorities on environmental sustainability. With planned capacity expansion and modernization of facilities, the division is geared to enhance competitiveness, increase order intake, and strengthen its presence in high-growth sectors.

SWOT ANALYSIS - ELECTRICAL DIVISION (CHENNAI)

Strengths

• Established Brand Image: Recognized for reliable and high-performance power transformers in the 8-31.5 MVA range.

• Certified Products: Holds ISO 9001 for Quality Management System and CPRI certifications for major transformer ratings up to 132kV, enhancing credibility.

• Robust Customer Base: Regular orders from state electricity boards (Tamil Nadu, Karnataka), EPC contractors, and industrial clients like SAIL.

• Manufacturing Infrastructure: Well-established facilities with potential for further technical upgrades.

Weaknesses

• Low Market Share: Current market share stands at only 1.8%, limiting competitive leverage.

• Pricing Pressure: High price sensitivity in the <132kV class due to numerous small-scale competitors offering lower- cost options.

• Limited Product Range: Predominantly focused on a narrow MVA/kV segment, restricting growth in broader transformer categories.

• Limited Manufacturing Capacity for Higher Voltage Class: AYCLs current plant is limited to producing transformers up to the 132 kV class. To capture higher-margin opportunities in the above -132 kV segment, where demand and profitability are significantly better, the company needs to either expand the existing facility or establish a new plant with enhanced capabilities.

Opportunities

• Rising Demand from Tariff Based Competitive Bidding (TBSB) Projects: Growth in transmission infrastructure, particularly to support renewable energy evacuation, is expected to boost transformer demand.

• Infrastructure Expansion: Plans to install a NABL-accredited lab with modern and reliable facilities, Vapor Phase Drying (VPD) unit, and advanced winding equipment can improve quality, compliance, and production capacity.

• Technology-Driven Efficiency: Adoption of dust-free enclosures and vertical winding machines can reduce defects and cycle time, increasing productivity and improved life expectancy.

Threats

• Intense Market Competition: Numerous unorganized and small players undercut prices, limiting margin improvement.

• Dependence on SEB and EPC Orders: High reliance on tender-based business may expose the unit to project delays and pricing volatility.

• Capex Execution Risk: Delays in execution or approvals for planned capex may slow capacity and technology upgrades.

• Raw Material Cost Volatility: Price fluctuations in key inputs like copper and steel may impact cost control.

Outlook - Electrical Division (Chennai)

With increased investment in transmission infrastructure and TBCB projects, demand for power transformers up to 132 kV is expected to remain stable. Electrical Division aims to improve competitiveness through facility upgrades, including a VPD unit and advanced coil winding system.

To capture higher-margin opportunities in the >132 kV segment, the division must explore expanding its manufacturing capacity through plant upgradation or a new facility.

SEGMENT WISE PERFORMANCE

The Company is a multi-segment Company as reported in note no. 49 in the accounts.

RISK AND CONCERN

Business risks are inherent to any enterprise. The Company, through its Risk Management Policy, proactively identifies internal and external risks and adopts suitable mitigation measures. The Risk Management Committee regularly reviews risk assessments and recommends minimization strategies to the Board.

The Audit Committee, with additional oversight on financial risks and internal controls, reviews the risk management framework. To safeguard strategic objectives, the Company continuously monitors, manages, and reports key risks that could impact business performance.

FINANCIAL PERFORMANCE

The details of financial performance of the Company are appearing in the Balance Sheet and statement of Profit & Loss for the financial year 2024-25.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

There have been no significant changes in key financial ratios during the financial year 2024-25 as compared to the immediately previous financial year 2023-24, except the followings:

Particulars	FY 2024-25	FY 2023-24	Remarks
Interest Coverage Ratio	(-) 0.30	(-) 3.67	Due to better EBIDTA
Debt Equity Ratio	4.08	3.00	Due to decrease in other equity
Operating Profit Margin (%)	(-) 2.11%	(-) 18.40%	Due to Increase in EBITDA
Net Profit Margin (%)	(-) 8.19%	(-) 18.20%	Due to lower loss incurred
Return on Capital employed (%)	(-) 4.34%	(-) 44.81%	Due to lower loss incurred

DETAILS OF CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF

The Return on Net Worth for the financial year 2024-25 stood at (-)25.22%, compared to (-)41.02% in the previous year. The improvement is primarily attributable to a reduction in net loss during the year.

INTERNAL CONTROL SYSTEMS

At AYCL, the internal control procedures include internal financial controls, ensuring compliance with various policies, practices and statutes considering the organizations growth and complexity of operations. The framework constantly monitors and assesses all aspects of risks associated with current activities and corporate profile, including commercial and financial risks. In addition, the Company has management reporting and internal control systems in place, that enable it to monitor performance, strategy, operations, business environment, procedures, funding, risk and internal control. The internal auditors carry out extensive audits throughout the year across all locations and across all functional areas and submit their reports to the Audit Committee.

The CEO and CFO certification provided in the relevant section of the Annual Report specify the adequacy of the internal control system and the procedures of the company.

HUMAN RESOURCES

During the year under review, industrial relations at the Company continued to remain cordial and peaceful in all the units/divisions except in a few tea gardens. There has been occasional agitation in a few tea gardens of the Company located in West Bengal and Assam by the workers/staffs/sub- staffs due to delay in payment ofwages and salary.

CAUTIONARY STATEMENT

Statements made in the Boards Report and Report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, predictions etc. may be “forwarding-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 affecting demand/supply and price conditions in the domestic markets in which the Company operates, changes in the Government regulations, tax laws, litigation, industrial relations and other statutes and incidental factors. Readers are cautioned not to place undue conviction on the forward-looking statements.

	For and on behalf of the Board
Kolkata,	Ananta Mohan Singh
14th August, 2025	Chairman & Managing Director