Austin Engineering Company Ltd Management Discussions

GLOBAL ECONOMY OVERVIEW:

The Global growth in the bearing industry is expected to slow down modestly with forecast of 3.1% for financial year 2025-26 as compared to 3.2% for financial year 2026-27 as per the World Economic Outlook (WEO) released by the International Monetary Fund (IMF) in April, 2026. This growth represent deceleration from the estimated growth rate of 3.4% recorded in 2025. After withstanding higher trade barriers and elevated uncertainty prevailed in last year, global activity now faces a major test from the outbreak of war in the Middle East. The overall impact of the Middle East conflict on growth in advance economies is expected to be limited. This modest effect reflects favorable terms of trade development in United States, stronger-growth momentum and offsetting government measures in Japan. In contrast, a more pronounced negative impact is anticipated in certain net energy-importing economies notably the Euro area and the United Kingdom. In emerging markets and developing economies, growth is expected to decline to 3.9% in 2026 before recovering to 4.2% in 2027.

Beyond the major global powers, instability across several emerging markets added pressure on trade, investment and capital flows. Sanctions raising, defense spending and shifting geopolitical alliances reshaped global priorities and economic engagement. Simultaneously the evolving geopolitical landscape is prompting economies to strengthen domestic manufacturing capabilities, accelerate clean energy transitions, expand electric mobility ecosystems and invest in digital infrastructure, creative new pathways for medium-term growth. Geopolitical tensions continue to shape global trade and economic dynamics. The prolonged Russia-Ukraine conflicts have disrupted energy markets; commodity flows and agriculture trade particularly impacting Europes energy.

INDIAN ECONOMIC OVERVIEW:

Although the global economy navigates geopolitical uncertainty, trade fragmentation and volatility arising from Middle East conflicts; India continues to demonstrate strong economic resilience. The economic survey as highlighted in financial year 2025-26; Indias GDP was recorded at 7.7% reinforcing its position as the world fastest growing major economy for the 4th consecutive times. Growth remains supported by robust domestic demand with private consumption accounting for 61.5% of GDP as per the First Advance Estimates, aided by moderating inflation, stable employment condition including real incomes and resilient rural demand supported by strong agriculture performance. Investment momentum in India remains strong with Gross Fixed Capital Formation at nearly 30% of GDP, supported by sustained public capital expenditure, infrastructure expansion, and improving private sector confidence. Indias robust macroeconomics fundamental, fiscal discipline, expanding manufacturing base and accelerating investments in digital and clean energy infrastructure position the economy favorable for sustained medium term growth.

Current scenario:

The ongoing Middle East crisis and disruption in global oil and gas supply chains continue to push risks to elevated energy prices, inflationary pressure and higher logistics cost consumption pattern are also evolving with spending increasingly shifting towards discretionary categories such as consumer durables, housing, travel, and digital services, creating a virtuous cycle of demand, investment and output that strengthen the economys resilience against global volatility. The adoption of a calibrated monetary policy by Reserve Bank of India (RBI) allows lower cost capital in manufacturing industries, supported credit growth, boosting consumption and investment activity. Add to this, the proposed overhaul of GST framework, is likely to enhance consumer affordability which leads to stimulate demand across sectors such as automotive, electronics, and construction.

FUTURE OUTLOOK:

The industrial sector grew by an estimated 6.2% in financial year 2025-26. Manufacturing growth reached 8.4% in the first half of the year, contributing to overall industrial growth. Construction activity, a key component of the industrial sector, remains supported by sustained public capital expenditure and ongoing infrastructure investments. The sustained expansion in construction goods and infrastructure-linked industries highlights the broader structural strength of the Indian industrial economy, even amid global geopolitical uncertainties and energy market volatility. The services sector continues to deepen its contribution to Indias economy, with its share in GDP rising from a pre-covid average of 51.3% during financial year 2015-16 to financial year 2019-20 to 53.6% in H1 of financial year 2025-26. The sustained expansion in trade, hospitality, transport, communication and broadcasting services led this growth, complemented by steady momentum in financial, real estate and professional services. The increasing share underscores the resilience of Indias consumption-driven economy and the growing importance of services as a key engine of economic growth.

Indian automotive sector stands as a key pillar of the countries manufacturing economy, supported by rising domestic mobility needs, infrastructure-led freight demand, increasing urbanization and deeper integration into global automotive supply chains. The industry produces about 34.7 million vehicles in financial year 2025-2026, reinforcing Indias position among the world largest automotive manufacturing hubs. By contributing about 7.1% to the national GDP at nearly to half of manufacturing GDP, the sector remains central to industrial growth, employment generation, export, and overall economic momentum. Despite geopolitical tensions prevailed, the medium-term outlook for the Indian automotive industry remains structurally strong. Rising income level, improving affordability, expanding financing access and sustained investment in infrastructure and logistic continue to underpin domestic demand. At the same time, India is increasingly emerging as preferred global manufacturing and export base for automotive OEMs. Indian exports in automobile reached a record 6.64 million units in financial year 2025-2026 registering robust growth of about 24%, the fastest in the last seven years. The passenger vehicle segment also recorded its highest-ever sales 4.64 million units in financial year 2025-2026, growing 7.9% over the previous years. The three-wheeler segment also delivered record performance with sales reaching 0.83 million units, reflecting growth of 12.8% over the previous years. The two-wheeler segment also surpasses its previous peak by achieving a record sales of 21.7 million units reflecting growth of 10.7% during the year. The commercial vehicle segment also achieved its highest ever sales of 1.08 million units in financial year 2025-2026, registering growth of 12.6%. Added with GST revenue income, other direct and indirect tax revenue made a strong foundation for Indian economy. During current scenario oil cries faces the challenges to the Indian economy. This shall however be compensated with the increased budget outlay in defense industries.

OPPORTUNITIES:

Indias industrial landscape is making a lot of headway when it comes to the consumption of anti-friction bearings in various sectors, which is driving up the overall demand for bearings market. So far, this growth has been driven by an expanding industrial sector, technology innovations and increased use with a variety of new applications. Ball and roller bearing solutions are becoming more popular due to their ability to reduce friction, improve efficiency and extended equipment lifespan. One of the biggest parts of this increase in consumption is coming from the automotive sector. However, as India slowly starts transitioning into electric vehicles (EVs), their high-tech demands could actually end up being great news for manufacturers who produce them. EV typically needs fewer bearings than traditional vehicles do but tend to come with specialized smart bearings that go much faster than others on top of that.

The national implementation of Bharat Stage VI emission norms a year back may have also played a role in the surge for anti-friction bearings lately in the India bearings market. These norms push for a reduction in vehicle weights, therefore changing up bearing designs and altering demand patterns. Anti-friction bearings are already heavily used outside of the automotive industry as well. They are frequently found in manufacturing plants, construction sites, mines and farms to name a few examples. As these industries continue to grow across India at large, so will their machinery and equipment usage which will benefit anti-friction bearing consumption even more.

THREATS:

Bearing industry being a capital intensive, there is always a threat of underutilization of expensive resources to be used and lesser absorption of fixed cost faced by the Company. Continual increase in raw material and consumables is another area of threat. Increase in labour cost will have to be matched by the corresponding increase in the productivity to retain competitiveness of industry. The shortage of appropriately skilled labour across is emerging as a significant and complex challenge to the companys growth and future.

Your Company continues to focus on quality and technology innovations besides further developing application engineering and R & D capabilities to strengthen the competitiveness.

STRENGTH:

The Directors and the top management of the Company are well experienced and technically qualified and sound. The Company is in this line of business for more than three decades and enjoys high reputation in the name of its brand and in the market. The Company has wide market network with established customer base. The Company is able to obtain skilled workmen at comparatively lower cost.

SEGMENT WISE PERFORMANCE:

The Company primarily operates in two segments of activities namely Bearing and Power. The segment wise revenue results and capital employed has been given here under by way of amount Rupees in Lakhs.

	2025-26	2024-25	2025-26	2024-25	2025-26	2024-25
Particulars	Bearing	Bearing	Power	Power	Total	Total
1. Segment Revenue	12184.95	10409.06	47.91	88.94	12232.86	10498.00
2. Segment Results (PBT)	658.75	408.18	21.65	67.85	680.40	476.03
3. Capital Employed	6754.40	6129.10	33.89	53.11	6788.29	6182.21

INTERNAL CONTROL SYSTEMS:

An important aspect of good Corporate Governance is a well-defined Internal Control and Internal Audit system. Therefore, your company views internal audit as a continuous process to keep management regularly appraised about the existence, adequacy and effectiveness of control systems and processes in the operations of the organization.

The Company has a sound system of internal controls for financial reporting of various transactions and compliance with relevant laws, rules, and regulations. The Company has well documented policies, procedures, and authorization guidelines commensurate with the level of responsibility and standard operating procedures specific to the business.

The Internal Audit Department has extensive audit programs for the year. The post audit checks and reviews are also carried out to ensure follow up on the observations made by the Audit Committee. The Audit Committee reviews the internal audit reports and the adequacy of internal controls periodically and takes corrective action as and when necessary. All transactions are authorized as per companys approval and signature guidelines, which are recorded and reported in an organized manner.

FINANCE:

AECL operates primarily in bearings and related components segments which are used in a wide range of applications across industries. The government policy appears to be on positive front. The macro environment has improved.

Your company has been consistently practicing prudent finance and working capital management. The strong focus on working capital and liquidity management has helped timely generation of sufficient internal cash flow to invest in long-term strategic objectives of the company. The Company was assigned rating of SME1 by SMERA Ratings Private Limited (formerly SME Rating Agency of India Limited) , Mumbai, under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ensuring transparency for investors. SME1 is the highest rating on SMERAs Bank Loan Rating Scale for SMEs, indicating the highest level of creditworthiness and the lowest credit risk for meeting financial obligations, such as loan repayments.

BUSINESS STRATEGY AND OUTLOOK:

AECL is the leading manufacturer of all types of anti-friction bearings, and it offers wide range of varieties to the different segments of people. The Company blend optimism with caution as it looks ahead to short term future. Easing of inflation and liquidity will set better chance for investment and consumption.

At the company level, the majority of product range is the import substitute and we are focusing more and more on export front. A number of steps for strict cost control and improving efficiency and production at all levels have been taken which is expected to further enhance the performance of company in the years to come. At the core of AECL, technical up gradation and advancement is a perpetual effort soliciting involvement of the top management which itself endeavors to encourage new development, continuous quality improvement and strong desire to prove that your companys technology is proficient to compete with any top technologically advanced organization and thus, resulting in unshakeable customer confidence in India and abroad for AEC bearings. The Company is trying to focus on sharpening its competitiveness and offering various product- mixes which is totally market driven.

The Company restricts its export domain only to the most quality-conscious market like the United States and European Union which accounts majority of its revenue. We have 100% subsidiary in USA which also acts on marketing front. What may come as a surprise to the most is that, despite our very modest size, we have the widest range of bearings in the domestic market, weighing from 50 gms. to over 500 kgs. We manufacture bearings for demanding applications. It is among a handful of customized bearing manufacturer worldwide producing bearings of 1800 mm diameter.

Ours special bearing range includes:

1. Steel Plant bearings

2. Mining Equipment.

3. Material handling equipment.

4. Bearings for cement, sugar, paper and other continuous process industry

5. Special bearings for high-speed heavy-duty turbines (used in power plants)

6. Oilfield applications

7. Agro-machinery

8. Gear Box

9. Motor/Pumps

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company believes that the quality of its employees is the key to its success in the long run and therefore is committed to provide necessary human resource development and training opportunities to equip them with skill, enabling them to adapt to contemporary technological advancements. Industrial relations during the year continued to be cordial. The company is committed to maintain good relations through negotiations and meetings and it encourages its employees to be entrepreneurial and focus on experimenting and being innovative.

The performance linked bonus and rewards were instituted, which not only helped to improve productivity but also brought the culture of healthy competitive performance within the organization. The gap between existing and desired skills has been filled up in the employees through training and development.

Your Company firmly believes that Human Resource Development strategies and practices will continue to provide sustained competitive advantage. The management of your company deeply appreciates the spirit and commitment of dedication of its employees.

CAUTIONARY STATEMENT:

Certain statements in the Management Discussion and Analysis describing the companys objectives, projections, estimates, expectations, or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied therein. Important factors that could make a difference include raw material availability and prices thereof, cyclical demand and pricing in the companys principal markets, changes in government regulations and tax regime, economic developments within India and the countries in which the company conducts business and other incidental factors. The Company will not be in any way responsible for any actions based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.