Automotive Axles Ltd Management Discussions

Economic environment World

In 2024, the global economy expanded at a moderate pace of 3.3%, according to the IMF, indicating a period of relative stability, albeit with constrained expansion. As we advance through 2025, the global environment is undergoing significant transition, driven by nations recalibrating their policy priorities in response to heightened geopolitical tensions and mounting economic challenges.

The path ahead requires international cooperation to navigate successfully. By implementing coherent strategies, strong leadership, and a commitment to shared progress, the global economy can restore momentum, rebuild buffers, and unlock new opportunities for prosperity across regions. Initiatives like the G20s focus on strengthening engagement with emerging and developing countries underscore the importance of inclusive approaches to economic resilience.

The United States has enacted a series of supplementary tariff measures, provoking prompt and robust reactions from principal trading partners. This led to the implementation of practically universal tariffs on April 2. As a result, effective tariff rates have surged to historic levels, causing significant harm to global GDP. The problem has been aggravated by the swift and unpredictable character of these policy changes, significantly increasing economic uncertainty and making the short-term outlook extremely unstable.

Given this uncertainty, global headline inflation is anticipated to decline at a more gradual pace than previously expected. The IMF forecasts a reduction to 4.3% in 2025, followed by a further decrease to 3.6% in 2026. The revision reflects increased inflation forecasts for industrialized countries, partially offset by minor reductions in emerging markets and developing economies.

GDP growth projections

(in %)

	2024	2025	2026
Global Economy	3.3	2.8	3.0
Advanced Economies	1.8	1.4	1.5
Emerging Markets and Developing Economies	4.3	3.7	3.9

(Source: IMF, World Economic Outlook, April 2025)

Outlook

Despite the current challenges facing the global economy, this period presents a unique opportunity to enhance resilience and chart a sustainable path forward. The adaptability demonstrated by various economies under strain suggests that recovery is possible through the right combination of coordinated policies and proactive reforms.

Countries can support a more balanced and inclusive global recovery by collaborating to establish a stable and transparent trading environment, making progress toward timely debt resolution, and addressing structural imbalances. For instance, the IMF emphasizes the importance of macroeconomic and structural policies to reduce excessive global imbalances over time, fostering sustainable global growth.

India

Indias gross domestic product (GDP) increased by 6.5% in the fiscal year 2024-25, so establishing India as one of the key countries with the fastest-growing economies in the face of global concerns. This success was underpinned by structural reforms, rapid digital transformation, and continued infrastructure investments, all of which combined to strengthen the economic foundation of the country. In addition, the robust domestic demand and continuous investment from the private sector contributed additional momentum across a number of different industries.

Throughout the course of the year, monetary policy became more accommodating. The Reserve Bank of India (RBI) lowered the repo rate by 25 basis points, bringing it down to 6.25 percent, with the intention of achieving a balance between the need to moderate inflation and the requirement to increase credit flow and investment. Through this supportive position, liquidity was increased, and the growth of the corporation was facilitated. The overall exports of India increased by about 6% year-on-year, demonstrating that Indias trade performance was resilient in the external environment. The export of services became a substantial contributor, which increased Indias stake in the global trade of services and solidified the countrys position as a leading exporter of services on a worldwide scale.

A cohesive backdrop for long-term economic performance was developed as a result of the interconnected developments in consumption, employment, investment, policy, and trade. The fact that India is able to navigate through a volatile global landscape while simultaneously encouraging internal transformation is evidence of the countrys growing resilience and readiness to face upcoming possibilities and challenges.

Indian GDP Projection (in %)

FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24	FY 2024-25
(6.6)	8.7	7.0	8.2	6.5

(Source: Government of India)

Outlook

The economic forecast for India during the fiscal year 2025-26 is cautious and resilient due to the countrys local strengths and the global uncertainty. Commodity price volatility, disruptions in trade, and geopolitical concerns are all potential factors that could impede growth. It is anticipated that the economy would be able to withstand these dangers because of the structural stability and robust policy framework that it possesses. Accelerating the increase of corporate wages, enhancing the attitude of consumers, and increasing private sector investment in strategically important industries are all necessary steps to maintain momentum. The demand in rural areas should increase as a result of agriculture, decreased food inflation, and macroeconomic stability. These components are absolute necessities for growth and consumption that are inclusive. It is expected that Indias global competitiveness will increase as a result of structured changes at the grassroots level and targeted deregulatory measures.

Indian Automobile and Industry

As per the latest data released by the Society of Indian Automobile Manufacturers (SIAM), between FY 2023-24 and FY 2024-25, the Indian automobile industry demonstrated a mixed but generally positive performance across key segments. Passenger vehicle sales grew modestly by 1.97%, reaching 4.3 million units, reflecting steady consumer demand. The commercial vehicle segment experienced a slight decline of 1.16%, with sales dipping to 956,671 units, indicating some softness in freight and transport activity. In contrast, the three-wheeler segment showed strong growth of 7.18%, driven by increased demand for urban mobility solutions. The two-wheeler segment, which remains the largest category, posted an impressive growth of 9.09%, crossing 19.6 million units, underscoring its continued popularity and expansion in both urban and rural markets. Overall, these trends highlight sustained momentum in personal and light commercial mobility, supported by favorable economic policies and improving consumer confidence.

Domestic Sales Trend for Automobiles

(Nos.)

Category	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles	27,73,519	27,11,457	30,69,523	38,90,114	42,18,746	43,01,848
Commercial Vehicles	7,17,593	5,68,559	7,16,566	9,62,468	9,67,878	9,56,671
Three Wheelers	6,37,065	2,19,446	2,61,385	4,88,768	6,91,749	7,41,420
Two Wheelers	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,087	1,79,74,365	1,96,07,332

(Source: https://www.siam.in/statistics.aspx?mpgid=8&pgidtrail=9)

Outlook

The Indian automotive industry is poised for a transformative decade, with vehicle sales expected to grow to approximately 7.5 million units by 2030. This growth trajectory is being fuelled by a combination of demographic, economic, and policy-driven factors. A rapidly expanding middle class, increased urbanization, and rising disposable incomes are set to elevate personal mobility aspirations across the country.

Crucially, the sector is undergoing a structural shift towards sustainability and digitization. The adoption of electric vehicles (EVs) is expected to gain significant momentum, supported by proactive government initiatives, increasing environmental consciousness, and improving charging infrastructure. By 2030, EVs are likely to represent a substantial share of new vehicle sales, driven by both two- wheelers and passenger vehicles.

Technology will be a defining force in this evolution. The consolidation of EV platforms is anticipated to optimize manufacturing efficiencies and enable scale, while the adoption of connected and smart mobility solutions will redefine user experiences. The integration of AI, IoT, and advanced telematics is set to create a more seamless, safe, and intelligent transportation ecosystem.

Furthermore, the Indian auto industry is expected to play a key role in global supply chains, leveraging its manufacturing strengths and engineering talent. As companies pivot towards cleaner and smarter vehicles, the country is well-positioned to emerge as a hub for innovation and production in the new mobility era.

Overall, the coming years will not only witness volume growth but also a qualitative transformation in how mobility is defined, delivered, and experienced in India.

(Source: https://www.forbes.com/sites/ sarwantsingh/2025/02/11/future-of-indian-auto-industry- to-2030/)

Indian Automotive Component Industry

The Indian auto component industry, a key enabler of the countrys mobility ambitions, is poised for an 8-10% revenue growth in FY 2025-26, according to a recent report by ICRA. While this represents a moderation from the 14% expansion seen in FY 2023-24, the outlook remains broadly optimistic underpinned by sustained domestic demand, the rising electrification of mobility, and proactive capacity expansion by leading players. From being a support function to OEMs to becoming a globally competitive, innovation- driven value chain, the Indian auto component industry has evolved remarkably.

Domestic market momentum: Passenger vehicles and commercial vehicles continue to witness strong replacement and discretionary demand, especially in urban and semi-urban markets. The sustained uptick in vehicle production volumes translates into higher off-take for component suppliers.

Electric vehicles and technology shift: Indias transition toward electric mobility is accelerating. Auto component players are investing heavily in EV-specific parts such as battery packs, controllers, thermal management systems, and power electronics. Yet, with only 30-40% of the EV supply chain currently localized, this space remains ripe for innovation and backward integration. The projected 25,000-30,000 crore in capital expenditure for FY 202526 will largely go into building EV capacity, indigenizing key inputs, and enhancing technological capabilities.

Export opportunities: Indian component manufacturers have made strong inroads into global supply chains, particularly for engine, transmission, and suspension parts. While high freight costs and geopolitical uncertainties may temporarily affect export volumes, India remains a favored sourcing hub due to its cost advantage, engineering expertise, and expanding product portfolio.

Indias auto component sector is entering a transformative phase marked by capability building and strategic realignment. With the near-term growth outlook expected to stabilise after years of double-digit expansion, the industry is recalibrating its priorities to build resilience and long-term strength. A clear thrust on localisation particularly in EV and advanced electronic components is reducing import dependence and enhancing value addition. Simultaneously, companies are expanding their global footprint beyond traditional markets by tapping into newer regions such as Africa, Latin America, and Southeast Asia.

This shift is complemented by a growing emphasis on digitalisation and sustainability. Industry players are increasingly embracing smart manufacturing, data-driven operations, and ESG-aligned practices to future-proof their businesses. At the same time, consolidation and strategic alliances are accelerating across the value chain, enabling access to scale, technology, and new customer segments.

Together, these shifts are reshaping the contours of the Indian auto component industry. With a unified focus on localisation, diversified markets, digital transformation, and collaborative growth, the sector is well-positioned to lead the next phase of Indias manufacturing and innovation journey.

(Source: https://timesofindia.indiatimes.com/business/ india-business/india-auto-component-industry-revenues- to-expand-8-10-in-2025-26-icra/articleshow/118414171. cms#:~:text=The%20Indian%20auto%20component%20 industry,affecting%20some%20exporters%20and%20 importers.)

Welcome to the World of Automotive Axles Limited

Automotive Axle Limited (AAL) is established in 1981 as a joint venture between the esteemed Indian conglomerate Kalyani

Group and Meritor Inc., USA. As a leading Automotive system manufacturer, we specialise in manufacturing of Rear Drive Axle Assemblies, S-Cam actuated quick-change air brakes and trailer axles catering to vehicles within the 7 to 55 tonnes gross vehicle weight (GVW) range.

Since inception, we have cultivated specialised expertise and leadership in applicating our products to various domestic and international markets. Our clientele spans across various segments, including light, medium, and heavy commercial vehicles, military vehicles, and off-highway vehicles. Our extensive product portfolio encompasses front steer axles, defence axles, off-highway axles, drive and non-drive axles, drum brakes and crown wheel pinions (CWP).

We have manufacturing facilities strategically located across India in Mysuru (Karnataka), Rudrapur (Uttarakhand) and Jamshedpur (Jharkhand). All our manufacturing Plants are equipped with world class facilities to ensure adherence to world-class manufacturing standards at every step. Our products meet high standards of quality & reliability requirement through our processes, ensuring that our products meet global benchmarks. Furthermore, our association with Meritor Heavy Vehicle Systems LLC USA,being a technology partner, enhances our capabilities in product engineering, validation and testing.

Listed on the National Stock Exchange of India Limited and BSE Limited, AAL stands as a beacon of excellence in the automotive industry, poised for continued growth and innovation.

Product segments

• Drive Axles

• Front Steer Axles

• Off-highway Axles

• Non-Drive Axles

• Drum & Disc Brake

• Suspension

Our Vision

To be a world-class quality manufacturer of drivetrain products for commercial, off highway and defense application, providing innovative solutions to customers at competitive price that enhance mobility, safety and environment and retain leadership.

Our Strengths

Our ability to develop, manufacture and supply products ahead of market needs help us in maintaining our leadership position. Our commitment to delivering world-class quality products is unwavering, supported by key pillars that drive our business forward:

• Decades of Expertise: With over 43+ years of experience, particularly in the Indian and Asian markets, we possess invaluable market insights and a keen

understanding of customer requirements. Our emphasis on innovation and cost-effective solutions ensures that our customers can trust in the reliability of our offerings.

• Technological Leadership: Our skilled workforce and technical prowess empower us to provide tailor-made products and services to our clientele. Additionally, our joint venture with Meritor Heavy Vehicle Systems LLC, USA, positions us at the forefront of technological leadership. During FY 2024-25, we have introduced MS185 our flagship product to additional customers and able to ramp up the volumes, providing a competitive advantage.

• Relentless Focus on Quality: We continuously elevate our quality standards through the adoption of internationally acclaimed methodologies such as TPM, Built in Quality, 5S, and Six Sigma processes. Our commitment to zero tolerance for defects is ingrained within our teams, ensuring that only the highest quality products reach our customers. We have embraced Total Productive Maintenance (TPM) as a cultural ethos to improve process consistency and, consequently, enhance quality.

• Best in-Cl ass Facilities: With state-of-the-art manufacturing facilities boasting advanced gear cutting technology such as Face Hob machines and Robotic Welding processes, along with a new axle assembly line integrated with Industry 4.0 technologies featuring digital interlocks and robotic painting, we remain committed to delivering products of unparalleled quality and reliability.

• Esteemed Clientele: With a broad client base across India and an expanding foothold in global markets such as China, USA, France, Italy, Brazil, and beyond, we are committed to nurturing strong partnerships. We leverage the latest technological solutions, including e-Axle, to support the manufacturing of electric vehicles, thus staying ahead of industry trends and meeting evolving customer needs.

Our Certifications

• Certified with ISO 14001:2015 for Environmental Management and ISO 45001:2018 for Occupational Health and Safety, showcasing our dedication to sustainability and workplace safety.

• Awarded Level-2 certification from JUSE, Japan for adhering to the 5S Standard, with our commitment to excellence reaffirmed through a re-certification audit by QCFI in collaboration with JUSE, Japan.

• Certified for IATF 16949:2016 - Quality

Management System.

• Total Heat Treatment Process is certified with CQI 9.

• Overall Welding processes certified with CQI 15.

Awards and Recognitions

We have been acknowledged by various institutions

and customers for our ongoing endeavours to enhance

operational excellence and provide top-tier products:

• Customer UD Trucks SUPPLIER AWARD - 2024 for returnable and reusable UD - Steel pallet Implementation.

• Recognised as the "Best Supplier for Daily Work Management" during Quality Month Nov-2024 by TATA Motors.

• Recognised as the Best Horizontal deployment & Best QC Story Competition 1^st Runner-up" by TATA Motors

• Enterprise Growth Awards 2025 from Deloitte India

SWOT Analysis

Strengths

• Advanced product engineering backed by modern, technology-driven manufacturing infrastructure.

• Proven expertise and leadership in the design and development of Axles and Brakes.

• Recognised as a leading manufacturer of Rear Drive Axle Assemblies in India, with consistent growth in export volumes.

• Enhanced quality and operational efficiency driven by the implementation of global best practices across production lines.

• Broad and diversified customer portfolio with deep- rooted, long-standing client relationships.

Opportunities

• Rising demand for technologically advanced and alternative fuel-compatible vehicles creating avenues for component innovation.

• Expanding domestic and international markets offering opportunities for volume growth and geographic diversification.

• Anticipated capacity expansion by OEMs expected to drive demand for high-performance auto components.

• I ncreasing focus on localisation by global players may lead to greater integration of Indian component manufacturers in global supply chains.

Weaknesses

• Vulnerability to cyclical slowdowns within the automotive sector, affecting order flows and capacity utilisation.

• High capital intensity and interest burden potentially impacting financial flexibility and investment capacity.

• Limited presence in premium or high-margin product categories in some segments.

Threats

• Escalating import costs of raw materials and components due to currency volatility and global supply chain disruptions.

• Rising competition from global OEMs and International Equipment Manufacturers (IEMs) setting up local manufacturing units.

• Rapid technological evolution may lead to product obsolescence, requiring continuous investment in R&D and upskilling.

• Rising geopolitical tensions and the potential reintroduction or increase of tariffs (e.g., Trump Tariffs) may impact cost structures and export competitiveness.

Operational Highlights of FY 2023-24

At AAL, we have adopted cutting-edge equipment and technology to deliver world-class products that meet global requirements. During the year under review, we have invested in advanced technology equipment and equipment upgrades for our production lines to meet new models and variants, with a focus on improving productivity, maintaining flexibility, and quickly responding to varying volume and variant demands.

Gear Line Key Improvements

Our CNC gear line is equipped with cutting-edge gear manufacturing equipment that adheres to global standards. We have implemented a fully-closed loop system with prediction to counter heat treatment distortion, allowing us to produce gears that meet the highest standards. With digitised masters and the ability to map heat-treated gear parts, we are able to produce precision parts that meet exact specifications.

We have also collaborated with blade suppliers to develop special ultrafine carbide blade materials with special coatings, improving speeds and feeds and significantly enhancing productivity. Additionally, we have installed a new bore turning machine for gear bore and back face grooving to support our growing export demand. These investments in equipment and processes have enabled us to maintain our position as a leading provider of high-quality gears for global markets.

Industry 4.0 Implementation

Our Axle assembly line and Housing Line 1 has been enabled with Industry 4.0. This enhances our capability to eliminate potential losses and improve Overall Equipment Effectiveness (OEE) and also supports in product and Part traceability. We are in process of evaluating investment towards digitizing and automating the production line with latest technology to improve the productivity and quality.

Total Productive Maintenance (TPM) Initiatives

Over the past four years, we have embraced the principles and practices of Total Productive Maintenance (TPM) to enhance safety, quality, and productivity. By systematically identifying and mitigating operational inefficiencies, we have strengthened our processes and improved overall efficiency.

Our commitment to TPM has delivered significant results. Following a rigorous stage assessment by the Japan Institute of Plant Maintenance (JIPM), our Mysore Plant was honored with the TPM Excellence Award in March 2024—a testament to our dedication to continuous improvement.

We continue to advance in our TPM journey, scaling best practices across our satellite units and reinforcing our operational excellence. Key initiatives include:

• TPM System Expansion: Horizontal deployment of TPM across our satellite units at Jams hedp ur and Panth Nagar.

• 5S Implementation: Certification and execution of the 5S system at Jamshedpur and Panth Nagar unit to optimize workplace organization and efficiency.

• HSE ISO Standards Compliance: Progressive horizontal implementation and certification of HSE ISO standards across satellite units, beginning with awareness training, followed by continued execution.

These initiatives reinforce our commitment to operational excellence, sustainability, and workplace safety, ensuring a structured approach to productivity and performance enhancement.

Market and Business outlook

Indias burgeoning auto market is on track to achieve a significant milestone, with forecasts indicating a staggering value of USD 350 billion by 2028. This growth trajectory is propelled by several factors, including escalating income levels, rapid urbanisation, and the expanding purchasing power of the middle class. Leveraging our profound understanding of real-world applications, we are poised to capitalise on this market expansion. By introducing key new products, we anticipate not only bolstering our market share but also gaining a competitive edge. Furthermore, investments in the modernisation of our gear and housing manufacturing lines will enhance productivity and optimise costs, enabling us to meet peak market demands. Implementation of TPM activities at our JSR and PNR plants is poised to yield longterm benefits. Our overarching objective is to surpass market growth by introducing innovative products while maintaining a steadfast focus on cost competitiveness, productivity, and quality.

Financial Performance

Key highlights	FY 2024-25	FY 2023-24	FY 2022-23	FY 2021-22	FY 2020-21
Total Income ( Million)	21,047.52	22,448.83	23,286.20	14,948.78	9,126.48
Profit before Depreciation & Tax ( Million)	2,442.58	2593.4	2,594.67	1,364.68	661.68
Profit After Tax(? Million)	1,555.35	1,661.55	1,620.29	743.58	227.30
Earnings Per Share (?)	102.92	109.95	107.22	49.2	15.04

 

Key Financial Ratios	2024-25	2023-24	If there is change of 25% or more as compared to the immediately previous financial year, detail explanation is provided
Debtors Turnover	5.2	5.2	The percentage clause does not equal to or more than 25% as compared to the immediately previous financial year
Inventory Turnover	6.2	6.6
Interest Coverage Ratio	83.2	99.0
Current Ratio	3.1	2.9
Operating Profit Margin (%)	11.9	11.8
Net Profit Margin (%)	7.5	7.0
Return on Capital Employed (%)	21.4	25.1
Return on Net Asset (%)	22.0	25.6
Return on Net Worth (%)	16.6	19.9
Debt Equity Ratio (%)	0.02	0.02	The outstanding debt as on 31st March 2025 is NIL.

Tax Transparency and Reporting

We began publishing an annual Tax Transparency Report from last financial year. The Tax Transparency Report is a voluntary disclosure we publish on our website to cater to the information needs of all our stakeholders. We prioritize corporate governance and transparency in managing our tax affairs. Tax transparency report can be accessed in our website www.autoaxle.com/governance

Quality Management

Our commitment to achieving world-class production quality, underpinned by the adoption of advanced manufacturing systems and globally recognised best practices. Our operations are driven by a robust Quality Management System (QMS) and Lean Manufacturing System (LMS), ensuring seamless integration of the Built-In Quality (BIQ) approach while systematically reducing coolant, oil, and chip (COC) waste.

To enhance process efficiency and standardization, we have embedded the Automotive Axles Production System (APS) into our workflow, complemented by the disciplined application of Gemba, Six Sigma, and 5S methodologies all of which contribute to sharper execution and continuous process improvement.

Our focus on quality is further reinforced by globally benchmarked systems and certifications, including:

• IATF 16949:2016 for automotive quality management

• CQI-9 for heat treatment process control

• CQI-15 for welding process standards

• OHSAS for comprehensive environmental, health, and safety management

In our journey towards becoming a benchmark organization in the manufacturing industry, we have launched a companywide Total Productive Maintenance (TPM) Excellence Program. This initiative is designed to drive operational excellence, enhance asset efficiency, and create a sustainable competitive edge that positions us as industry leaders.

Human Resource Management

Our employees are not just part of our workforce; they are the vital pulse of our organization. We are dedicated to creating an inspiring and positive work environment where every employees voice is heard. By actively addressing employee concerns and promoting a culture rooted in open communication, we shape and nurture a robust company culture. Our commitment extends to attracting and retaining skilled individuals who can help us build a workforce that is both dynamic and dedicated, ultimately driving the success of our organization. Furthermore, during significant changes, we guide our organization through effective change management processes, ensuring that both the organization and its employees are engaged in creating and implementing strategies that generate value.

Our Focus Areas

1. Building a Diverse Talent Pool: Fostering diversity is a cornerstone of our strategic priorities. We believe that a diverse workforce brings a wealth of perspectives, enhancing creativity and driving innovation. We actively seek to attract individuals from various backgrounds to enrich our organizational tapestry.

2. Comprehensive Employee Development Initiatives: We are committed to the professional growth of our employees. Our structured onboarding programs ensure that new hires feel welcomed and prepared, while our continuous learning opportunities—ranging from workshops to online courses—facilitate skill enhancement. We also tailor career development plans to align employees aspirations with the organizations objectives, helping them navigate their career paths effectively.

3. Fostering an Agile and Ethical Culture: We prioritize creating an agile and ethical workplace that encourages inclusivity, resilience, and innovation. Our culture empowers employees to share ideas freely, fostering a collaborative environment where every individual feels included and valued.

4. Elevating Performance through Creativity: We strive to cultivate an environment that not only encourages but actively celebrates innovation and creativity. This supportive atmosphere empowers our teams to develop groundbreaking products, services, and solutions that meet the evolving needs of our customers.

5. Building Strong Employee Relations: Our commitment to strong employee relations is reflected in our approach to engagement. We focus on creating approachable, empathetic communication channels that facilitate conflict resolution, thereby maintaining a harmonious and productive work environment. This proactive strategy significantly boosts employee morale and loyalty.

The Vibrant Culture at AAL:

At the core of our organization lies a vibrant and inclusive culture that we uphold at every level. Our cultural objectives serve as guiding principles, influencing how we interact and operate daily. Above all, we are unwavering in our commitment to treat every employee with respect and dignity. We strive to create an environment where each individual feels valued, empowered, and inspired to contribute their best.

Our dedication to continuous improvement drives us towards excellence across all facets of our organization. We continuously seek and implement innovative solutions while refining our processes to better serve our workforce. Our culture promotes a collaborative and performance-driven ethos, wherein teamwork and innovation are recognized as essential elements of our success. Through these fundamental values, we cultivate a dynamic and supportive environment that propels us toward achieving our collective goals and aspirations.

Moreover, we recognize that embracing diversity and inclusion is crucial to our long-term success. We advocate for diversity in all its forms, welcoming unique perspectives and experiences that fuel innovation. By nurturing an inclusive environment where every voice is respected and heard, we harness the full potential of our diverse workforce, allowing us to thrive in a rapidly changing global landscape.

Strategic Talent Acquisition and Retention

Onboarding diverse talents is a foundational aspect of our organizations growth and success. We are deeply committed to integrating diversity and inclusion into our core principles, which fosters a culture of creativity and innovation driven by unique viewpoints and ideas.

The ongoing development and retention of our talent pool are central to our sustained growth. We conduct thorough skill assessments and competency mapping to ensure that each employees strengths are effectively utilized across the organization. Collaborating closely with employees, we craft personalized career development plans that align their professional goals with the evolving needs of the organization. Our comprehensive training programs encompass both technical skills and soft skill enhancement, ensuring continuous learning and upskilling opportunities.

In addition, we recognize the value of diverse experiences and actively promote job rotations that allow employees to broaden their skill sets. We invest in nurturing future leaders through executive mentorship and coaching programs, with the goal of developing essential leadership skills. Ultimately, our commitment to diversity, talent development, and inclusive leadership drives our organizational success and resilience in a competitive business landscape.

Commitment to Employee Engagement

We place a high priority on fostering a collaborative and motivated work environment, exemplified by our commitment to the One AAL concept, which unifies our employees across all our locations.

1. Employee Surveys: To ensure we remain attuned to our employees needs and satisfaction levels, we conduct regular surveys. These assessments provide valuable insights into employee perspectives while allowing us to identify areas for improvement.

2. Inclusive Culture Initiatives

• Family Day Events: We host Family Day events that invite employees to bring their families to experience the workplace firsthand. These occasions foster transparency, trust, and a sense of community as families celebrate employee milestones and achievements alongside their loved ones.

• Cultural Celebrations: We honour cultural diversity by celebrating various traditions and customs through local festivals. These events not only enrich our workplace but also promote understanding and appreciation of different cultures.

• Recreational Activities: We organize annual sports and cultural days filled with a variety of indoor and outdoor activities. These events encourage interaction among employees from different departments, thereby fostering a more cohesive and integrated work environment.

• Summer Camp: The 2025 Summer Camp for employees children was thoughtfully organized around the theme of sustainability, with a special emphasis on reducing plastic usage. Each participant received a customized activity kit to support their involvement throughout the program. The camp featured a diverse range of engaging and educational sessions designed to spark creativity, encourage eco-conscious behaviour, and support holistic development. Beyond active participation, the initiative aimed to nurture a lasting appreciation for nature and instill a sense of environmental responsibility in the young minds.

Health & Wellness Programs

• Saamarasya: Our NLP-based program, Saamarasya, aims to enhance positivity and promote solution- oriented thinking among our employees. This initiative is designed to reinforce a culture of wellness and mental resilience throughout the organization.

• This enhanced version elaborates on specific details and provides clearer, more vivid descriptions, while still conveying the original information and intent.

• Soukhya: An activity based, physical well being program aims at improving fitness of our employees and safeguarding everyone from lifestyle disorders. The initiative engages employees in various physical activities that are focused as well as entertaining. Trained wellness experts have been involved to conduct the program and enhance its effectiveness.

Feedback & Communication: At our organization, we have proactively established engaging town hall meetings that occur on a quarterly basis, providing a dynamic platform for employees to share their thoughts and ideas. These sessions are designed to promote open dialogue between employees and the leadership team, ensuring that everyone is informed about critical company updates, strategic initiatives, and relevant developments in our industry landscape. By fostering a culture of transparency, we encourage every team member to contribute to our shared goals and vision.

Employee Recognition and Rewards

• Employee Appreciation Day: Celebrating our employees achievements is vital to cultivating an engaged and motivated workforce. Therefore, we celebrate "Employee Appreciation Day" on the first Friday of each month, creating an atmosphere of recognition and gratitude. During this lively event, we shine a spotlight on employees who have made significant contributions

to improving key performance indicators such as productivity, quality, and safety. The day features a celebratory ceremony where employees receive awards across multiple categories, including On-the-Spot Awards for immediate contributions, Kaizen Awards for continuous improvement efforts, Quality Awards for excellence in product or service delivery, and Safety Awards recognizing adherence to safety protocols.

• Best Employee of the Year Award: We also present the prestigious Best Employee of the Year award, which honors the individual who consistently demonstrates exceptional performance throughout the year. A panel of cross-functional leaders meticulously reviews nominations submitted by peers and supervisors, evaluating each candidate on their technical expertise, notable achievements, and capability to inspire teamwork. The recipient of this award not only receives a trophy during an annual gala event but is also recognized in our company newsletter and on our internal website, further inspiring others to pursue excellence in their roles.

Learning and Development: In recognition of the rapid changes within the business environment, we place a strong emphasis on continuous Learning and Development. We have dedicated substantial resources to provide our workforce with extensive training programs that encompass both technical skills—such as advanced software training, project management methodologies, and industry- specific certifications—as well as essential soft skills, including effective communication, conflict resolution, and leadership capabilities.

In addition, we understand the importance of developing future leadership within our organization. To this end, we offer specialized development programs such as Supervisory Development, Managerial Development, and Leadership Development aimed at empowering high-potential employees. These programs not only equip participants with advanced skill sets but also provide opportunities for mentorship, experiential learning, and networking with senior leadership, thereby preparing them for positions of greater responsibility.

Diversity, Equity & Inclusion Initiatives (DEI):

Our commitment to Diversity, Equity, and Inclusion (DEI) is a cornerstone of our organizational culture. We strive to cultivate a workplace where diverse perspectives are celebrated, equity is prioritized, and all employees feel included and valued. By actively promoting DEI, we empower our workforce to harness its full potential, drive innovation, and build stronger connections with our clients and communities.

A noteworthy initiative within our DEI framework is our strategic effort to integrate women into core shop floor production roles, which has been a long-term endeavor over the past few years. This initiative not only enhances gender diversity within our workforce but also actively seeks to challenge and reshape traditional gender roles in the manufacturing sector. We are proud to report that through our ongoing efforts, female representation in our workforce has significantly increased to 14%, a clear testament to our commitment to fostering a more inclusive environment.

Policy for Women Employees: We are steadfast in our dedication to creating an inclusive workplace where every employee, regardless of gender, caste, creed, or background, is treated with equality and respect. To support our commitment, we have implemented proactive policies designed to address the unique challenges that women face in the workplace, ensuring a safe and secure atmosphere for all.

We have established regular communication channels, including monthly check-ins and an anonymous feedback system, which allow women employees to voice their concerns and suggestions directly to management, enhancing the overall workplace experience. To mark International Womens Day on March 8^th, 2025, we organized a vibrant panel discussion under the theme "Accelerate Action". This event provided a valuable platform for women employees to engage with senior management, sharing insights on equity, career growth opportunities, and the necessary support for their professional development.

In line with our commitment to diversity and inclusion, we also conduct targeted focus group meetings for diverse employees to connect with senior women leaders on a more personal level. These gatherings serve as constructive forums for employees to share their experiences, perspectives, and career aspirations openly. By investing in these initiatives, we aim to foster a supportive and positive environment where every employee feels empowered to contribute their unique insights and talents, ultimately driving our collective success.

Occupational Health Centre (OHC)

Prioritising the health and safety of our employees, AAL maintains a dedicated Occupational Health Centre (OHC) staffed with qualified medical professionals and equipped with emergency medical resources to address industry- specific health and safety concerns. Monthly health programmes conducted by our doctors educate employees on work-related health hazards and promote a healthy work-life balance. Our fully equipped state-of-the-art OHC facilities ensure prompt response to emergencies, including those arising from pandemic-related health challenges. Additionally, we have a company-owned ambulance ready for transportation in case of any casualties, with tie-ups established with major hospitals in Mysuru for referred cases treatment.

Safety, Health and Environment (SHE)

We are deeply committed to protecting the safety, health, and environmental well-being of our people and the communities in which we operate. Our SHE framework takes an integrated and proactive approach starting from identifying

risks associated with workplace activities to implementing preventive measures, ensuring regulatory compliance, and fostering a culture of continuous improvement.

By embedding SHE principles into our operations, we not only safeguard our workforce but also strengthen business resilience, reduce risk-related costs, and align with the expectations of our stakeholders. Our focus on SHE helps us drive sustainable growth while maintaining trust and accountability across our ecosystem.

Safety

At AAL, safety remains a cornerstone of our operations. We continuously enhance safety protocols, integrating structured scientific and engineering approaches to improve workplace safety. Key initiatives include strengthening our LockOut & TagOut system, observing National Safety Day and Chemical Disaster Prevention Day to promote awareness, and revising our HSE policy & procedure for stricter compliance.

Infrastructure upgrades, including plant machinery layout approvals and enhanced safety signage, warnings & visuals, further reinforce our commitment. We have also developed a pool of certified internal auditors through specialized ISO- 45001 :2018 training and ensured regulatory compliance by renewing crucial licenses such as PESO certification for gas cylinder storage & Diesel Bulk Storage.

Digitalization efforts are underway to streamline the Manual Work Permit System, while emergency preparedness has been rigorously tested through onsite emergency mock drills with different assumed scenario in collaboration with industry and District crisis management groups. Proactive steps, such as the introduction of anti-skid mats, hazard signages, mapped PPE requirements, and the issuance of tested powered safety goggles, ensure a safer work environment.

Additionally, the On-Site Emergency Plan has been reviewed and approved by regulatory authorities, and critical equipment like LPG bulk storage bullets have undergone hydro-static pressure testing and certification. Through these comprehensive measures, AAL continues to uphold the highest safety standards, fostering a secure and compliant workplace for all.

Health

• Each year, we prioritise the health of our workforce by conducting annual and bi-annual medical check-ups for all employees, including new recruits, to ensure their well-being. These comprehensive check-ups encompass vision and colour vision tests, audiometry, skin assessments, and ENT examinations.

• Emphasised on holistic wellness, we organised a dedicated awareness session for women employees, enlightening them on the significance of proper nutrition and fitness. We believe such initiatives empower employees to excel in both their professional and personal lives.

Environment

At AAL, we remain steadfast in our commitment to environmental protection, continuously enhancing our sustainability efforts through strategic initiatives.

To optimize water conservation, we have expanded our rainwater harvesting capacity by constructing an additional storage pond with 1000KL capacity, contributing to our goal of sustaining 70% water positivity. Waste management has been strengthened through a scientific approach to storage, handling, and disposal, mitigating risks of accidental spillage and land contamination.

Aligned with our net-zero objectives, we have achieved a major milestone—80% of our energy consumption now comes from renewable sources. Observing World Environment Day helped reinforce environmental awareness among employees, complemented by competitions and recognition programs.

Infrastructure improvements include the installation of electromagnetic water flow meters for borewell freshwater consumption monitoring, dual media filters to enable rainwater reuse, and renewed compliance certifications such as the Borewell NOC from KGWA Bangalore. Additionally, 30 qualified internal auditors have been certified in ISO-14001:2015 EMS, ensuring adherence to best environmental practices.

Biodiversity preservation has been a focus, with professional documentation of rare species, migratory birds, and native flora within our premises. We also initiated large-scale tree plantations in the Bandipur Forest buffer zone, reinforcing our ecological responsibility. Employee engagement extended to sustainability actions, such as participating in the "Clean Drive" campaign led by KSPCB Mysuru.

Further ESG efforts include a materiality assessment involving key stakeholders, ongoing digital tool development, and strengthened infrastructure for non-hazardous waste storage to prevent environmental contamination.

On continual basis, Carbon footprint Monitoring. Measurement & Analysis is being carried out across our operations to reduce & optimise the Green House Gas Emissions.

Through these initiatives, AAL continues to uphold its commitment to environmental stewardship, fostering a greener future while ensuring regulatory compliance and sustainable growth.

Proactive Risk Management

We believe effective risk management is a strategic enabler that supports long-term value creation. Our risk framework is designed not only to safeguard our business from uncertainties but also to equip us with the agility to navigate evolving challenges and capitalize on emerging opportunities.

Key risk areas and strategic responses

Industry Risk

Our business is inherently linked to the performance of the automotive sector. A slowdown in the markets where our customers operate due to macroeconomic conditions, regulatory changes, or shifting consumer trends could directly impact our demand pipeline and revenue visibility.

Our Response

• Continuous monitoring of global automotive market trends

• Deployment of a diversified, resilient business model

• Long-term customer engagements to mitigate demand volatility

• Development of value-driven offerings aligned with customer expectations

• Focus on enhancing competitiveness through excellence in quality, cost, and delivery

Cost inflation risk

The prices of critical raw materials are subject to global supply chain dynamics, commodity market fluctuations, and inflationary pressures. An increase in input costs can adversely affect our profitability if not effectively managed.

Our Response

• Strategic procurement alliances to ensure cost advantages

• Lean manufacturing initiatives to improve cost efficiency

• Regular process optimisation and waste reduction

• Ongoing focus on driving structural cost improvements Technology Risk

In a rapidly evolving automotive landscape, the inability to innovate or adapt to changing technological expectations and customer preferences can erode market relevance and impact future growth.

Our Response:

• Active scanning of technological advancements and industry trends

• Commitment to continuous product and process innovation

• Investments in future-ready technologies and digital capabilities

People Risk

Our growth depends on the availability and retention of skilled, motivated talent. Challenges in attracting, developing, and engaging employees can result in talent gaps, reduced productivity, and a weakened organisational culture.

Our Response:

• Strategic focus on talent retention and leadership development

• Performance-linked rewards and recognition systems

• Strong values-led people practices from hiring to onboarding

• Comprehensive employee engagement and wellbeing initiatives

Internal Control Systems

Your Company has established adequate internal control procedures, commensurate with the nature of its business and size of its operations. These controls have been designed to provide reasonable assurance regarding the maintenance of proper accounting controls for ensuring orderly and efficient conduct of its business, monitoring of operations, reliability of financial reporting, accuracy and completeness of the accounting records, the timely preparation of reliable financial information, protecting assets from unauthorised use or losses, prevention and detection of frauds and errors, and compliances with regulations. Your Company has continued its efforts to align all its processes and controls with global best practices.

To provide reasonable assurance that assets are safeguarded against loss or damage and that accounting records are reliable for preparing financial statements, the Management maintains a system of accounting and controls, including an internal audit process. Internal controls are evaluated by the Internal Audit team and supported by Management reviews. All audit observations and follow-up actions thereon are tracked for resolution by the Internal Audit function and reported to the Audit Committee. Continuous training for the enforcement of AAL Code of Business Conduct is conducted across the organisation. The Code covers transparency in financial reports, ethical conduct, regulatory compliance, conflicts of interest review and reporting of concerns. Antifraud programmes including whistle blower/vigil mechanisms are operative across the Company.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objective, projections, estimates and 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 government regulations, tax laws and other statutes and incidental factors.