Banco Products India Ltd Management Discussions

The Companys Management presents its perspective on the operating and financial performance for the financial year 2025-26, along with an outlook on the business performance for the coming years, as follows:

Industry Structure and Developments: Global Economy and Its Outlook:

The global economy in FY 2025-26 faced headwinds from higher trade barriers and elevated uncertainty, which was offset by tailwinds from technology-related investment, accommodative financial conditions, and fiscal and monetary support. However, towards the end of the year, the underlying environment has become fragile and less predictable than it appeared at the start of the year on account of risks related to geopolitical disruption, energy market volatility, and the possibility of renewed trade fragmentation. The IMFs April 2026 World Economic Outlook notes that, under a limited-conflict assumption, global growth is projected to slow down at 3.1% in 2026 and 3.2% in 2027, but it also stresses that the war in the Middle East has raised commodity prices, firmed inflation expectations, and tightened financial conditions that led to huge supply chain disruptions globally.

The growth pattern remains uneven across regions. Advanced Economies are expected to expand at a relatively subdued pace, while Emerging Markets and Developing Economies continue to outperform the Advanced Economies, supported by stronger domestic demand, younger demographics, and industrialization. For export-oriented manufacturers this divergence matters because it changes the relative strength of end-markets, the cost of capital, and the risk profile of global customers.

The IMFs limited conflict baseline suggests growth of 3.1% in 2026. The most important feature of the global outlook is that it is now scenario driven rather than single path. A base case of modest growth can quickly shift to a slower and more inflationary outcome if energy prices remain elevated or if trade routes are interrupted for longer than expected.

Indian Economy and Its Outlook:

India continues to stand out as the fastest growing major economy, and the latest official national accounts reinforce that position. The Ministry of Statistics and Program Implementations Second Advance Estimates released on February 27, 2026 state that real GDP is estimated to grow by 7.6% in FY 2025-26, after 7.1% growth in FY 2024-25. These figures confirm that India is still growing faster than most large economies, even as the global environment becomes less favorable. The composition of growth remains important. Domestic consumption is supported by rising incomes, better financing conditions, and a gradual improvement in consumer confidence. Public investment remains a powerful anchor because capex has a broad multiplier effect on construction, logistics, industrial activity, and automobile demand. Manufacturing also contributes more meaningfully than in earlier cycles, which is important because the countrys medium-term industrial strategy depends on deeper localization and stronger export competitiveness.

Indias outlook for the next 12 to 24 months remains structurally strong. Growth should continue to outpace the global average, supported by domestic demand, capex, services, and a young consumer base. The main risk is not a collapse in activity but a squeeze in margins and spending power if energy prices stay high. For industrial companies, the best strategy in this environment is not to assume a benign macro backdrop, but to plan for moderate growth with sharper cost discipline. Indias manufacturing momentum has remained encouraging. The shift away from China-centric sourcing has also helped India gain mindshare with global manufacturers. That said, this is not an automatic gain; manufacturers need quality, reliability, and delivery discipline to convert opportunity into export share. On the policy side, the Reserve Bank of India held the repo rate unchanged at 5.25% in its April 8, 2026 policy meeting and retained a neutral stance. Official CPI data show that inflation was 2.75% in January 2026 and 3.4% in March 2026, which means price pressures remain manageable but are moving upward from earlier lows.

The automotive and industrial thermal management industry is undergoing a transformation driven by:

-Cleaner emission norms (e.g., CPCB IV+, BS-VI, Stage V)

-Growing demand for energy efficiency and lightweight components

-Increased outsourcing by global OEMs to low-cost manufacturing countries like India

Demand development:

The demand development of your companys products and services is directly dependent on the development in the user industries. Investment towards increasing production capacity and adopting new age technologies, both for handling additional business volume changes as well as product diversity remains to be the norm.

Automotive:

The Indian automotive industry maintained strong momentum in FY26, driven by robust domestic demand, infrastructure development, improving rural consumption, and continued economic growth. Recovery in exports and sustained investments by OEMs further strengthened industry prospects. While the sector continues to navigate commodity price fluctuations, evolving regulatory requirements, and the transition towards sustainable mobility, the long-term outlook remains positive. Auto-component manufacturers are well positioned to benefit through innovation, localization, technology development, and close collaboration with OEMs.

Agriculture:

India remained one of the fastest-growing major economies in FY26, with strong rural demand supporting the agricultural sector. A favorable monsoon, higher government spending on agriculture, increasing farm mechanization, improved MSP realization, and continued adoption of modern farming practices contributed to healthy demand for agricultural equipment. The Government continued to focus on strengthening the agriculture ecosystem through investments in irrigation, digital agriculture, rural infrastructure, and farm mechanization. These initiatives, coupled with improving farm incomes and easier access to finance, created a positive outlook for the tractor and farm equipment industry. India continued to offer one of the highest growth opportunities globally for agricultural machinery and allied products. These factors position India as one of the most attractive growth markets globally for the agricultural machinery industry.

Industrial:

India maintained strong industrial growth in FY26, driven by robust GDP growth, increased public and private capital expenditure, and continued investments in infrastructure. Government initiatives such as PLI, PM Gati Shakti, and Make in India supported manufacturing expansion, while rising demand from sectors including power generation, construction, mining, railways, and commercial vehicles created significant opportunities for industrial equipment and engineering products.

Bespoke Engineering Approach:

Banco Group adopts a bespoke engineering approach focused on co-creating solutions for its customers. By integrating feedback from real-world usage and leveraging advanced simulation tools, the Company develops customized, cost- effective, and technically optimized products. This agility and customer-centricity are key differentiators in serving both ICE and EV platforms.

Electric Vehicle (EV) Segment:

Indias EV market continued its strong growth trajectory in FY26, driven by supportive government policies, increasing investments in domestic manufacturing, expanding charging infrastructure, and rising consumer adoption. Growth across electric two-wheelers, passenger vehicles and buses strengthened the outlook for the sector. Continuous improvements in battery technology and charging infrastructure are expected to further accelerate EV penetration. Banco remains actively engaged with OEMs in developing innovative thermal management solutions and products for next-generation electric vehicles.

To address emerging needs in EVs and alternative fuel vehicles, the Company had incorporated a wholly owned subsidiary, Banco New Energy Cooling Systems Limited (BNCL). Commercial production of heat exchangers for locomotives at BNCLs new plant in Anki, Gujarat commenced on 12^th October 2023, marking a significant milestone in this strategic direction.

Operations and Manufacturing:

Given the cost-sensitive nature of the industry, the Company continues to:

-Strengthen its vendor base

-Expand in-house component manufacturing

-Invest in low-cost automation and capacity enhancement

These initiatives are aimed at improving cost competitiveness, scalability, and delivery speed in response to evolving customer expectations.

STRENGTHS:

The Companys core strengths continue to arise from its established market position, engineering depth, long-standing customer relationships and diversified business model. These strengths provide a strong platform for sustained growth, operational resilience and enhanced value creation across domestic and international markets.

-Established legacy and trusted brand: With more than six decades of industry experience, the Company has built a strong reputation in thermal management and sealing solutions. Its consistent focus on quality, reliability and customer service has strengthened con dence among OEMs, replacement-market partners and global customers.

-Diversi ed customer, product and geographic base: The Company serves a broad range of customers across automotive, agriculture, construction, industrial, power generation and aftermarket segments. Its presence across domestic and export markets reduces overdependence on any single customer, sector or geography.

-Strong engineering and R&D capabilities: In-house design, testing, validation and product development capabilities enable the Company to offer customized, cost-effective and high-performance solutions aligned with changing emission norms, operating conditions and customer requirement increasing as various sophisticated R & D Equipments for future ready.

-Long-standing OEM relationships: Strategic relationships with leading domestic and global OEMs provide visibility into evolving technology trends and support continued participation in new platforms and product-development programmes.

-Manufacturing depth and operational agility: Modern manufacturing infrastructure, integrated processes and responsive production planning allow the Company to manage product complexity, customer schedules and demand

uctuations effectively inspired by automation in each area.

-Quality systems and certi cations: The Companys adherence to stringent quality systems and internationally recognized standards supports repeat business and enhances its credibility as a reliable long-term supplier.

-Export capability and global reach: A growing international customer base, supported by strategically located subsidiaries and business-development efforts, strengthens revenue diversi cation and improves the Companys ability to serve customers across geographies.

WEAKNESSES:

While the Company continues to maintain a strong competitive position, certain business realities require continued attention. The Company remains exposed to commodity-price movements, particularly in metals and other key inputs, which can affect margins depending on the timing and extent of cost pass-through. Foreign exchange uctuations may also in uence import costs and export realizations. In addition, global logistics disturbances, longer lead times and dependence on selected imported materials can create inventory and working-capital pressures. The Company continues to mitigate these challenges through strategic sourcing, supplier development, nancial hedging where appropriate, inventory planning and disciplined cost-control initiatives.

OPPORTUNITIES:

-Growth in Indian automotive and industrial sectors: Continued expansion in automotive, agriculture, construction, infrastructure and industrial activity creates opportunities for demand growth across existing and adjacent applications.

-Technology transition in mobility: The shift towards higher thermal ef ciency, compact design, emission compliance, alternative fuels and electric mobility provides scope for deeper engagement with OEMs on advanced cooling and heat-management solutions.

-New sectors and applications: The Company is well positioned to expand its presence in electric vehicles, locomotives, power generation equipment, compressors, gen-sets, agricultural machinery, construction equipment and other industrial applications where reliable cooling systems are critical including new applicability.

-Expansion with global OEMs: Global customers are increasingly evaluating India as a competitive sourcing base. The Companys engineering capability, quality track record and cost competitiveness can help convert RFQs and development enquiries into long-term business.

-Aftermarket potential: A growing vehicle population, increasing awareness of quality replacement parts and stronger service networks provide attractive opportunities in the aftermarket segment.

-Digitalization and automation: Investments in process automation, data visibility, manufacturing systems and digital tools can improve productivity, quality consistency, traceability and decision-making across operations.

THREATS, RISKS AND CONCERNS:

The Company operates in an environment marked by competitive intensity, technology change, input-cost volatility and geopolitical uncertainty. Competition from domestic and international suppliers may affect pricing, margins and customer retention. Volatility in copper, aluminium and other metals, along with foreign exchange movements, can impact procurement costs and pro tability. Supply chains continue to remain exposed to geopolitical developments, trade restrictions, freight volatility, natural disasters and other external disruptions.

Changing regulations relating to emissions, safety, environment and sustainability may require continued investments in engineering, testing and compliance. Customer expectations are also evolving towards lighter, more ef cient and application-speci c products suitable for new-generation vehicles and equipment. As the Company increases its use of digital systems, cybersecurity, data protection and IT resilience remain important areas of focus.

Mitigation Measures

-Diversifying vendors and developing alternate sources for critical materials.

-Monitoring foreign exchange and commodity exposures and using hedging mechanisms where prudent.

-Maintaining strategic inventory and strengthening supply-chain visibility.

-Investing in R&D, product development and regulatory compliance capabilities.

-Enhancing manufacturing productivity through automation, process improvement and waste reduction, driving cost control measures across the organization.

-Strengthening cybersecurity, internal controls and business-continuity preparedness.

-Regularly reviewing risks through management oversight, audits and governance processes.

The Company remains committed to protecting stakeholder value through operational resilience, disciplined risk management, innovation and continuous improvement.

Technology and Innovation

Technology and innovation remain central to the Companys long-term competitiveness. The Company continues to invest in product engineering, process improvement, automation and testing capabilities to address evolving emission norms, ef ciency requirements and customer applications. Development efforts are focused on advanced thermal-management solutions for automotive, off-highway, agricultural, power-generation and industrial equipment, including applications aligned with BS-VI, BS-IV/Trem V and CPCB IV+ requirements and newer applications.

The Company is also strengthening its capabilities in embedded systems, application-speci c solutions, digital tools and system integration, thereby complementing its mechanical-engineering expertise and positioning itself as a more complete thermal-systems partner. Continuous upskilling of employees supports this technology-led approach and helps build a future-ready organization.

Internal Control and its Adequacy:

The Company has an adequate system of internal controls commensurate with the nature and scale of its operations.

The internal-control framework is designed to ensure proper maintenance of accounting records, reliability of nancial and operational information, safeguarding of assets, authorization of transactions and compliance with applicable laws, regulations and internal policies. The Company has clearly de ned responsibilities, reporting lines and approval mechanisms to support effective governance.

Operational and nancial performance is reviewed periodically through monthly, quarterly and annual management reviews. The internal audit function reviews operational controls, process compliance, risk-management practices and the effectiveness of corrective actions. The Audit Committee reviews reports of the internal and statutory auditors, monitors implementation of recommendations and keeps the Board informed of signi cant observations. Normal foreseeable risks to the Companys assets are covered through appropriate insurance arrangements.

Segment-Wise Performance a) The Company is only in one line of business- automobile components. b) The Segment Revenue in the Geographical Segment considered for disclosures are as follows:

- Revenue within India includes sales to customers located within India

- Revenue outside India includes sales to customers located outside India

(Rs. In Crores)

Sales	2025-26	2024-25
Within India	882	764
Outside India	344	323

Information Technology Strategy & Progress

Banco Products has continued to strategically invest in digital technologies to support its vision of global scalability, operational resilience, and data-driven innovation.

1. Strategic IT Vision

Our IT roadmap is aligned with business goals, focusing on enhancing manufacturing ef ciency, improving supply chain agility, and enabling faster, data-driven decision-making across the enterprise.

2. Core IT Infrastructure

-ERP Modernization: Upgraded and strengthened the enterprise resource planning environment through SAP Warehouse Management to improve real-time data processing, inventory visibility, and integration across core business functions.

-Hybrid Cloud Deployment: Adopted a balanced cloud and on-premises infrastructure model by migrating 60% of workloads to cloud/SaaS platforms, improving system availability, scalability, and business continuity while reducing infrastructure risk.

-End-to-End Network Restructuring: Redesigned the enterprise network architecture to enhance connectivity, performance, security, and centralized manageability across locations.

3. Manufacturing & Operations Technology

-IoT Integration: Connected 30% of critical manufacturing equipment with Internet of Things-enabled monitoring to capture real-time operational data, improve maintenance planning, reduce downtime, and enhance production visibility.

-MES Rollout: Initiated pilot deployment of a Manufacturing Execution System across three plants to enable real-time production tracking, improve shop- oor control, and increase manufacturing ef ciency.

4. IT Governance & Compliance

-Service Delivery: Strengthened IT service management through adoption of the ITIL framework, ensuring structured incident handling, service request management, and 98% Service Level Agreement compliance during the reporting period.

5. Cybersecurity Enhancements & Initiatives:

-Next-Generation Firewall and Endpoint Detection: Implemented advanced perimeter and endpoint security tools to monitor threats, block unauthorized access, and protect business-critical systems from cyber risks.

-Cyber Awareness Training: Conducted employee training programs to improve understanding of phishing, password security, safe data handling, and responsible digital behavior.

-Incident Response and Recovery Protocols: Updated procedures for identifying, reporting, containing, and recovering from cybersecurity incidents to improve readiness and minimize business disruption.

-Vulnerability Assessment and Penetration Testing: Performed quarterly security assessments to identify system weaknesses, validate controls, and proactively reduce exposure to cyber threats.

6. Planned Enhancements

-Zero Trust Architecture: Planned transition to a security model where every user, device, and application is continuously veri ed before access is granted, regardless of network location.

-AI-Based Threat Detection and Response: Proposed use of arti cial intelligence and machine learning to detect abnormal activity, prioritize alerts, and accelerate response to potential cyber incidents.

-Advanced Data Leakage Protection: Planned implementation of enhanced Data Leakage Protection controls to safeguard intellectual property, sensitive documents, and con dential business information from unauthorized sharing or exposure.

-PLM Implementation: Planned adoption of Product Lifecycle Management to centralize product design, engineering changes, documentation, and collaboration across the product development lifecycle.

-SAP Version Upgradation: Planned upgrade of the SAP environment to the latest supported version to improve system performance, security, compliance, and access to new business capabilities.

These initiatives underpin our commitment to building a future-ready enterprise that leverages technology as a core business enabler.

Financial performance with respect to operational performance:

The detailed financial analysis of the Companys operations for the year is given in the Boards Report and therefore the same is not repeated. However, some important ratios on the Companys profitability are given below.

Particulars	2025-26	2024-25	Reasons for Significant changes
Operating Profit (PBT)(%)	38	29	Increase in other income including dividend from subsidiary.
Earnings Per Share (EPS) (Rs.)	29	19	Increase in other income including dividend from subsidiary.
Cash Earnings Per Share (Rs.)	31	20	Increase in other income including dividend from subsidiary.
Return on Net worth (PAT) (%)	44	33	Increase in other income including dividend from subsidiary.
Dividend Payout Ratio	51	59
Retained Earnings (Rs. in crores)	908	704	Lower dividend distributed vis-?-vis PAT
Retained Earnings (%)	81	82
Debtors Turnover	4.31	4.62
Inventory Turnover	4.41	4.04
Interest Coverage Ratio	721	139	Lower utilisation of borrowed fund.
Current Ratio	5.13	3.32	Lower utilisation of borrowed fund and FY 2024-25 unpaid dividend paid in FY 2025-26
Debt Equity Ratio	0.00	0.00835

Material Developments in Human Resources:

The industrial relations in all the units of the Company during the nancial year 2025-26 were peaceful and harmonious.

Experienced and motivated employees have been the backbone of the Company. There were 447 people employed in the Company as on 31.03.2026.

Our Company rmly believes that a strong team and a positive work culture are the foundation of sustainable growth. We continuously encourage and train our employees to understand, adopt, and apply the latest technological trends. This empowers them to achieve higher ef ciency in production and quality, while creating greater value and satisfaction for our customers and stakeholders along with individual personal developments.

Training needs are identi ed through a structured and systematic process. Based on these needs, employees are provided with meaningful training and development opportunities in skill enhancement as well as behavioral improvement. This approach helps every individual grow with con dence and ensures that personal development moves in harmony with the overall progress of the organization.

Future Strategy / Outlook:

Your Company will continue to follow a technology led strategy growth plans in both automative, farm and industrial equipment segments. Strengthening supply relationship with current customers by providing newer cooling technology models and sealing gaskets. At the same time breaking of new grounds with new clients above mentioned sectors. With these twin objectives in sight, group continues to add production capabilities plus bring on newer performance products through R & D efforts. To add to improve response time to customers supply expectations, we are adding capacities in internal fabrication and quoting facilities to provide ideal once stop shop services.

Cautionary Statement:

Certain statements made in this report, are forward looking statements and actual results may differ from such expectations or projections about the future, as several factors would make significant difference to the Companys operations such as economic conditions affecting demand and supply, governments regulations, level of competitions prevailing at the relevant time, etc. The Company assumes no responsibility publicly to amend, modify or revise any such statements on the basis of subsequent developments, information or events.