Banco Products (India) Ltd Management Discussions

The Companys Management presents its perspective on the operating and financial performance for the financial year 2024–25, along with an outlook on the business performance for the coming years, as follows:

Industry Structure and Developments:

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

The Indian off-highway industry is transitioning towards Stage V and CPCB IV+ norms, anticipated to be fully implemented by FY 2025–26. This regulatory evolution necessitates agile development of advanced, high-performance cooling systems across a wide array of platforms. Quick turnaround and innovation are becoming industry norms, especially in response to diverse OEM product programs.

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 sector witnessed strong recovery and growth, with increased vehicle sales across categories.

Government infrastructure investments have significantly boosted demand for construction equipment and heavy-duty commercial vehicles. Additionally, OEMs are accelerating the launch of new models to remain competitive.

Agriculture:

The Indian Government has been supporting accelerated development of agriculture sector with higher grain support prices which has stimulated demand for tractors and combined harvesters.

Industrial:

Demand is increasing in all sectors due to faster pace of GDP growth and government spending on roads and the launch of large infra projects resulting in downstream demand for power generation equipment, mining machinery etc.

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:

While the Indian EV market is in early stages, growth is visible across two-wheelers, passenger cars, and electric buses. However, further progress will be driven by cost of batteries and advancement downstream in the charging network facilities. Banco is actively engaged in several development projects in this space.

To address emerging needs in EVs and alternative fuel vehicles, the Company 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 12th 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 Company continues to build on its inherent strengths, which have positioned it as a trusted partner to customers in India and globally. The key strengths that support the Companys sustainable growth and competitive advantage include:

Rich Industry Legacy and Market Leadership:

With over 64 years of industry experience, Banco is recognized as a trusted brand and one of the leading manufacturers in the thermal management and sealing solutions space. This legacy reinforces customer confidence and brand credibility.

Diversified Customer and Geographic Base:

The Company enjoys a wide and well-diversified customer base across multiple geographies, minimizing dependency on any single market, segment, or customer. This provides resilience against localized economic or sectoral slowdowns.

Strong R&D and Product Development Capabilities:

The Company possesses robust in-house research, design, and product homologation capabilities. These competencies enable the Company to develop customized, cost-effective, and high-performance solutions aligned with evolving customer and regulatory requirements.

Track Record of Innovation and New Product Introductions:

A continuous focus and investment on innovation and product development has helped the Company expand its product portfolio and address emerging market needs. The consistent introduction of new products supports customer retention and acquisition.

Operational Flexibility and Responsiveness:

The Company has demonstrated agility in its operations, enabling it to swiftly adjust production volumes and processes in response to fluctuations in demand. This operational adaptability enhances customer service and cost control.

Long-standing Relationships with OEMs:

The Company has nurtured strong, strategic relationships with leading Original Equipment Manufacturers (OEMs) across passenger vehicles, commercial vehicles, off-highway equipment, and international markets. These partnerships help the Company anticipate industry trends and secure repeat business.

Expanding Global Presence:

Banco Group continues to secure export orders from established markets, thereby expanding its global footprint. A well-diversified export base strengthens revenue stability and reduces exposure to regional economic fluctuations.

Strategically owned subsidiaries allow for penetration and sustained growth in new and/or emerging markets whilst enhancing customer service with ability to support fluctuating demands from customers with quick turnaround times.

State-of-the-Art Manufacturing Infrastructure:

The Banco Group operates advanced manufacturing facilities equipped with world-class machinery and processing technologies. This infrastructure supports high-quality production and a wide-ranging product portfolio. The Company is driven by investments to improve its manufacturing processes for efficiency and reduced overall production costs.

Commitment to Quality and Certifications:

The Companys adherence to stringent quality standards, supported by globally recognized certifications, has earned it a reputation for reliability and excellence. This has resulted in a consistent increase in repeat business and strong word-of-mouth referrals.

WEAKNESSES:

While the Company continues to strengthen its position in the global thermal management and automotive components industry, certain internal and external factors pose ongoing challenges. Key concerns impacting the business environment include:

Commodity Price Volatility and Inflationary Pressures:

The unprecedented and sustained rise in commodity prices—particularly metals and raw materials critical to the

Companys operations has exerted pressure on margins. Combined with broader inflationary trends, these factors continue to impact manufacturing costs and operational efficiency.

Foreign Exchange Fluctuations:

The Company operates across multiple geographies and deals with both exports and imports. Consequently, it remains exposed to fluctuations in foreign exchange rates, which may affect input costs, pricing strategies, and overall financial performance.

Global Supply Chain Disruptions:

Continued disruptions in global logistics and supply chains, driven by geopolitical uncertainties, transportation constraints, and uneven demand-supply dynamics, have affected the timely procurement of materials and delivery of products, leading to increased lead times and inventory management challenges.

The Company is actively addressing these concerns through strategic sourcing, financial hedging, cost control initiatives, and continuous engagement with supply chain partners to mitigate their impact on operations.

OPPORTUNITIES:

The Company is strategically positioned to capitalize on multiple growth avenues, both in the domestic and global markets. The Company continues to pursue new development projects, expand into emerging sectors, strengthen its export presence, and invest in innovation to unlock its full growth potential. Key opportunity areas include:

Growing Indian Economy and Automotive Sector Transformation

Indias robust economic growth and increasing demand across core sectors, including automotive, agriculture, construction, and infrastructure, present a strong foundation for sustained business expansion. The automotive industry, in particular, is witnessing the rollout of numerous new vehicle platforms across passenger, commercial, and off-highway segments.

These developments are accompanied by rising demand for:

Higher energy efficiency

Enhanced thermal performance

Cleaner emission compliance

These trends present significant opportunities for the Company to collaborate with OEMs in co-developing advanced, energy-efficient, and cost-effective engine cooling systems tailored to future-ready vehicles.

New Market Sectors and Applications

Cooling systems have broad applicability across a wide spectrum of automotive and industrial uses. The Companys earlier initiatives in industrial and specialty segments are now translating into active business engagements, and efforts are being scaled up to further penetrate high-potential sectors such as:

Electric vehicles (EVs) and Alternative energies

Agricultural and construction machinery

Power generation equipment

Industrial compressors and gen-sets

Expanding Relationships with Global OEMs

The Company is a preferred strategic supplier to several leading multinational corporations operating in India. The Company is now leveraging these domestic relationships to expand supply chains to their overseas operations, in a phased and structured manner. A noticeable increase in Requests for Quotations (RFQs) from global OEMs indicates growing interest and recognition of Bancos engineering and cost advantages.

Strengthening Export Business

Global OEMs and Tier-1 suppliers are increasingly seeking cost-effective and reliable alternatives to their existing supplier base. Banco continues to expand its international business development efforts, with a focus on tapping into these shifts. The Company is actively pursuing export opportunities to:

Broaden its global customer base

Mitigate regional demand volatility

Diversify revenue streams

Focus on R&D, Innovation, and Technology Integration

The Company maintains a strong emphasis on R&D and innovation to drive long-term growth. Ongoing investments in:

Embedded systems

Application-specific software

System integration capabilities are aligned with future automotive and industrial requirements. These technological advancements complement the Companys mechanical engineering expertise, positioning The Company as a complete thermal systems provider.

Opportunities in Digital Transformation and Automation

The Indian automotive industry is undergoing a major digital and automation-led transformation. This shift is creating new opportunities to innovate and meet the needs of a tech-savvy, performance-oriented customer base. Companies that can adapt to these trends by leveraging Indias skilled workforce, strong supplier ecosystem, and growing domestic demand will have a distinct competitive advantage. The Company is actively exploring automation and digitization across both product and process levels to stay ahead of the curve.

Aftermarket Growth Potential

Indias rapidly aging vehicle population, combined with rising consumer awareness of quality and performance in replacement parts, is driving robust growth in the automotive aftermarket. The Company is well-positioned to tap into this segment through:

An expansive distribution network

Strong brand presence

Continuous engagement with workshops, mechanics, and channel partners

Focused product development tailored to aftermarket needs

The Companys aftermarket strategies are aligned with rising trends in vehicle servicing, repairs, and customization.

THREATS, Risk and Concerns:

In an increasingly dynamic and interconnected global business environment, the Company faces a range of challenges that require continuous monitoring and strategic mitigation. While the Company remains resilient and forward-looking in its approach, it acknowledges the following potential risks and concerns that could impact its operations and financial performance:

Intensifying Competition

The Company operates in a highly competitive landscape, both domestically and globally. The increasing presence of international players in the Indian market and aggressive pricing strategies by competitors may impact market share, margins, and customer retention.

Inflationary Pressures and Cost Escalations

Persistent inflation, along with rising interest rates, may adversely affect input costs, borrowing costs, and overall operating expenses. Tariffs and duties on certain components could also escalate the cost of production, thereby impacting profitabi lity.

Dependence on Imported Raw Materials

A significant portion of the Companys raw materials, especially specialized components and metals, are sourced from international markets. This reliance exposes the Company to supply chain disruptions, currency fluctuations, trade restrictions, and geopolitical risks.

Volatility in Metal Prices and Foreign Exchange Rates

As a manufacturer of radiator and cooling systems,the Company is exposed to fluctuations in the prices of base metals like copper and aluminium. Additionally, volatility in foreign exchange rates can affect the cost of imports and earnings from exports, leading to financial unpredictability.

Supply Chain Disruptions

Global and domestic supply chains remain vulnerable to disruptions arising from geopolitical conflicts, logistical constraints, pandemics, and natural disasters. Any prolonged interruption in material availability or logistics could delay production and deliveries.

Geopolitical and Global Economic Risks

Global crises such as armed conflicts, pandemics, or economic downturns can trigger a cascading impact on vehicle demand, customer sentiment, and overall supply chain efficiency. These uncertainties may lead to reduced orders from OEMs and delays in capital investments by clients.

Evolving Customer Expectations

OEMs and end-users are increasingly seeking products that offer improved thermal efficiency, compact designs, weight optimization, and compatibility with EV and hybrid applications. The Company must continuously invest in R&D and product innovation to remain aligned with such expectations.

Regulatory Changes and Compliance

Changes in environmental laws, emission norms, safety standards, and other government policies (such as Bharat

Stage norms) may require significant investments in re-engineering, testing, and certification. Failure to comply with evolving regulations may restrict market access or lead to penalties.

Environmental Concerns and Sustainability Pressures

Increasing regulatory focus on environmental sustainability and carbon emissions places additional responsibilities on manufacturers. The need to adopt eco-friendly processes and products may involve additional capital expenditure and innovation cycles.

Cybersecurity and Data Risk

As the Company moves towards greater digitalization, there is an increasing risk of cyber threats, data breaches, and IT infrastructure vulnerabilities, which may impact operations, reputation, or data privacy.

Mitigation Measures

The Company has implemented comprehensive risk management and mitigation frameworks, which include:

Diversification of supplier base to reduce import dependence

Active hedging strategies for foreign exchange and commodity pricing

Strategic inventory planning and alternate sourcing arrangements

Ongoing investments in R&D and digital transformation

Proactive compliance with regulatory standards and sustainability initiatives

Regular monitoring and internal audits to identify and address emerging risks

The Company remains committed to navigating uncertainties through strategic foresight, operational resilience, and continuous innovation. The Companys integrated risk management approach enables it to respond effectively to dynamic market conditions and protect stakeholder value.

Technology and Innovation

The Company remains committed to staying ahead of regulatory and technological changes through:

Strategic investments in product and process innovation

Development of advanced solutions for contemporary emission norms for BS-VI for automotive, BS-IV / Trem V for agriculture machineries/off highway equipment and new CPCB IV+ norms for Power Generation pequipment.

Continuous improvement in manufacturing technology and automation

Upskilling of workforce, aligned with the Companys people-first development philosophy

Internal Control and its Adequacy:

The system of internal control designed to provide reasonable maintenance of proper accounting records and the reliability of operational and financial information complying with statutes, safeguarding assets from unauthorized use or losses executing transaction with proper authorization ensuring compliance of corporate policies used with a view to running business. The Company has clearly defined organization structure and lines of authority.

Sufficient control is exercised through monthly, quarterly and annual business review by the Management Review

Committee and application of Corporate Governance. An internal audit system is in place. Normal foreseeable risks to the Companys assets are adequately covered by comprehensive insurance.

The Company has, appointed Mr. Snehal Kumar Shah, Head-Internal Audit Department as Internal Auditor of the Company, for the services of Internal Audit of operations of the Company for better control and to ensure adequacy and efficacy of the Internal Audit function.

In line with well accepted practices and objectives, the planning and internal audits are oriented towards the review of operational controls in the management of risk strengths and opportunities.

The Company has an Audit Committee, which reviews the Reports of Internal and External Auditors, mak ing suggestions for improvements, follow up on the implementation of corrective actions and keeps informed the Board of its major observations from time to time.

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	2024-25	2023-24
Within India	764	727
Outside India	323	265

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 efficiency, improving supply chain agility, and enabling faster, data-driven decision-making across the enterprise.

2. Core IT Infrastructure

ERP Modernization: Successfully upgraded to SAP S/4HANA, providing real-time data processing and seamless integration across core business functions.

Hybrid Cloud Deployment: Migrated 60% of workloads to cloud/SaaS platforms, improving system availability and reducing infrastructure risk.

3. Manufacturing & Operations Technology

IoT Integration: Connected 20% of critical manufacturing equipment for real-time monitoring, improving maintenance planning and operational visibility.

MES Rollout: Initiated pilot deployment of a Manufacturing Execution System (MES) across three plants, enhancing production tracking and efficiency.

4. IT Governance & Compliance

Service Delivery: Strengthened IT service management by adopting the Information Technology Infrastructure

Library (ITIL) framework, achieving 98% Service Level Agreement (SLA) compliance during the reporting period.

5. Cybersecurity Enhancements & Initiatives:

Implemented next-generation firewalls and endpoint detection systems.

Cyber awareness training for all employees.

Updated incident response and recovery protocols.

Quarterly vulnerability scans and penetration testing.

6. Planned Enhancements

Transition to Zero Trust Architecture.

AI-based threat detection and response.

Advanced Data Leakage Protection (DLP) for intellectual property protection.

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	2024-25	2023-24	Reasons for Significant changes
Operating Profit (PBT)(%)	29	30
Earnings Per Share (EPS) (Rs.)	19	*18
Cash Earnings Per Share (Rs.)	20	*20
Return on Net worth (PAT) (%)	33	35
Dividend Payout Ratio	59	95
Retained Earnings (Rs. in crores)	704	595
Retained Earnings (%)	82	71
Debtors Turnover	4.62	4.60
Inventory Turnover	4.04	3.90
Interest Coverage Ratio	139	308	Interest for the current financial year includes onetime interest towards import custom duty.
Current Ratio	3.32	5.2
Debt Equity Ratio	0.00835	0.00625

*In accordance with the "Ind AS 33 Earning per share" the figures of Earnings Per Share for the FY 2023-24 have been restated to give effect to the allotment of the bonus issue in the ratio 1:1.

Material Developments in Human Resources:

The industrial relations in all the units of the Company during the financial year 2024-25 were peaceful and harmonious.

Experienced and motivated employees have been the backbone of the Company. There were 427 people employed in the Company as on 31.03.2025.

Your Company puts special emphasis on team building and positive work culture. We train employees to understand and absorb the latest technological trends which in turn prepare them to achieve higher efficiency levels in production, quality besides leading to higher customer satisfaction.

There is a systematic identification of training needs. Training and development inputs are provided to all employees in the areas of skill development and behavioral improvement so that individual development keeps pace with organizational development.

Future Strategy / Outlook:

Your Company will continue to follow technology led strategy to realize profitable growth and thus create sustainable value for the organization. Collaboration with our customers on the basis of our proven ‘bespoke engineering approach will remain cornerstone of our future strategy. Besides strengthening our core markets, we will expand and broad base our customer market portfolio in Indian and International markets. We will continue to invest in advanced manufacturing and supply chain processes to retain our leadership position. Relentless drive to improve quality and productivity while cutting waste and cost defines our approach towards manufacturing excellence.

Qualified, trained and motivated employees drive successful strategies and towards this objective we also plan to step up our employee development initiative in the coming days.

Cautionary Statement:

Certain statements made in this report, are forward looking statements and actual results may differ from such expectations or projec about the future, as several factors would make significant difference to the Companys operations such tions 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.

	By the order of the Board,
	Mehul K. Patel
Date : 08.08.2025	Chairman
Place : Bil	(DIN: 01772099)