Bharat Bijlee Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS, OPPORTUNITIES AND THREATS

The resilience of the global economy is being tested by escalating trade tensions and a heightened wave of uncertainty around the scope, timing, and intensity of tariffs. Geopolitical tensions and changing global power relations are adding another layer of complexity. Persistent trade and geopolitical uncertainties continue to test the global economys resilience. The global economy is projected to experience slower growth in 2025 and 2026 compared to 2024, with the OECD expecting a decline from 3.3% to 2.9%. This slowdown is attributed to trade barriers, tighter financial conditions, and policy uncertainty. While some major economies are showing signs of resilience, others face headwinds like weak investment, aging populations, and geopolitical tensions. India is the third-largest producer and consumer of electricity worldwide, with an installed power capacity of 466.24 GW as of January 31, 2025. Growing population along with increasing electrification and per-capita usage will provide further impetus. Large renewable-energy capacity addition, industrial expansion, public infrastructure development projects such as metro lines, electrification of the railways, EV charging stations, data centers, and overall grid strengthening, continue to drive growth for the transformer industry. The nation plans to invest 9,15,920 Crores (US$ 107 billion) by 2032 to develop additional transmission lines, supporting its goal to nearly triple its clean power capacity. the Indian power sector presents an investment opportunity worth

40,00,000 Crores (US$ 461.95 billion) over the next decade, driven by rising demand, infrastructure upgrades, and the transition to clean energy.

OPERATIONAL AND FINANCIAL PERFORMANCE OF SEGMENTS

The Company operates in two business segments, viz. Power Systems and Industrial Systems.

Power Systems:

This segment comprises the design, manufacture, commissioning and marketing of power transformers; EPC projects for electrical substations including delivery, rectification, commissioning and servicing of transformers; and marketing of maintenance products.

The Projects business continues to focus on selection of quality projects and execution excellence. It recently completed its first outdoor GIS (Gas Insulated Switchyard) project at Navi Mumbai for a reputed business house. It has won not only accolades but performance incentive from its customers for timely execution of projects without cost over-runs.

The Transformer business, with its focus on emerging sectors like data centers, renewables, etc. has diversified its customer base to complement the strong base in public electricity utilities. This also helped to improve the velocity of working capital thereby unlocking precious cash. Your Company has embarked on capacity expansion of transformer manufacturing facility at its Airoli works. The current capacity of 18000 MVA will be increased to 28000 MVA at a capital outlay of about Rs.170 Crores, to be funded out of internal accruals.

The revenue of the Power Systems segment increased by 4.3% compared to the previous year. Correspondingly, the segmental profit improved by 9.70% to 172.22 Crores from 156.99 Crores in the previous year.

Industrial Systems:

This segment comprises the development, marketing and manufacture of a wide range of standard and customized electric motors, magnet technology machines and the engineering and supply of drives and automation solutions. The electrical motors business continued to face severe headwinds of intense competition. In spite of volume growth, the competitive intensity kept prices depressed, adversely affecting segmental margins. The focus continues to be on widening market reach, refining the supply chain, and on developing energy-efficient and economical products. During the year, your Company delivered its first batch of 3.3kV Closed Air Circuit Air-cooled (CACA) medium voltage (MV) motors for water application. The CACA system offers more robust cooling, especially for larger motors with higher power ratings, in severe environments and for applications where efficient heat dissipation is crucial.

Our Motors Centralized Type Test Field (CTTF) laboratory recently received the significant National Accreditation Board for Testing and Calibration Laboratories (NABL) accreditation for testing motors up to 11000V and 1500kW rating. Our CTTF lab is now the first and only NABL-accredited facility for HT motor testing.

We have expanded our brake motor range and now offer brake motors in IE2 energy efficiency levels, available up to 30 kW and 200 frame size. Engineered for the toughest industrial applications, these motors are ideal for Cross Travel/Long Travel (CT/LT) and hoisting in cranes (used in material handling and infrastructure), textile machinery, machine tools, geared motors, and more.

Though the Magnet Technology Machines (MTM) business registered growth in the domestic as well as export markets, the in_ux of various imported brands has caused severe price competition adversely affecting profitability. Synchronous AC Servo motors manufactured in-house by the MTM business have been well received by the market.

During the year, your Company inaugurated our new expanded Drives & Automation plant at our factory in Airoli. The plant is now doubled in size and capacity, and upgraded specifically to produce KEBs new generation range of F6 drives. It is equipped with new load and functional test benches, along with modern equipment like the automated servo press-fitting of electronic components to enhance the assembly and testing capabilities.

The revenue of the Industrial Systems segment decreased by 1.9% compared to the previous year. However, the segmental profit declined by 24.7% to 62.90 Crores from

83.57 Crores in the previous year.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Key Financial Ratio	FY 2024-25	FY 2023-24	Change	Reason for Variance Greater than 25%
			(%)
Debtors Turnover Ratio1	5.03	4.89	2.87%	N. A.
Inventory Turnover Ratio2	6.84	6.47	5.69%	N. A.
Interest Coverage Ratio3	14.36	9.14	57.13%	Increased due to improvement in the performance of the Company in current financial year.
Current Ratio4	2.19	1.66	31.75%	Increased due to movement of bank deposits from non-current assets to current assets.
Debt Equity Ratio5	0.04	0.08	(48.76%)	Improved due to:
				(1) Improvement in the performance of the Company and
				(2) Reduction in borrowings in the current financial year
Return on Net Worth6	7.02%	8.11%	(13.37%)	N. A.
Operating Profit Margin7	9.41%	9.30%	1.18%	N. A.
Net Profit Margin8	7.03%	7.02%	0.12%	N. A.

1 Turnover (net) / Average Trade Receivables

2 Turnover (net) / Average Inventory

3 (Profit before Tax + Finance Cost + Depreciation + Loss on sale of Fixed Assets (net)) / (Finance Cost + Lease payments)

4 Current Assets / Current Liabilities

5 Total debt / Shareholders equity

6 Profit After Tax / Average of (Equity Capital + Other Equity)

7 (Profit before Tax - Exceptional Income) / Turnover

8 Profit after Tax / Turnover

RISKS AND CONCERNS

A rise in input cost pressures in the manufacturing sector, global protectionism in trade policies, geopolitical tensions and subdued demand pose risks to Indias economic growth. The global environment has been tough, with tariffs creating a great deal of uncertainty. The export sector is also expected to encounter some headwinds from rising geopolitical tensions, inward-looking policies and the risk of a potential tariff war among major economies. (RBI Annual Report, 2025).

The global demand for power transformers continues to be strong, thereby driving demand for requisite raw materials exponentially. Certain critical inputs may face supply constraints for these reasons or may become costlier. Since most domestic manufacturers are expanding transformer capacity, such expanded capacity, in absence of sustained demand, may exacerbate price competition in the Industry. Availability of rare earth magnets, an input for certain types of motors, due to export control regulations imposed on key suppliers as a consequence of prevailing geopolitical situation may be cause of concern.

INTERNAL CONTROLS AND RISK MANAGEMENT

Most internal controls of the Company have been automated through the SAP ERP system. System-driven controls ensure consistency, continuous monitoring and compliance. Internal controls have been designed to mitigate financial and operational risks and to ensure that transactions are made within the authority delegated by top management, properly recorded, and correctly reported. Internal controls across the Company are periodically reviewed and tested to assess their adequacy and effectiveness both by the Companys Internal Audit team and the Statutory Auditors. The Management and Audit Committee are apprised of the outcome of such reviews. Internal controls are further reinforced based on such reviews as required. The Company has defined a framework for Risk Management that is reviewed regularly and updated for all businesses of the Company.

OUTLOOK

The Indian economy is poised to sustain its position as the fastest-growing major economy during FY26, supported by a pickup in private consumption, healthy balance sheets of banks and corporates, easing financial conditions, and the governments continued thrust on capital expenditure. The easing of supply chain pressures, softening of global commodity prices and higher agricultural production on the back of a likely above-normal south-west monsoon augur well for the inflation outlook in 2025-26.

Your Company is continuously investing resources in enlarging its technologically advanced, superior, and sustainable product offerings and in augmenting its facilities to capitalise on emerging opportunities.

For Bharat Bijlee Limited

 

Nikhil J. Danani

Vice Chairman & Managing Director