Bharat Gears Ltd Management Discussions

Global Economy

The global economy exhibited stability throughout 2024, despite encountering a complex interplay of significant challenges and opportunities shaped by economic, geopolitical, and policy-related influences. According to the RsWorld Economic Outlook report by the International Monetary Fund (IMF), global Gross Domestic Product (GDP) growth moderated to 3.3%. Growth trends varied, with developed economies experiencing a slower rate of expansion, while emerging markets, particularly those in Asia, sustained relatively stronger growth momentum.

Geopolitical factors, including the ongoing Russia-Ukraine conflict, disruptions in the Red Sea, persistent supply chain issues, and trade tensions between major economic powers, continued to present challenges to global economic stability in 2024. Moreover, the evolving landscape of climate change policies and regulations influenced investment choices across various industries.

Despite these obstacles, the United States economy showed resilience, achieving 2.8% growth driven by a robust labour market and moderating inflation. The Eurozone, however, experienced slower growth at 0.9%, including a slight contraction in Germany. Emerging markets, particularly in Asia, maintained stronger growth momentum, reaching 5.3% overall, fuelled by investments in technology and infrastructure. Chinas economy grew by 5.0%, supported by government policies and a recovering property sector. The U.S. economy outperformed expectations, while the UK and Europe, particularly Germany, faced a slowdown that brought down overall GDP rates and narrowly avoided recession. On a positive note, India continued to excel, but China encountered challenges due to slowdown in its property sector.

Global inflation is showing improvement, estimated at 5.7% in 2024, down from 6.7% in 2023. Advanced economies are likely to achieve their inflation targets sooner than emerging markets and developing economies, where the decline may be more gradual. In advanced economies, inflation rate was at 2.6% in 2024, likely reaching target levels by late 2025. Emerging markets will experience a slower but still positive trend.

Defying significant easing expectations for 2024, major central banks largely maintained high rates to combat inflation. The Federal Reserves target rate remained elevated for most of the year, with a 25-basis point cut in December, bringing it to 4.25-4.50%. Similarly, the European Central Bank held rates steady after earlier hikes, also implementing a 25-basis point cut to its deposit rate in December, reducing it to 3.00%. The Bank of Englands Bank Rate stayed high throughout much of 2024, with cuts later in the year reducing it by 25 basis points to 5.00% in August and a further 25 basis points to 4.75% in November.

Outlook

The global economy is projected to sustain a consistent growth pattern, with anticipated expansion rates of 2.8% and 3.0% in 2025 and 2026, respectively.

Growth in the U.S. is expected to fall to 1.8% in 2025 and 1.7% in 2026, driven by shifts in labour market dynamics and a reduction in consumer spending. The Eurozone is forecast to experience a fall, with GDP of 0.8% in 2025 and then recovering to 1.2% in 2026, supported by increased consumer expenditure and reduced inflation. Overall growth in developed economies is expected to stabilise at around 1.4% in 2025 and then rise to 1.5% in 2026.

Although global disinflation continues, certain regions are experiencing stagnation due to persistently high inflation rates. Global inflation is forecast to decrease to 4.4% in 2025 and 3.5% in 2026, with developed economies expected to achieve their targets before others. Monetary policies are likely to remain varied across different regions.

(Source: WEO)

Indian Economy

Indias economy displayed resilience and consistent growth throughout FY 2024-25, continuing its status as one of the worlds fastest-expanding major economies. As indicated by the Second Advanced Estimate (SAE) data released by the National Statistical Office (NSO), real Gross Domestic Product (GDP) is estimated to be 6.5% for FY 2024-25, following a notable 9.2% (per First Revised Estimate) growth in the previous financial year. This sustained momentum is a reflection of the nations sound economic foundations, supportive government policies, an expanding services sector, and strong domestic demand, all of which contribute to increased confidence in Indias long-term growth potential.

Government reforms, substantial investments in both physical and digital infrastructure, and initiatives like RsMake in India and the Production-Linked Incentive (PLI) scheme have played a crucial role in improving the countrys growth path and encouraging self-sufficiency.

The services sector sustained robust growth at 7.2% in FY 2024-25, propelled by strong activity across a range of segments, including finance, real estate, professional services, public administration, defence, and other related areas.

Indias economic standing continues to ascend. Ambitious national objectives are set to achieve a $5 trillion economy by FY 2027-28 and a $30 trillion economy by 2047. These targets are to be realised through investments in infrastructure, ongoing reforms, and widespread adoption of technology. The capital investment budget for 2025-26 demonstrates this commitment, increasing to Rs11.21 Lakh Crore, representing 3.1% of GDP.

Outlook

Indias economy is projected to expand by 6.2% in the FY 2025-26. By 2030, India is expected to become the worlds third-largest economy, propelled by infrastructure investment, private capital expenditure, and the expansion of financial services. Continuous reforms are anticipated to underpin this long-term growth.

This optimistic outlook is reinforced by Indias demographic advantages, increased capital investment, proactive government policies, and strong consumer demand. Improved rural consumption, driven by moderating inflation, further strengthens this growth trajectory. The governments emphasis on capital expenditure, fiscal responsibility, and increasing business and consumer confidence supports both investment and consumption.

Initiatives such as Make in India 2.0, Ease of Doing Business reforms, and the Production-Linked Incentive (PLI) scheme are designed to promote infrastructure, manufacturing, and exports, positioning India as a global manufacturing centre. With inflation expected to align with targets by 2025, a more accommodating monetary policy is anticipated. Infrastructure development and public policies will drive capital formation, while rural demand will be supported by initiatives such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).

(Source: PIB, MoSPI, Economic Survey)

Union Budget 2025-26

The Union Budget 2025-26 is poised to have a broad-based impact on the Indian economy, balancing growth with fiscal consolidation. By raising the income tax exemption limit to Rs12 Lakh per annum, the budget puts more money in the hands of middle-class households, likely to give a boost to consumption as well as household savings. This step is expected to support domestic demand and strengthen key consumer-driven sectors.

Accelerated infrastructure spending, particularly in roads, railways, and urban development, is set to create jobs, improve connectivity, and generate a multiplier effect across allied industries such as cement, steel, and construction. The continued push for domestic manufacturing through an expanded Production Linked Incentive (PLI) scheme strengthens Indias industrial base and supports the "Make in India" agenda, with long-term gains in exports and employment.

The budgets rural focus, including the transformation of India Post into a logistics and financial services backbone, aims to integrate rural areas more deeply into the formal economy. This could improve rural incomes and broaden market access for small producers.

On the sustainability front, the extension of subsidies under the FAME India Phase II scheme and investments in EV infrastructure reinforce Indias transition to clean mobility and renewable energy, sectors which are expected to shape long-term growth and attract green investment.

By targeting a lower fiscal deficit of 4.4% of GDP (down from 4.8%), the government signals a shift toward fiscal discipline, even as it maintains momentum on growth-oriented reforms. The overall effect is a budget that supports short-term recovery while laying the groundwork for more inclusive and sustainable economic expansion.

Industry Overview Global Tractor Sector

The global tractor industry continued its upward trajectory in 2024, driven by increasing mechanisation in agriculture, technological advancements, and supportive government policies.

In 2024, the global tractor market was estimated at $84.50 billion. This growth is attributed to the rising demand for efficient agricultural practices and the integration of advanced technologies in farming equipment.

(Source: Mordor Intelligence)

The Asia-Pacific region, particularly India and China, maintained their dominance in the tractor market. In 2024, these countries reported combined sales of approximately 1.36 million units, with India and China experiencing compound annual growth rates (CAGRs) of 8% and 7%, respectively, from 2022 to 2027. This growth is driven by government initiatives of promoting agricultural mechanisation and the expansion of the agricultural sector. In North America, after challenging past year, demand of mid and large tractors have started showing sign of recovery since start of calendar year 2025. Favourable climatic conditions and government support to farmers contributed to increased crop production and tractor sales in the region.

(Source: mobilityforesights.com)

The industry saw notable technological advancements in 2024, including the integration of telematics and precision agriculture technologies into tractors. These innovations enhanced operational efficiency, reduced downtime, and improved crop yields, aligning with the global trend towards sustainable farming practices.

Despite the positive growth trajectory, the tractor industry faced challenges such as fluctuating commodity prices and economic uncertainties, which impacted farmers purchasing power. Additionally, environmental concerns necessitated the development of eco-friendly and fuel-efficient tractors, prompting manufacturers to invest in research and development.

The global tractor market is expected to maintain its growth momentum, driven by continuous advancements in technology, supportive government policies, and the increasing need for food production due to population growth. Manufacturers focussing on innovation, sustainability, and affordability are likely to gain a competitive edge in this evolving market landscape.

Indian Tractor Sector

Indias tractor industry, a vital component of its agricultural sector, exhibited resilience and adaptability amidst fluctuating market dynamics. As the worlds largest tractor market, accounting for one-third of global production (excluding sub-20 horsepower belt-driven tractors used in China), India continued to play a pivotal role in global agricultural mechanisation.

The Tractor and Mechanisation Association (TMA) reported that the tractor industry rebounded in FY 2024-25, recording an 8% increase in domestic sales, reaching 9,39,713 units compared to 8,67,237 units in FY 2023-24. This growth follows an 8% decline in the previous fiscal and is attributed to favourable monsoon conditions and other positive market factors.

Exports also improved, reversing a 22% slump from the previous year. Data from the Tractor & Mechanisation Association (TMA) highlights the industrys resilience, with total production reaching 10,07,660 units in FY 2024-25, up from 9,47,143 units in FY 2023-24. This marks a notable recovery, although it remains below the peak production of 10,71,310 units recorded in FY 2022-23.

(Source: The Hindu)

Several factors have influenced the performance of the industry. Government initiatives have enhanced support for agriculture, including subsidies and favourable policies, which have encouraged farmers to invest in mechanisation, thereby boosting tractor demand. Technological advancements have also played a significant role, as manufacturers have introduced new models equipped with advanced features to cater to the evolving needs of modern farming practices. For instance, one of the key tractor manufacturer launched Indias first autonomous concept electric tractor, in collaboration with technology partners, aiming to enable precision-based farming. Additionally, favourable monsoon conditions have contributed to improved farm incomes, allowing farmers to invest in tractors and other agricultural equipment.

(Source: farmonaut.com, mobilityforesights.com)

Outlook

The outlook for the Indian tractor industry in FY 2025-26 remains cautiously optimistic. ICRA projects a modest volume growth of 1-4%, contingent upon favourable monsoon conditions and stable agricultural output.

Continued government support, technological innovations, and a focus on sustainable farming practices are expected to drive the industrys growth. However, challenges such as fluctuating raw material costs and the need for infrastructure development in rural areas may influence the sectors trajectory.

(Source: icra.in)

Global Construction Equipment Sector

The global construction equipment sector experienced a dynamic year in 2024, marked by both growth and challenges across various regions and market segments.

In 2024, the global construction equipment market was valued at approximately $222.37 billion. Growth trajectory is expected to continue in the long run, with projections indicating a market size of $315.64 billion by 2030, reflecting a compound annual growth rate (CAGR) of 5.97%. Similarly, the heavy construction equipment segment is anticipated to grow to $314.4 billion by 2030, at a CAGR of 6.0%.

(Source: GlobeNewswire)

The Asia-Pacific region maintained its dominance in the construction equipment market, accounting for a 41.65% share in 2023. This leadership is attributed to rapid urbanisation, substantial infrastructure investments, and the expansion of the manufacturing sector. In contrast, the North American market experienced a slowdown, with companies like Caterpillar revising their revenue expectations downward due to reduced demand from government infrastructure projects and declining farm incomes. Similarly, European markets faced challenges, as evidenced by Volvos anticipation of relatively flat markets in the upcoming year, reflecting broader macroeconomic uncertainties.

(Source: fortunebusinessinsights.com, reuters.com, The Wall Street Journal)

Global construction machinery sales were forecasted to reach 1.08 million units in 2024, representing an 8% decrease compared to the previous year. This decline is indicative of a market undergoing normalisation after periods of heightened demand. Notably, while certain sectors such as infrastructure and energy/utilities continued to exhibit growth, the residential construction sector faced declines, influencing overall equipment demand.

(Source: statista.com, aem.org)

The industry saw significant technological advancements in 2024, with manufacturers integrating the Internet of Things (IoT) and automation into construction machinery. These innovations enhanced efficiency, safety, and operational productivity, aligning with the evolving demands of complex construction projects. The emergence of smart cities and advancements in infrastructure technology further fuelled the demand for innovative machinery.

(Source: GlobeNewswire)

In near future, the construction equipment industry is entering a period of transition, where economic cycles, infrastructure investments, and technological innovation will shape market dynamics. However, challenges such as fluctuating demand in certain regions and sectors, as well as macroeconomic uncertainties, may influence the pace

of expansion. Companies that adapt to these evolving market dynamics by embracing innovation and strategic planning are likely to maintain a competitive edge in the coming years.

Indian Construction Equipment Sector

The Indian construction equipment (CE) sector, a pivotal component of the nations infrastructure development, demonstrated a mixed performance in FY 2024-25, reflecting both resilience and challenges. As the third-largest CE market globally, valued at approximately $10 billion, Indias CE industry plays a crucial role in supporting the countrys economic growth and infrastructure expansion.

(Source: indianinfrastructure.com)

FY 2024-25 commenced with a 5% YoY growth in CE sales during the first quarter (April-June 2024), totalling 28,902 units. This increase was driven by segments such as earthmoving equipment (5% growth), road construction equipment (9% growth), and concrete equipment (11% growth). However, material handling and material processing equipment experienced decline of 3% and 4%, respectively, during this period.

(Source: mojo4industry.com)

In the second quarter (July-September 2024), the industry witnessed a modest 1% year-on-year growth, with total sales reaching 30,686 units. Domestic sales accounted for 27,382 units, while exports contributed 3,304 units. The earthmoving equipment segment continued its positive trajectory with a 6% increase in sales. Conversely, material handling and concrete equipment segments experienced declines of 17% and 10%, respectively.

Overall, FY 2024-25 saw a cumulative 3% year-on-year increase in sales compared to the same period in the previous fiscal year, indicating a steady, albeit modest, growth trajectory.

(Source: equipmenttimes.in)

Several factors have influenced the industrys performance:

• Enhanced support for agriculture, including subsidies and favourable policies, has encouraged farmers to invest in mechanisation, thereby boosting tractor demand

• Manufacturers have introduced new models equipped with advanced features, catering to the evolving needs of modern farming practices

• Adequate rainfall has led to improved farm incomes, enabling farmers to invest in tractors and other agricultural equipment

Outlook

The Indian Construction Equipment sector is forecasted to achieve significant growth. Projections suggest that the market could triple in size, positioning India as the worlds second-largest CE market by 2030.

This optimistic outlook is underpinned by the governments continued emphasis on infrastructure development, urbanisation, and the adoption of advanced technologies. However, challenges such as high capital costs and environmental compliance requirements persist. Addressing these issues through collaborative efforts between industry stakeholders and policymakers will be crucial to sustaining the sectors growth momentum.

(Source: india-briefing.com, equipmenttimes.in)

Global Automobile Industry

The global automobile industry experienced a dynamic year in 2024, marked by significant shifts towards electrification, regional variations in sales performance, and ongoing challenges related to supply chains and market competition.

In 2024, global motor vehicle production reached approximately 92.5 million units, encompassing passenger cars, light commercial vehicles, minibuses, trucks, buses, and coaches. This production level reflects a modest increase compared to previous years, indicating a steady recovery from the disruptions caused by the COVID-19 pandemic.

(Source: Statista)

The transition to electric mobility accelerated notably. According to the International Energy Agency (IEA), global sales of electric cars (battery-electric + plug-in hybrid) surged past 17 million units in 2024, marking a ~20% increase from 2023s nearly 14 million. This jump lifted the global market share to over 20%, up from 18% in 2023. The IEA projects electric car sales will exceed 20 million in 2025, taking nearly a quarter of global car sales.

(Source: Global EV Outlook)

In 2024, regional insights into the global automobile market revealed varying trends across key regions. China, the worlds largest automobile market, continued to dominate, with electric vehicles (EVs) making up 50% of new car sales by July. Domestic manufacturers like BYD played a crucial role in driving this growth. Meanwhile, Europe experienced mixed results. While EV adoption advanced, traditional automakers faced significant challenges. For example, Volkswagen reported a 7% decline in third-quarter global deliveries, attributed to weak demand from China and high domestic production costs. In contrast, the United States market demonstrated resilience, with EV sales rising significantly. Teslas Model Y and Model 3 stood out as

the best-selling EVs both globally and domestically, helping Tesla maintain a 17% share of the global EV market. These regional dynamics underscored the shifting landscape of the automotive industry as it increasingly embraced electrification.

(Source: Associated Press, Reuters.com)

Despite the positive trends in electrification, the industry faced challenges, including supply chain disruptions, semiconductor shortages, and intensifying competition, particularly in the EV segment. Manufacturers are compelled to innovate and adapt to changing consumer preferences and regulatory landscapes.

The momentum towards sustainable mobility solutions is expected to persist, with projections indicating that electric vehicles could constitute a significant portion of new car sales in the coming years. However, the pace of this transition will depend on factors such as infrastructure development, technological advancements, and economic conditions across different regions.

Indian Automobile Industry

The Indian automobile industry is a cornerstone of the countrys manufacturing sector and a significant contributor to the economy. This growth trajectory was driven by a resurgence in consumer demand, a trend towards premiumisation, favourable government policies, and advancements in technology.

It is anticipated that the average price of luxury automobiles will reach Rs 1 Crore, while mass-market vehicles will see prices rise to Rs 13 Lakh. This is due to price increases of 2-4% implemented by manufacturers to mitigate rising costs.

In FY 2024-25, Indias automobile industry demonstrated remarkable resilience and growth, solidifying its position as the worlds third-largest automotive market. The overall market size of the Indian automobile industry reached approximately $137.06 billion, reflecting the sectors strong performance. The sectors expansion was driven by evolving consumer preferences, policy support, and significant investments in infrastructure and technology.

(Source: Mordor Intelligence)

The industry witnessed a total production of 30.61 million vehicles, encompassing passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles, marking an 11% increase from the previous years 27.5 million units. This surge was primarily attributed to heightened demand across various segments, reflecting positive consumer sentiment and economic recovery.

The electric vehicle market in India, though still emerging, demonstrated promising growth. EVs accounted for approximately 2.5% of the 4.3 million cars sold in 2024, representing a 20% increase in EV sales compared to the previous year. This growth outpaced the overall car market expansion of 5%, signalling increasing consumer acceptance and interest in electric mobility solutions. The governments push towards electric mobility, through initiatives such as the FAME India Scheme, played a crucial role in promoting EV adoption.

Automakers responded proactively to this trend, with plans to introduce nearly a dozen new EV models in 2025. These upcoming models are expected to feature longer driving ranges and faster charging times, addressing two critical factors influencing consumer adoption of EVs.

The Indian governments commitment to sustainable mobility was evident in the Union Budget 2025-26, which introduced several measures to support the automotive sector. Key among these was the proposed elimination of basic customs duty on 35 capital goods required for EV battery manufacturing, aiming to lower production costs and boost domestic manufacturing, thus making electric vehicles more affordable.

The budget also emphasised continued support for the Production-Linked Incentive (PLI) scheme to further boost domestic EV production, reduce import reliance, and promote self-reliance. Increased budget allocations were also designated for expanding EV charging infrastructure across highways and urban areas, addressing range anxiety and supporting broader EV adoption.

Despite the positive growth, the automobile industry faced challenges in FY 2024-25, including supply chain disruptions, especially in semiconductor availability, which impacted production schedules. Additionally, fluctuating raw material prices and regulatory changes posed hurdles for manufacturers. However, the sector demonstrated resilience through strategic partnerships and investments in local manufacturing capabilities.

Outlook

The Indian automobile industry is projected to continue its growth trajectory, with total vehicle sales expected to exceed 5 million units in FY 2025-26 with several key factors influencing its trajectory. The passenger vehicle segment is expected to maintain its upward trend, driven by sustained consumer interest in SUVs and the introduction of new models catering to this demand. Automakers are likely to focus on innovation and feature enhancements to attract a broader customer base.

The commercial vehicle sector is anticipated to experience a rebound, supported by increased infrastructure investments and economic activities. Government initiatives aimed at boosting infrastructure development are expected to stimulate demand for commercial vehicles, particularly in construction and logistics sectors.

The two-wheeler market is projected to sustain its growth momentum, supported by strong rural demand and the introduction of affordable models. Additionally, the emergence of electric two-wheelers may contribute to the segments expansion, offering consumers cost-effective and environmental friendly transportation options.

The electric vehicle market is poised for exponential growth, with projections indicating sales could reach 3 Lakh units by FY 2025-26. As manufacturers ramp up production and expand their EV offerings, along with continued government support, the transition towards sustainable mobility is expected to gain significant traction. This surge will be driven by new model launches, improved charging infrastructure, and supportive government policies.

(Source: Siam, Reuters, Zee Business, The Times of India)

Company Overview

Bharat Gears Limited (BGL or Rsthe Company) is one of Indias foremost and most trusted manufacturers of automotive gears, catering to a diverse range of industries

Automobile Domestic Sales Trend

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	5,68,5 59	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
Quadricycles	942	(12)	124	725	725	120
Tractors	7,05,011	8,99,407	8,42,266	9,45,311	8,67,237	9,39,713
Grand Total	2,22,50,562	1,95,19,640	1,84,59,872	2,21,49,473	2,47,20,700	2,65,47,104

both domestically and internationally. Established in 1971, with a commitment to engineering excellence, BGL has continually evolved, integrating cutting-edge technology, advanced manufacturing processes, and a customer-centric approach to solidify its leadership position in the gear and transmission component industry.

With a legacy spanning several decades, BGL has established itself as a preferred partner for leading automotive OEMs, off-highway vehicle manufacturers, and the aftermarket sector. The Company specialises in the production of a wide array of high-quality products, including transmission gears, bevel gears, differential gears, shafts, and a host of precision-engineered components that enhance the performance and efficiency of vehicles worldwide.

At the core of BGLs success is its unparalleled focus on innovation, quality, and sustainability. The Company operates state-of-the-art manufacturing facilities equipped with advanced CNC machines, heat treatment furnaces and stringent quality control systems to ensure that every product meets global industry standards. With strong engineering capabilities, BGL continuously explores new avenues for technological advancements, improvement in process efficiencies, and product enhancements to meet the ever-evolving demands of the automotive sector.

BGLs expansive global footprint spans across key automotive markets, with exports reaching multiple continents. The Company has built long-standing relationships with customers by providing value-driven solutions, customised engineering services, and consistent product reliability. Through strategic collaborations, supply chain efficiencies, and a commitment to operational excellence, BGL remains at the forefront of industry trends and market dynamics.

As the automotive industry undergoes rapid transformation with the emergence of electric mobility, sustainable manufacturing, and digital integration,

BGL is proactively positioning itself to adapt and thrive. The Company continues to invest in next-generation technologies, automation, and talent development to strengthen its competitive edge and drive future growth.

Business Departments

The Company operates across several key industrial sectors, providing specialised engineering components and equipment.

Gears

The Companys production encompasses a wide variety of gear and transmission technologies, including ring gears, pinions, transmission gears, shafts, differential gears, and sub-assemblies, with a primary focus on automotive applications. BGL sells/supplies these components to major Original Equipment Manufacturers (OEMs) in both India and international markets, serving diverse automotive segments such as heavy, medium, and light trucks, tractors, utility vehicles, construction equipment, and off-highway vehicles.

Automotive Components

In addition to its gear production, the Company supplies a wide spectrum of automotive components. This includes automotive clutch assemblies and components, turbochargers and related parts, driveline products, axle shafts, flywheel assemblies and rings, propeller shaft components, U-J Cross, steering components, differential cages, steel wheel rims, turbocharger core and rotor, ST. Bevel, ceramic button, and break lining.

Heat-Treating Furnaces

The Companys Furnace division specialises in the manufacture of dependable batch and continuous heat-treating furnaces, based on designs provided by AFC-HOLCROFT, USA. These furnaces are designed with end-to-end capabilities, user-friendly operation, and straightforward, cost-effective maintenance suitable for Indian operational environments.

Industry Segments

The Companys customer base is broadly categorised into the following four industry segments:

Agricultural Machinery: The primary product line within this segment is tractors, and this sector generates the largest share of the Companys revenue.

Automotive: The Company supplies engineering goods for medium and heavy commercial vehicles, including heavy, medium, and light trucks, utility vehicles, and off-highway vehicles.

Construction Equipment: BGLs product lines serve multiple sectors within the construction industry, including earth-moving equipment, material handling equipment, and road construction equipment.

Others: The Companys products are utilised in a range of other sectors requiring specialised engineering goods, such as wind turbines, oil drilling, hydraulic systems, cooling towers, and material handling systems.

Business (Plants) Operations

Bharat Gears Limited (BGL) maintains manufacturing operations across three locations: Mumbra and Lonand in Maharashtra, and Faridabad in Haryana. All three plants are IATF certified, guaranteeing high standards of quality and operational efficiency. The Faridabad and Lonand plants hold ISO 14001:2015 and ISO 45000:2018 certifications. The Mumbra plant, the oldest of the three, specialises in the production of bevel, transmission, and differential gears. The Lonand plant focusses on the manufacture of transmission gears, while the Faridabad plant produces both bevel and transmission gears. BGL consistently invests in the modernisation of its manufacturing facilities, incorporating the latest technological advancements.

The Company has achieved international recognition for its dedication to quality and technological progress. BGL continually enhances its manufacturing capabilities with cutting-edge technology and implements industry best practices such as Kaizen, Total Quality Management (TQM), 5S Systems, autonomous maintenance, and visual management across all its plants. Safety is a paramount concern at BGL, as demonstrated by its strong safety record.

Key Focus Area

Production and Manufacturing Excellence:

Built in Quality

The Company is committed to enhancing quality for long-term success through customer satisfaction. Every employee at BGL values RsQuality and actively participates in improving processes, products, services, and the overall culture. Bharat Gears implements various quality methodologies, some of which as detailed below have shown impressive results in the reported financial year.

Mumbra Plant

• Partial reconditioning of machines such as CNC Micromatic External Grinders, Coniflex - (Differential Gear cutting) machines is done to improve the part quality and reduction in rejection

• Completed reconditioning of both Indo Gas Generators to avoid scaling issue

• For Transmission Gears and Shaft, teeth chamfering implemented on Kanzaki and samputensili deburring machines to improve process flow and reduction in rejection

• For ZF Ring Gear - Measure-Mate, Multi gauging unit introduced for fast checking of internal Splines to reduce overloading on P40 Machine

• Clip-lock type material handling introduced for some of the critical parts processed at vendor for ease of handling and avoiding dents/damages

Lonand Plant

• Introduced "Zero Tolerance Culture drive" against the material handling & movement

• 150 nos.+/month Audit done by Quality

• 100 nos.+/month awareness/training sessions by Quality & production

• Introduced low cost gadget with high accuracy at much rationalise cost - CNCtize gadget instead of Auto Roll tester

• Introduced Compact DOP tester instead of Micrometer at rationalise costs to eliminate the inspection error with 0.001mm repeatability

• Installation of multi-gauging checking units to substantially improve quality levels

• Introduced & Drove the SGA Culture (Small Group Activity/Quality circle) against the top Defects contributors

With all cumulative efforts, we achieved the lowest ever plant PPM 3298, which is lowest in the Plant history with improvement trend of 60% from last year,

& lowest ever dent/damage trend of avg 77 nos./month against the trend of avg 742 nos./month 87% reduction in dent damage from last year.

Faridabad Plant

At the Companys Faridabad Unit, increase in the quality enhancement measure included CMM & P-40 machines, 20% In-house rejection PPM and 45% customer complaint reduced in this financial year as compared to last financial year. QMS Portal introduced for standardisation of documents to increase access and awareness in people.

Sustainability Efforts

This year marked a pivotal step in the Companys sustainability journey with the official launch of Project Vasundhara - our comprehensive ESG initiative. We commenced our first-ever ESG maturity and materiality assessments, a crucial step to align our business with global best practices and evolving stakeholder expectations. These foundational efforts have successfully laid the groundwork for a effective ESG framework that will guide our actions going forward. With pride, we announce the publication of our inaugural ESG Report, a significant milestone that reflects our commitment to transparency, responsibility, and sustainable growth. In our ongoing pursuit of global best practices and to demonstrate our commitment to sustainable supply chains, this year, we also underwent an EcoVadis assessment, a globally recognised sustainability rating, the results of which will be detailed in next years report.

As we move forward, we aim to set measurable, science-aligned ESG targets, strengthen our climate action initiatives, and consistently raise the bar to become the most sustainable automotive gear manufacturer in the industry.

Energy Conservation

The Company is dedicated to fulfilling its sustainability objectives, with a particular focus on energy conservation through the reduction of energy intensity in manufacturing processes and infrastructure. Bharat Gears Limited (BGL) plants have implemented a range of initiatives, including regular audits to enhance energy performance and ensure energy-efficient operations. These initiatives include:

• The installation of in-house automatic power factor correction (APFC) panels in the Low Tension (LT) Room to effectively manage the power factor

• The cleaning of all transparent roof sheets at the Mumbra and Lonand Plants to increase natural light on the shop floor, thereby reducing power consumption

• The maintenance of a unity power factor throughout the year

During FY 2023-24, the Lonand Plant undertook several energy efficiency measures. These included the installation of a 1,300 kilowatt peak (Kwp) solar plant and vertical

transparent sheets in the heat treatment plant to maximise the use of daylight. BGL also replaced older High-Pressure Mercury Vapour (HPMV) lamps with Light Emitting Diodes (LEDs), improving Lux levels and conserving energy. The cleaning of all transparent sheets following the monsoon season further enhanced daylight utilisation and power savings. Additionally, preheating and tempering times for low-weight components were reduced significantly, leading to further power savings. Electrostatic precipitators were installed on four hobbing machines to eliminate oil fumes from cutting operations.

At the Faridabad Plant, various energy-saving measures have been implemented. These include motor optimisation, the installation of motion sensors on office lights in various departments to conserve electricity, and energy conservation through drive optimisation.

Safety Management

Bharat Gears prioritizes the safety of its staff and the continuity of its operations through a comprehensive safety management system implemented across all manufacturing locations. This includes stringent measures such as the elimination of dangerous materials like kerosene and asbestos, and the provision of protective gear and uniforms to all employees. The Company ensures a safe working environment through regular employee awareness programmes, careful machine selection based on Rs5S System compatibility, and the application of Kaizen principles. Regular monthly safety committee meetings and audits, quarterly fire and mock drills, and monthly firefighting and first aid training are conducted.

Financial Highlights (Rs in Lakhs)

An emergency preparedness plan is kept up to date, and the commitment of senior management to Environmental, Health, and Safety (EHS) is integral to all systems. Unsafe conditions have been identified and remedied, and strict discipline is maintained in the handling of hazardous materials.

The Lonand Plant has successfully completed ISO 45001 re-certification audit. A separate Safety Department, led by a qualified safety officer and assisted by Safety Marshals, has been established to further strengthen safety measures.

Operational Support System

To support its operational activities, Bharat Gears relies on strong IT systems, including a tailored Enterprise Resource Planning (ERP) system, to manage core and support functions. IT is also used extensively in engineering and manufacturing to improve products, manage knowledge, maintain customer relationships for reporting, and resolve problems.

The Companys Human Resources team supports the workforce involved in manufacturing, ensuring the availability of skilled personnel to achieve business goals related to industry leadership, process efficiency, product quality, and customer satisfaction. The Companys HR policy promotes competitiveness, work-life balance, and a positive work culture. Regular training and engagement programmes are held to improve employee skills. As of 31 March, 2025, the Company employed 1,104 permanent staff members.

Particulars	FY 2024-25	FY 2023-24	Variance (%)
Operating revenue	64,753.19	66,304.74	(2.34)%
Other income	251.33	362.42	(30.65)%
EBITDA	2,780.84	2,715.89	2.39%
Finance costs	1,708.07	1,748.41	(2.31)%
Depreciation and amortisation expense	2,363.14	2,255.07	4.79%
Exceptional items	1,683.77	-	-
Profit/(Loss) before tax	393.40	(1,287.59)	(130.55)%
Tax expense/(credit)	74.59	(313.81)	(123.77)%
Profit/(Loss) for the year	318.81	(973.78)	(132.74)%

Key Financial Ratios

Particulars	FY 2024-25	FY 2023-24	Variance (%)
Debtors Turnover Ratio	6.08	5.56	9.35%
Inventory Turnover Ratio	7.39	7.29	1.37%
Interest Coverage Ratio	1.63	1.55	5.16%
Current Ratio	1.22	1.26	(3.17)%
Debt Equity Ratio	0.54	0.84	(35.71)%
Operating Margin (%)	0.64%	0.69%	(7.25)%
Net Profit Margin (%)	1.00	(1.00)%	(200)%
Return on Net Worth (%)	3.00	(8.00)%	(137.50)%

Global headwinds, including the ongoing Russia-Ukraine and Israel-Hamas conflicts and rising inflation in the USA and Europe, led to a significant slowdown in export demand, adversely impacting offtake from export customers.

The Companys profitability metrics, including interest coverage, operating profit margin, net profit margin, and return on net worth, have shown improvement, primarily driven by enhanced operational margins and supported by gains from the sale of land. However, operational losses have led to a deterioration in the working capital position, resulting in a decline in the current ratio. The debt-equity ratio has improved due to scheduled debt repayments and the prepayment of debt.

Key Operational highlights FY 2024-25

• The Company implemented several energy conservation initiatives, including lighting upgrades, process optimisation, and equipment automation, resulting in notable reductions in power consumption and improved sustainability performance

• Manufacturing operations were streamlined through the adoption of lean practices and the reorganisation of equipment, leading to improved efficiency, reduced inventory, and enhanced throughput

• Cost reduction efforts across energy, manpower, maintenance, raw materials, and packaging yielded significant savings, with overall cost efficiencies exceeding set targets for the year

• Quality performance improved through regular audits, employee awareness programmes, and structured quality initiatives, resulting in a sharp decline in defect rates and overall product rejections

• Workforce efficiency was strengthened by optimising manpower deployment, closely monitoring overtime, and driving resource rationalisation without compromising productivity

• Upgrades in tooling and automation enhanced production capability and consistency, supporting increased output volumes and reduced dependence on manual intervention

• Process innovations across key operations contributed to lower carbon emissions and more sustainable production practices, reinforcing the Companys commitment to environmental responsibility

• Enhanced packaging solutions and supply chain improvements helped reduce logistics costs while improving handling efficiency for both domestic and export markets

• In-house maintenance and retrofitting of machinery improved equipment availability and extended asset life, reducing the need for external support and cutting down capital expenditure

• A strong culture of continuous improvement was fostered through increased employee participation in Kaizen and other structured problem-solving activities, driving operational excellence across the board

Key Strategies and Outlook

Our strategic focus for the upcoming three years centres on several key areas designed to ensure sustainable growth and market leadership:

• Growing Sales and Revenue: We aim for strong and consistent growth in our sales, targeting a double digit CAGR. This aggressive target reflects our confidence in market opportunities and our ability to expand our reach

• Achieving Cost Leadership: We are committed to being the best at managing our costs. This means a focussed effort on actively reducing expenses related to raw materials, employee wages (manpower costs), and the overall cost of manufacturing our products

• Continuous New Product Development: Innovation is crucial to our future. Our strategy involves launching 100+ new products every year. These new developments will help us replace older or less popular models, ensuring our product lineup remains fresh, relevant, and competitive in the market

• Building a Skilled and Motivated Team: We believe our people are our greatest asset. We are dedicated to creating a team that is highly capable, inspired, and knowledgeable. This will be achieved by fostering a strong performance-driven culture where individual and collective efforts contribute directly to our companys success.

• Maintaining and Expanding Technology Leadership:

We aim to continue being the leader in technology for our Bevel gear products. Furthermore, we are investing significantly to establish a similar leading position in the Transmission gear range, broadening our technological advantage across our core offerings

Risk and Concerns

The Company places significant emphasis on effective risk management, meticulously monitoring both internal and external factors for potential threats. This constant vigilance allows for the early identification of emerging risks, enabling the swift implementation of appropriate mitigation strategies. Through this proactive risk reduction approach, the Company aims to maintain a secure and stable operating environment.

RISK	IMPACT		MITIGATION
Macro Environment Risk	Economic downturns can negatively affect business operations. Declines or recessions may significantly reduce the demand for industrial and automotive components, potentially disrupting the Companys operational activities.		To develop effective growth strategies, the Company conducts regular assessments of its order book, execution plans, market opportunities, and shifts in the business environment across various markets. This analysis enables the Company to refine its sector and geographic diversification strategy, allowing it to capitalise on emerging opportunities and adapt its approach to address new challenges.
Technological Risk	The implementation of novel manufacturing technologies, such as automation and digitalisation, presents challenges that could impact both production efficiency and product quality. Furthermore, failure to adopt cutting-edge technology may impede the Companys capacity to satisfy changing global market requirements, potentially resulting in the loss of business opportunities.		The Company places a high priority on proactive investment in modern and sustainable technologies, aiming to maintain product quality and expand its product range. Additionally, research and development efforts are directed towards emerging technologies, applications, and market trends, with the goal of improving manufacturing processes, quality control, and product enhancements.
Financial Risk	The Companys global operations expose it to risks stemming from foreign exchange fluctuations, increasing interest rates, and changes in credit availability and liquidity. These factors can adversely affect the Companys profit margins and overall profitability. Furthermore, unexpected inventory write-offs, resulting from insufficient protection or obsolescence, could damage the Companys reputation and lead to financial losses.		The Company diligently monitors exchange rate fluctuations and utilises a hedging strategy to minimise the effects of adverse currency movements. Its robust credit policies, effective collection procedures, and established banking relationships assist in mitigating risks related to liquidity and credit access. The Company conducts regular evaluations of inventory targets and policies concerning slow-moving items. Furthermore, it has established appropriate storage facilities and material handling systems to improve material storage practices.
Supply Chain Risk	Disruptions within the supply chain could result in material or component shortages, leading to loss of sale or increased costs. Additionally, recent geopolitical tensions have exerted pressure on the supply chain network.		The Company has strengthened its supply chain network and developed strong relationships with suppliers and vendors to ensure uninterrupted operations. Wherever feasible, dual sourcing has been put in place to reduce potential risks.
RISK	IMPACT	MITIGATION
Raw Material & Inflation Risk	Increase in the prices of essential inputs, including steel, energy, and other raw materials, can significantly affect the Companys overall cost structure. This rise in input costs presents a risk to the Companys profitability and its capacity to deliver finished products on time, within budget, and to the required quality standards. Fluctuations in raw material prices, such as alloy steel, further intensify this risk, potentially impacting the Companys profit margins.	The Company employs a comprehensive strategy to mitigate the risks associated with inflation and raw material price fluctuations. Inflation is monitored, and export contract prices are adjusted accordingly. Contracts are established with clients to pass on variations in raw material costs, thereby protecting profit margins. Cost-saving initiatives include the implementation of process automation, a shift towards renewable energy sources, and improvements in supply chain efficiency. Furthermore, the Company maintains strong relationships with vendors and implements rigorous inventory control to procure materials at competitive prices. These combined efforts are designed to protect the Companys profitability and maintain operational efficiency.
Regulatory Risk	The Companys products are essential in many critical industrial and commercial applications where failures can cause substantial losses. Consequently, it is vital that these products comply with strict regulatory requirements, quality standards, and technical specifications set by Original Equipment Manufacturers (OEMs) or regulatory authorities. Non-compliance with these standards could lead to business losses and harm the Companys reputation.	To uphold precision, quality, and productivity standards, the Company consistently invests in the modernisation of its manufacturing facilities and the development of its workforces skills. Beyond the quality control tests performed by the Inspection and Quality Assurance team, the Company regularly seeks client feedback on product quality. Furthermore, the Company secures product liability insurance to safeguard itself from potential financial losses.
Natural Calamities & Crisis Risk	Natural disasters and global or national crises, including pandemics, earthquakes, geopolitical instability, and wars, pose a risk to the Company. These events have the potential to cause operational disruptions, facility shutdowns, production reductions, project delays, supply chain obstacles, and increased construction expenses.	The Company prioritises the safety of its stakeholder community and the maintenance of business continuity during unforeseen crises. It concentrates on strategies such as delaying capital expenditures, managing liquidity, establishing alternative supply and manufacturing options, and implementing cost-reduction measures to insulate business operations in such challenging circumstances.
People Risk	Excessive manpower can create issues such as industrial relations problems, decreased gross margins, lower productivity standards, and negative impacts on support systems. Furthermore, a lack of qualified personnel for key business positions can impede the organisations growth potential. Inadequate leadership team development and succession planning can also present significant challenges for the Company.	The Company conducts benchmarking studies across all its plants to adopt best practices and improve manpower utilisation. Measures such as enhancing machine maintenance to increase productivity and implementing lean layouts are prioritised. Furthermore, a structured process is used to identify critical positions requiring succession planning.

Internal Control Systems & Their Adequacy

Bharat Gears Limited is an organisation driven by systematic processes. Its effective internal control system is essential for maintaining efficient daily operations. The Company employs a structured approach to financial reporting across various transactions, operational efficiency, asset protection, and adherence to relevant laws and regulations. Our systematic audit process is continuous, providing a foundation for evaluating the effectiveness of internal control systems. Our internal controls are appropriately designed to ensure the reliability and accuracy of financial and other records necessary for the preparation of financial information and related data.

Internal audits are conducted by appointed external auditors, with support from the Companys functional teams. Internal Auditor reports are reviewed during Audit Committee meetings. Recommendations for improving internal controls are proposed and carefully considered.

Furthermore, the Boards Audit Committee reviews and deliberates on suggestions from the Internal Auditors on a quarterly basis. The overall objective is to achieve continuous improvement in the Companys internal controls and systems.

Cautionary Statement

The statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, and expectations may be Rsforward-looking statements within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand, supply, and price conditions in the domestic & overseas markets in which the Company operates, changes in Government regulations, tax laws & other statutes, and other incidental factors. The Company assumes no responsibility in respect of forward-looking statements, which may be amended or modified in the future.