Bharat Seats Ltd Management Discussions

According to the World Bank, global growth in 2025 averaged 2.7%, shaped by offsetting forces like trade policy headwinds on one side and the fading impact of monetary easing, fiscal support, and technology investments on the other. While the post-pandemic recovery was strong, it remained uneven and came at the cost of elevated inflation and debt. Inflation moderated across most economies, moving closer to central bank targets, with interest rates beginning to decline. Growth in advanced economies proved resilient despite rising trade tensions and policy uncertainty.

The United States benefitedfrom relative demand resilience and investment in advanced manufacturing and technology, while Europe faced persistent industrial softness amid energy transition costs and external demand constraints. For industrial supply chains, this environment translated into more selective capital flows and a higher premium on reliability, quality execution, and localisation. Global economic conditions in 2025 presented a mix of downsides and upsides.

Trade tensions, tighter financial conditions and heightened geopolitical stress, and the risks of natural disasters. At the same time, private sector adaptation helped reduce the drag from higher trade barriers, while technology led investments supported productivity gains.

Due to robust domestic demand, rationalisation of income and goods and services taxes, and the front loading of government capital expenditure. India continues to stand out as one of the worlds fastest growing major economies, well positioned to sustain this momentum. While global growth remained steady but below historical averages, Indias growth profile continued to be supported by infrastructure spending, services strength, and steady manufacturing activity creating a structurally attractive environment for engineering-intensive companies.

Overall, the Automobile industry will closely monitor macroeconomic factors and global geopolitics, which will determine the key demand conditions and supply chain dynamics going forward.

INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian automobile industry is segmented into various categories including passenger vehicles, commercial vehicles, two-wheelers, and three-wheelers. Passenger vehicles consist of cars, utility vehicles, and vans, while commercial vehicles include trucks, buses, and other utility vehicles.

Indias automotive industry in FY2025 reflected a normalisation pattern certain segments moderated after strong growth in the earlier recovery phase, while structural drivers continued to reshape platform requirements. Passenger vehicles remained supported by a GST moderation, SUV-led mix, urban consumption resilience, and expanding model portfolios. Two-wheelers showed gradual recovery, with rural demand sensitivity influenced by income cycles and in line with freight cycle normalisation. While global growth financing remained steady but below historical averages, Indias growth profile continued to be supported by infrastructure spending, services strength, and steady manufacturing activity creating a structurally attractive environment for engineering-intensive companies.

In Electric Passenger Vehicles, while battery electric vehicles (BEVs) are seeing adoption, hybrid electric vehicles (HEVs) and plug-in hybrids (PHEVs) have seen a resurgence due to their ability to offer immediate emission reductions without relying on extensive, yet-to-be-developed charging infrastructure.

The Indian automotive market continues to be healthy in this turbulent scenario. Ownership of cars, scooters and tractors are much below global averages, on a per capita basis. As the Indian economy continues to grow, this ratio will increase and lead to healthy demand for vehicles. The market has also been positively impacted by the optimization in GST that has lowered prices for the retail buyer. India is one of the few regions in the world where both the traditional Internal Combustion Engine (ICE) vehicles and EVs are expected to grow well in the next 3-5 years.

Maruti Suzuki India Limited is the bellwether of the Indian passenger vehicle industry and for the financial year 2025-26 the Company achieved its highest ever sales. Affordability and practicality are the hallmarks of Maruti Suzuki vehicles, making them a popular choice among car buyers. The company has built a strong reputation for manufacturing vehicles that are not only affordable in terms of their purchase price but also in terms of their maintenance costs.

OPPORTUNITIES AND THREATS

The automotive sector is one of the most important and rapidly developing sectors in the economy. The automotive industry has had a lasting impact on society, starting as a steam-powered carriage and continuing through the new age of electric and autonomous automobiles. Technologies has changed the way we travel, live, and work, bringing people and places closer together than before.

The use of electric cars (EVs) is anticipated to rise as a result of growing environmental concerns and governmental efforts to minimise carbon emissions. Optimization of fuel-driven combustion engines and cost efficiencyprograms are excellent opportunities for the automobile market. Emerging markets will be the primary growth drivers for a long time to come, and hence fuel-efficient cars are the need of the hour. The increased availability of data and information, shift in consumer demand, and expanded regulatory requirements for safety and fuel economy will fuel the growth of this industry.

There are ample opportunities for growth, particularly in the electric vehicle segment, where the government is offering incentives and subsidies to promote adoption. Over the next decade, this will lead to newer verticals and opportunities for auto component manufacturers.

Despite these opportunities, Indias automotive sector faces structural challenges. Although the country is the fourth largest automobile producer globally, its share in the $20 billion global automotive component trade remains modest at around 3%, with particularly low representation in high precision segments such as engine components, drive transmission, and steering systems. Operational costs, infrastructural gaps, moderate integration into global value chains, and limited R&D expenditure continue to constrain competitiveness. Addressing these challenges will be critical for India to strengthen its position in the global automotive ecosystem and fully leverage the opportunities presented by electrification and digital transformation.

SEGMENT WISE/ PRODUCT WISE PERFORMANCE

The Company is currently operating primarily under a single business segment manufacturing complete seating systems and interior components for passenger Cars as well as Utility Vehicles.

RESEARCH. DEVELOPMENT (R&D)

R&D team is backbone of any business house irrespective of segment. This is the team that works on products packed with advanced technologies and processes, conceiving the product and preparing it to be commercialized. The Company is working on the following different product portfolios: a) Seating System design & development for passenger cars b) NVH components like Floor carpet, Silencer Dash Inner, Silencer Dash Outer, Cover Motor Under, Fender Lining, Wheel Housing Cover, etc. for passenger car. c) Design & Development for extrusion products like Roof Molding and Molding Windshield for passenger car d) Seating system design & development for 2-Wheelers. e) Design & Development of Rear Door for passenger cars Besides all above Company is continuingly engaged in Value Engineering and Value analysis (VA- VE) in process, creating design and development standard for each commodity, developing expertise knowledge in fabric lay-outing called nesting to increase yield, etc. for value addition.

Technical Show: This year your company demonstrated multiple new innovative products including new 2nd row multi-functional Captain seat, new insulation (V-Wave), Ambient lighting, and Tonneau cover.

RISK AND CONCERNS

The Company is exposed to external and internal risks associated with the business.

BUSINESS RISK including supply chain disruptions, labour shortages, regulatory The auto motive industry faces significant challenges, emissions targets, political instability, economic uncertainty and technological and market shifts.

FINANCIAL RISK

There are several financial risks, including slow sales growth, increased competition, the potential for new tariffs, and economic uncertainty.

The companys sales and margins are subject to the market factors that affect Maruti Suzuki India Ltd. and Suzuki Motorcycle India Private Ltd. Any disruption of supply chain, availability of raw material could potentially impact its financial position and earnings.

The Company is exposed to the risks associated with fluctuations in foreign currency rates, import duties and taxes

Your Company reviews forward exchange contracts/ derivative contracts on a regular basis to analyze foreign exchange exposure and confirms that the Company has a Risk Management policy, with a clause on foreign exchange risk management in place.

Both the operational and financial risks are constantly assessed, and adequate steps are taken from time to time to mitigate them successfully.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls to ensure that transactions are properly authorized, recorded, and reported, apart from safeguarding its assets. The internal control system is supplemented by well-documented policies, guidelines and procedures and reviews carried out by the Companys internal audit function, which submits reports periodically to the Management and the Audit Committee of the Board.

Your Company has a favorable work environment that motivates performance, customer focus and innovation while adhering to the highest degree of quality and integrity.

DISCLOSURE OF ACCOUNTING TREATMENT

The Company has complied with all the provisions of the accounting standards in accordance with Section 133 of the Companies Act, 2013.

HUMAN RESOURCES/ INDUSTRIAL RELATIONS

Your Company believes that employees are key for our success, have immense knowledge and power of innovation. Your Company aims to create an environment where every employee can contribute to the companys performance, excel and grow in their respective jobs. Our focus is to recruit employees with right skills and talent, raise competency through training and development, recognize and reward leadership and performance. Several measures are implemented to retain the talent within the organization. At each location, the work force goes through a mandatory training plan including the vision, mission and company values which forms a base for treating everybody with dignity and respect. To further strengthen and motivate our employees, several initiatives are taken on a continuous basis to foster teamwork, trust and communication across the organization. Employees are encouraged to have a passion for excellence and focus on the customer with a performance goal of doing things right first time and every time. Your Company provides challenging and fulfilling opportunities to maximize employee potential so that every employee excels and grows along with Companys growth.

Your Company ensures quality at our suppliers and service providers by horizontal deployment of learnings and training at our supplier partners.

In addition to timely delivery and quality, your Companys utmost focus is on the safety of its workforce.

Health, Safety and the Environment remain our top priority. Periodic audits are carried out both internally as well as through external agencies to identify gaps and to define action items for continuous improvement, ensuring a safe workplace for employees. The total number of permanent employees on the rolls of Company as on 31st March 2026 are 445.

FINANCIAL PERFORMANCE

The Company continued its focus on lean operations and cost optimization through several measures.

The details of the financial performance of the company appear in the Balance Sheet, Profit & Loss Account and other financial statements forming part of this Annual report. For financial highlights

RESULTS of the Boards Report.

KEY FINANCIAL RATIOS

Changes in key financial ratios are as under:

Sr. Ratios	Unit	2025-2026	2024-2025	% change
No.
1 Debtors Turnover	Times	8.48	8.59	-1.28%
2 Inventory Turnover	Times	33.73	27.08	24.56%
3 Interest Coverage Ratio#	Times	10.27	8.87	15.78%
4 Current Ratio	Times	0.88	0.80	10%
5 Debt Equity Ratio #	Times	0.48	0.78	-38.46%
6 Operating Profit Margin	%	4.10	4.10	-
7 Net Profit Margin	%	2.16	2.54	14.96%
8 Return on Net worth##	%	16.81	16.81	-

Earnings before interest, depreciation, tax and amortization (EBIDTA) have been considered for coverage ratio.

Operating profit is earning before interest and tax (EBIT)

# Interest coverage ratio has increased, and Debt Equity ratio has decreased on account of repayment of loan and increase in the profitability.

## Return on net worth has been calculated on PAT and shareholders fund

There is an upwards trend, compared to last year due to an overall upswing in sales primarily due to more off-take by MSIL.

DISCLAIMER

Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Companys objectives, projections, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.