Carnation Industries Ltd Management Discussions

ANNEXURE-II

ECONOMY OVERVIEW GLOBAL ECONOMY

The global economy in CY 2024 demonstrated resilience and adaptability despite ongoing geopolitical shifts and structural transitions. Growth remained steady at 3.3% year-over-year (YoY) signalling cautious optimism in a dynamic environment. The United States led among advanced economies recording a robust 2.8% growth supported by strong labour markets and strong domestic demand. While the Eurozone experienced slower growth at 0.9%, it continued its structural realignment particularly in energy-intensive industries. Overall advanced economies grew by 1.8% YoY. Emerging Markets and Developing Economies (EMDEs) continued to be a key engine of global growth expanding by a healthy 4.3%. India and China stood out with impressive growth rates of 6.5% and 5.0% respectively driven by rising domestic consumption rapid digital adoption and increased infrastructure investment particularly in India and South-East Asia.

The global energy transition gained strong momentum in 2024, marked by increased investments in renewable energy infrastructure and clean technologies, reflecting a growing and widespread commitment to achieving climate goals. Chinas recovery is progressing steadily, supported by ongoing reforms and policy measures, even as it navigates challenges from a cooling property sector and softer external demand. While regional conflicts, climate-related disruptions and rising trade fragmentation present ongoing risks, these challenges highlight the importance of continued global cooperation and innovation to sustain recovery and build resilience for the future.

Global Economic Growth (%)

	Estimate		Projections
World Output (Real OOP; Annual change)	CY23	CY24	CY25	CY26
Global Economy	3.5	3.3	2.8	3.0
Advanced Economies	1.7	1.8	1.4	1.5
United States	2.9	2.8	1.8	1.7
Euro Area	0.4	0.9	0.8	1.2
Emerging Markets and Developing Economies	4.7	4.3	3.7	3.9
Emerging and Developing Asia	6.1	5.3	4.5	4.6
China	5.4	5.0	4.0	4.0
India	9.2	6.5	6.2	6.3

Source: International Monetary Fund (IMF) April 2025 report

The global economic outlook for 2025 reflects a promising blend of emerging opportunities and manageable risks, shaped by evolving trade relationships and proactive policy measures. Inflation in advanced economies is projected to ease steadily, reaching target levels around 1.5% by 2026. Meanwhile, emerging markets and developing economies are also expected to experience a gradual easing of inflation, settling near 3.7% over the same period. The U.S. decision to impose tariffs on different countries in March 2025, along with subsequent retaliatory actions, has the potential to disrupt global trade, increase inflationary pressures and weigh on economic growth.

Advanced economies are on track to achieve their inflation goals sooner, while EMDEs, especially China and India, continue to demonstrate strong growth momentum. Although recent trade tensions and tariff measures may introduce some upward pressure on prices, ongoing technological progress and welldesigned policy responses are enhancing economic resilience. Additionally, the growing emphasis on renewable energy is driving global growth by creating jobs, reducing energy costs and supporting long-term energy security.

In 2025, the global economy is expected to grow by 2.8% year-over-year, with a further improvement to 3.0% projected in 2026. Advanced economies are anticipated to achieve modest but consistent growth of 1.4% in 2025 and 1.5% in 2026, while Emerging Markets and Developing Economies are set to maintain a stronger pace, expanding by 3.7% and 3.9% respectively. Inflation is forecast to ease globally, declining to 4.3% in 2025 and further moderating to 3.6% in 2026. Despite ongoing uncertainties around trade policies and inflation, proactive fiscal interventions and global cooperation are anticipated to cushion risks. Through innovation, targeted investments, and adaptive policy shifts, the global economy remains well-positioned to sustain growth and explore new avenues of opportunity.

The global infrastructure construction market is poised for robust growth, with a compound annual growth rate (CAGR) of 6.27% projected from 2025 to 2030. Additionally, the World Trade Organisation (WTO) projects global merchandise trade to grow by 2.8% in both 2024 and 2025, followed by a slight moderation to 2.6% in 2026. These encouraging trends reflect the positive Global Economic Growth (%) effects of globalisation and supportive policy frameworks, which are accelerating the shift toward clean energy and positioning it as a vital driver of sustainable and inclusive growth worldwide.

INDIAN ECONOMY

India continues to rank among the fastest-growing major economies globally, driven by a favourable demographic profile, resilient domestic consumption, structural economic reforms and a sustained push for digital transformation. Key growth enablers include robust GST collections, expanding infrastructure and manufacturing activity and rapid technological adoption across sectors. The governments focus on improving ease of doing business and encouraging a startup ecosystem has further strengthened economic momentum. However, in FY2025, GDP growth moderated to 6.5% year-on-year, reflecting the impact of global headwinds and domestic challenges. Contributing factors to the slowdown include softening manufacturing output, elevated food inflation, subdued urban demand, stagnant employment generation, widening trade imbalances and muted private sector investments.

Despite facing challenges, India remains on a steady growth path, driven by strong manufacturing, expanding services, increased infrastructure investment and government initiatives promoting digital transformation, financial inclusion and ease of doing business. Gross GST collections hit 1.96 lakh crore in March 2025, signalling robust economic activity, while the Index of Eight Core Industries grew by 0.5% in April 2025, with Cement, Coal, Steel, Electricity and Natural Gas recording positive gains. For FY2025, GST collections rose 9.4% year-on-year to 22.1 lakh crore. Efforts to diversify trade through new free trade agreements helped reduce external risks and rising urbanisation alongside a growing middle class boosted consumer spending. Inflation concerns, driven by global supply chain issues and volatile commodity prices, led RBI has played a proactive role in managing inflation and supporting growth.

The Reserve Bank of Indias Monetary Policy Committee (MPC) enacted two consecutive repo rate cuts of 25 basis points each, lowering the rate to 6% by April 2025 and adopting a more accommodative monetary stance. In its 6th June, 2025 meeting, the MPC further eased the repo rate by 50 basis points, bringing it down to 5.50%. In a bid to boost liquidity, the RBI decided to cut the cash reserve ratio (CRR) by 100 basis points to 3% in a phased manner. The move comes at an opportune time and is expected to stimulate domestic demand, support credit growth, and add fresh momentum to overall economic activity. Consumer Price Index (CPI) inflation is projected to average 3.2% in the fiscal year 2024-25, a significant decline from 5.4% in 2023-24 and is expected to remain moderate at around 3.7% in FY2026.

Outlook

Indias economic outlook remains strong and forward-looking, supported by a combination of structural strengths and proactive policy measures. The country is on track to become the worlds third-largest economy, powered by robust domestic demand, increasing capital investments and a series of structural reforms aimed at boosting productivity and global competitiveness. Growth is expected to hold steady at 6.5% year-on-year in FY2026, matching the previous years performance and remaining above the global average. A key factor underpinning this momentum is the governments substantial capital expenditure of 11.2 lakh crore - 3.1% of GDP - allocated for FY2026, reinforcing its commitment to infrastructure development and long-term capacity building. In addition, Indias demographic advantage, marked by a large and youthful population, continues to support consumption and labour supply. Over the past decade, focused investments in digitalisation, regulatory reforms, financial inclusion and physical infrastructure have laid a strong foundation for sustained growth. As the economy urbanises and industrialises, the shift towards clean and renewable energy will play a crucial role in shaping a sustainable and resilient growth trajectory. (Source: PIB)

Manufacturing is emerging as an integral pillar in the countrys economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables. The Indian manufacturing industry generated 16-17% of Indias GDP pre-pandemic and is projected to be one of the fastest growing sectors.

The machine tool industry was literally the nuts and bolts of the manufacturing industry in India. Today, technology has stimulated innovation with digital transformation a key aspect in gaining an edge in this highly competitive market.

Technology has today encouraged creativity, with digital transformation being a critical element in gaining an advantage in this increasingly competitive industry. The Indian manufacturing sector is steadily moving toward more automated and process-driven manufacturing, which is projected to improve efficiency and enhance productivity.

Indias manufacturing sector reached a 16-year high in March, with the HSBC Manufacturing Purchasing Managers Index (PMI) rising to 59.1, driven by strong increases in output, new orders, and job creation across various goods sectors.

India has the potential to become a global manufacturing hub for wind power components. India is well-positioned to cater to 10% of the global wind energy demand by 2030, leveraging its manufacturing capacity, technology, and global reputation. With 17% of the nations GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economys output come from manufacturing by 2025.

India now has the physical and digital infrastructure to raise the share of the manufacturing sector in the economy and make a realistic bid to be an important player in global supply chains.

A globally competitive manufacturing sector is Indias greatest potential to drive economic growth and job creation this decade. Due to factors like power growth, long-term employment prospects, and skill routes for millions of people, India has a significant potential to engage in international markets. Several factors contribute to their potential. First off, these value chains are well positioned to benefit from Indias advantages in terms of raw materials, industrial expertise, and entrepreneurship.

Second, they can take advantage of four market opportunities: expanding exports, localising imports, internal demand, and contract manufacturing. With digital transformation being a crucial component in achieving an advantage in this fiercely competitive industry, technology has today sparked creativity. Manufacturing sector in India is gradually shifting to a more automated and process driven manufacturing which is expected to increase the efficiency and boost production of the manufacturing industry.

India is gradually progressing on the road to Industry 4.0 through the Government of Indias initiatives like the National Manufacturing Policy which aims to increase the share of manufacturing in GDP to 25 percent by 2025 and the PLI scheme for manufacturing which was launched in 2022 to develop the core manufacturing sector at par with global manufacturing standards.

The Union Minister for Finance and Corporate Affairs , Ms. Nirmala Sitharaman announced the "National Manufacturing Mission" in the Union Budget 2025-26 to boost "Make in India" by supporting industries of all sizes with policy frameworks, ease of business, MSME growth, future-ready workforce, and clean tech manufacturing. According to MeitY, Indias digital economy is projected to grow at twice the rate of the overall economy, accounting for 20% of the national income by 2029-30, surpassing both agriculture and manufacturing, driven by digital platforms and widespread digitalisation across sectors.

FDI in Indias manufacturing sector has reached Rs. 14,34,224 crore (US$ 165.1 billion), a 69% increase over the past decade, driven by production-linked incentive (PLI) schemes. In the last five years, total FDI inflows amounted to Rs. 33,31,465 crore (US$ 383.5 billion). India is planning to offer incentives of up to Rs. 18,000 crore (US$ 2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers, and inputs for vaccines.

India ranked among the top five countries in services export growth in FY25 (April-November), rising to 12.8% from 5.7% in FY24, with computer and business services contributing around 70%. Major players like Apple and its contract manufacturers, along with Dixon Technologies, are expanding their workforce to meet growing production needs.

(Source: https://www.ibef.org/industry/manufacturing-sector-india )

INDIA WINE MARKET OVERVIEW AND OUTLOOK

Indias wine market is valued at approximately $150-200 Mn (including both domestic and imported wines) with more than 3 Mn cases being sold annually.

Going forward, the Indian wine market is expected to grow at ~15% CAGR over CY 2023- 20282 led by the increasing prosperity and disposable income, rapid urbanization, evolving consumer preferences and increase in number of working women and women drinkers

Key Growth Drivers:

• Aspirational: One of the primary drivers of this growth is the growing popularity of wine among the urban, middle- class population. Today, wine is seen as a sophisticated and aspirational drink

• Food Pairing: The popularity of Western cuisines, particularly Italian and French, has also boosted the wine market in India.

• Emergence of Vineyards and New Varietals: Another key factor in the growth of the wine industry is the emergence of new wineries and vineyards as well as expansion of the different red, white and rose varietals throughout the country.

• Favourable Demographics: The wine industry in India benefits from a favourable demographic profile that supports its growth. Indias burgeoning middle class that is growing, is open to new experiences and experimentation. The countrys young population people in India are more receptive to trying new experiences and are willing to explore several types of beverages, including wine, providing a promising opportunity for wine companies to tap into this growing market segment.

• Online Ordering & Home Delivery: The COVID-19 pandemic led to the emergence of recent sales channels in the alcobev industry. Home delivery and limited e-commerce options for alcobev gained more prominence for their convenience, better purchase experience, which attracted more customers, including women. This sales channel has a promising future as it can improve the penetration of the alcobev industry, especially since the number of traditional outlets remains limited.

• Premiumisation: Premiumisation grew significantly during the pandemic because consumers wanted to create affordable luxury experiences the comforts of their own homes and were willing to spend more on higher quality products across all alcohol categories, with no sign of this inclination slowing. This trend towards premiumization is expected in the sparkling wine category as well, where high-end bubbles are on an upward trajectory.

• Rise of In-Home Consumption: Post COVID-19, saw a sea of change in consumer behaviour around alcohol consumption, with a shift towards drinking at home.

• Favourable Policies Towards Wine: One of the main drivers of the growth of the wine industry in India is the favourable regulations that treat wine as a distinct and separate category from other alcobev. These regulations have been particularly favourable in the states of Maharashtra and Karnataka, contributing significantly to the growth of the domestic wine industry

INFRASTRUCTURE INDUSTRY - POSITIONED FOR GROWTH

The global infrastructure sector is undergoing a significant transformation, prioritising sustainable development and heightened environmental awareness, propelled by growing global climate commitments. The industry is increasingly embracing cleaner technologies in public infrastructure projects and accelerating the integration of renewable energy solutions. Modernising existing infrastructure alongside the development of new, sustainable assets has emerged as a strategic priority for both governments and private investors. Governments across the globe are rolling out ambitious infrastructure development initiatives aimed at driving economic growth and improving connectivity. The scale of investment needed is substantial, with projections suggesting that over US$ 2 trillion per year will be required in transportation infrastructure alone through 2040 to support global economic expansion.

The global Infrastructure Sector Market size is estimated at US$ 2.89 trillion in 2025, and is expected to reach US$ 3.92 trillion by 2030, at a CAGR of 6.27% during the forecast period. According to the WTOs latest Global Trade Outlook and Statistics, the volume of world merchandise trade is projected to decline by 0.2% in 2025 under current conditions and tariff situation. This shift marks -0.2% contraction in merchandise trade in 2025 - down from +2.9% in 2024. However, a recovery is anticipated with the merchandise trade expected to increase by 2.5% in 2026. Regionally, the impact on merchandise trade is likely to be uneven.

Indias infrastructure sector is expected to experience significant growth, driven by various government initiatives and an increase in government investments. With 11.2 lakh crore allocated for capital expenditure in FY2026, infrastructure development remains a priority for economic growth and job creation. Key developments include highway expansion faster construction and increased private sector participation. Urban infrastructure is also strengthening through initiatives such as the Urban Challenge Fund, the extended Jal Jeevan Mission and the revised UDAN scheme.

Indian Market Outlook

The Indian industrial and manufacturing sectors are poised for robust growth, driven by the governments emphasis on "Make in India" initiatives, infrastructure development, and increasing exports. The demand for quality castings and forgings?core products of Carnation Industries Limited?is expected to rise steadily across automotive, railway, sanitary, and infrastructure segments. With India emerging as a global manufacturing hub, domestic foundries and casting companies stand to benefit from increased orders, especially as industries seek reliable local suppliers to reduce import dependence.

Simultaneously, the Indian beverages market, including alcoholic and non-alcoholic segments, is witnessing rapid expansion fueled by rising disposable incomes, urbanization, and changing consumer preferences. The spirits and wine industry, in particular, is projected to grow significantly, supported by greater acceptance, evolving lifestyles, and increased availability through modern retail channels. Carnations entry into this sector through the acquisition of Oniv Beverages Private Limited positions the Company to capitalize on these favorable market dynamics.

However, challenges such as fluctuating raw material prices, regulatory complexities, and competition from both organized and unorganized players remain key considerations. Additionally, supply chain disruptions and macroeconomic uncertainties could impact growth trajectories in the short term.

Overall, the Indian market offers substantial opportunities for Carnation Industries Limited to leverage its core manufacturing expertise while diversifying into the promising beverages sector. Strategic alignment with market trends and continued focus on innovation and quality will be critical for sustained growth in the evolving Indian economic landscape.

1. Foundry & Casting Market

• Indias foundry and casting sector reached USD 19.8 billion in 2024 and is projected to grow to USD 51.2 billion by 2033 at a CAGR of ~11.1% imarcgroup.com+4imarcgroup.com+4imarcgroup.com+4.

• The metal casting market specifically was valued at USD 13.2 billion in 2024, expected to reach USD 21.9 billion by 2033 (CAGR ~5.5%) imarcgroup.com.

• Within that, the iron casting segment alone stood at USD 4.5 billion in 2024, growing to USD 6.5 billion by 2033 (CAGR ~4.3%) imarcgroup.com.

-?ill Growth Drivers:

• Rapid expansion in automotive production, including EVs, with over 5 million passenger vehicles and 23.9 million two-wheelers produced in FY 202425 .

• Government-backed infrastructure and "Make in India" initiatives have committed over USD 1.4 trillion in projects, directly increasing demand for cast components imarcgroup.com+2marketresearchfuture. com+2imarcgroup.com+2.

• Industry-wide modernization, incorporating CAD/CAM, 3D printing, automation, and Industry 4.0 solutions to boost efficiency and export competitiveness .

2. Opportunities and Threats

• Opportunities

Re-entry into the manufacturing value chain post-resolution approval offers renewed focus on industrial and export orders.

Entry into beverages provides access to a high-margin, fast-growing consumer sector.

Adoption of technological upgrades and automation in foundries can improve margins and reduce waste.

• Threats

High input cost volatility (e.g., pig iron, scrap metal, energy).

Intense competition from organized and unorganized players in both the foundry and beverage industries.

Regulatory risks in liquor and beverage licensing across states.

3. Segment-wise or Product-wise Performance

Industrial Castings: With production partially restored post-CIRP, the Company expects steady growth in demand for grey and ductile iron components from infrastructure and sanitation sectors in FY 2025-26.

Oniv Beverages: Recently acquired (April 2025), with an FY 2023-24 turnover of ?16.91 crores. Oniv is expected to contribute meaningfully to revenue from H2 FY 2025-26.

4. Outlook

Post-resolution, Carnation Industries Limited is focused on operational revival and strategic diversification. The Company expects stable revenue growth from castings due to government infrastructure spend and renewed private sector demand. In the beverage space, the Company will focus on scaling Onivs product lines, entering new regional markets, and exploring both alcoholic and functional beverage segments. The management aims to transform Carnation into a two-engine enterprise-industrial manufacturing and consumer-facing beverages? ensuring revenue diversification and long-term resilience.

5. Risks and Concerns

Delays in production ramp-up may impact short-term cash flows.

Integration challenges and regulatory approvals for the beverage business could pose execution risks.

Liquidity pressures from historical debt may require disciplined cash and working capital management. Compliance and taxation complexities in alcoholic beverage operations.

6. Internal Control Systems and Their Adequacy

The Company has implemented appropriate internal control systems in line with its scale and complexity. Post- CIRP, new systems are being integrated across accounting, inventory management, and procurement functions. The internal audit function is being strengthened with oversight from the Resolution Professional and newly appointed Key Managerial Personnel (KMPs).

7. Financial Performance with Respect to Operational Performance

Q3 FY25: Net loss of ?2.71 million due to subdued production post-resolution.

9M FY25: Net profit of ?19.19 million reflecting partial recovery and other income components.

The equity base was restructured under the approved resolution plan, effective November 14, 2024, cancelling earlier share capital and issuing new equity (90% to promoter, 10% to public shareholders).

8. Human Resources and Industrial Relations

The Company has resumed hiring and capacity restoration across its three grey iron and one ductile iron foundries. It is focused on building a skilled and agile workforce with an emphasis on technical training, compliance, and safety. The addition of beverage operations will require recruitment in marketing, logistics, and FMCG sales.

9. Key Managerial Changes

Ms. Anamika Gupta appointed as Chief Financial Officer w.e.f. November 18, 2024.

Mrs. Parul Rai appointed as Company Secretary and Compliance Officer w.e.f. November 18, 2024.

Mr. Sanjay Agarwal resigned from Company Secretary position w.e.f. May 29, 2023.

Cautionary Statement

This Management Discussion and Analysis Report includes forward-looking statements relating to the Companys future business plans, financial performance, strategic initiatives, and industry outlook. These statements are based on current expectations and assumptions and are subject to inherent risks and uncertainties, many of which are beyond the Companys control.

Actual results may differ materially from those expressed or implied in such statements due to factors such as changes in economic conditions, regulatory developments, market volatility, operational challenges, and competitive dynamics. The Company does not undertake any obligation to update these forward-looking statements, except as required by applicable law, and advises stakeholders to interpret them in light of these uncertainties.

	For and on behalf of the Board
	Carnation Industries Limited
	Bhawna Gupta
Date: 05.09.2025	Director
Place: Delhi	DIN:10101543