Carraro India Ltd Management Discussions

GLOBAL ECONOMY

The global economy entered 2026 with underlying momentum intact, supported by technology-led investment, accommodative financial conditions, and the continued realignment of supply chains. This momentum was tested by the outbreak of conflict in the Middle East, which unsettled energy markets, revived inflationary pressures, and slowed the pace of global growth.

According to the International Monetary Fund (IMF), global growth moderated to 3.0% in 2025 from 3.3% in 2024 and is projected to remain at 3.0% in 2026 before improving to 3.4% in 2027. While the global economy continues to demonstrate resilience, growth remains constrained by geopolitical tensions, trade policy uncertainty and elevated public debt levels, underscoring a cautiously improving yet uneven economic outlook.

Higher energy prices and renewed cost pressures across industries followed, keeping central banks cautious as they weigh inflation control against growth. Global headline

inflation is expected to rise to 4.4% in 2026 before easing to 3.7% in 2027.

Advanced economies are expected to post moderate growth, on the back of steady labour markets and public investment, while emerging markets and developing economies remain the main engine of global expansion. Commodity price volatility, external financing pressures, and geopolitical uncertainties remain key challenges for many of them.

Trade and investment flows keep shifting as businesses build sturdier supply chains, widen their sourcing networks, and adjust to a more fragmented geopolitical map. Advances in AI and digital technology, in parallel, are opening fresh avenues to lift productivity and underpin growth over the longer term.

The outlook still carries risks from geopolitical tension, energy-market disruption, trade-policy uncertainty, and fiscal strain. Set against these, continued innovation, structural reform, and closer international cooperation could keep the global economy on a steady footing and support future growth. 1

Real GDP Growth (in %)
Year	Global Economy	Advanced Economies	Emerging Markets and Developing Economies
2025 (E)	2.9	1.8	4.4
2026 (F)	2.5	1.5	3.6
2027 (f)	2.8	1.8	4.2

INDIAN ECONOMY

The Indian economy delivered a strong performance in 2025-26, reinforcing its position as the worlds fastest-growing major economy despite persistent geopolitical tensions, trade uncertainty, and a difficult external environment. Backed by a good agricultural year, firm domestic consumption, sustained infrastructure spending, and a healthy financial sector, real GDP expanded by 7.7% during the year, up from the revised rate of 7.1% in 2024-25. Momentum held through the year, with GDP rising by 7.8% in the fourth quarter, reflecting the underlying domestic demand and investment activity. 2

A favourable monsoon, higher agricultural productivity, and continued policy support underpinned the years growth. Agriculture was central to rural incomes, consumption, employment, and food security. Indias foodgrain production reached a record estimated 376 Million tonnes during the 2025-26 crop year, representing a 5.3% increase over the previous year. This output across major crops helped ease food inflation, improve rural purchasing power, and spur demand across sectors such as consumer goods, housing, automobiles, and financial services. Agricultural exports

held firm, increasing by 2.8% year-on-year to approximately USD 52.6 Billion, a mark of the sectors competitiveness and its contribution to external stability. 3

The pickup in rural demand ran alongside urban consumption, creating a broad-based demand base. Household spending drew support from rising incomes, better labour market conditions, and easing inflation. Firm domestic demand and improved business confidence together kept investment activity ticking over across sectors.

Infrastructure development remained a principal engine of growth, backed by sustained public capital expenditure and increasing private sector participation. Investments across roads, railways, airports, logistics networks, renewable energy, urban infrastructure, and digital connectivity widened productive capacity and carried strong multiplier effects into employment and activity. Construction was among the years best-performing sectors, aided by the infrastructure cycle and large-scale public investment programmes. Continued rollout of PM GatiShakti and industrial corridor projects further improved connectivity, logistics efficiency, and competitiveness. 2

The strong investment environment was matched by healthy corporate balance sheets, improving capacity utilisation, and policy measures aimed at boosting manufacturing and industrial growth. Production Linked Incentive (PLI) schemes and supply-chain diversification opportunities continued to support capital formation and deepen the manufacturing base. 2

A favourable agricultural year and stable supply conditions drove a marked moderation in inflation during 2025-26. Consumer Price Index (CPI) inflation averaged approximately 2.1%, supporting real income growth and consumer spending. Benign inflation added to macroeconomic stability and gave policymakers room to support growth without straining financial stability. 2

Indias external sector also demonstrated resilience despite elevated geopolitical tensions and global trade disruptions. Services exports, healthy remittance inflows, and comfortable foreign exchange reserves cushioned the economy against external shocks. Combined merchandise and services exports reached an estimated USD 863 Billion during the year, underlining the competitiveness of Indian businesses and their deepening place in global value chains. 4

Fiscal consolidation stayed a policy priority through this period. The Government held the fiscal deficit at 4.4% of GDP in 2025-26 while continuing to prioritise infrastructure creation, agricultural development, and social sector investments. Building on this momentum, the Union Budget 2026-27 targets a further reduction in the fiscal deficit to 4.3% of GDP and proposes total expenditure of approximately 53.5 Lakh Crore. Capital expenditure has been increased to a record 12.2 Lakh Crore, about 3.1% of GDP, reaffirming the Governments commitment to infrastructure-led growth and long-term productivity enhancement. 4

The banking and financial services sector stayed a core enabler of activity through the year. Healthy credit growth across retail, agriculture, MSME, and corporate segments supported consumption and investment, while improving asset quality, strong capital adequacy, and sustained digitalisation shored up the sector. Continued demand for financing across infrastructure, agriculture, housing, and small business pointed to both the breadth of growth and the deepening of financial intermediation. 2

India enters 2026-27 from a position of strength, supported by firm domestic demand, healthy agricultural output, a resilient financial system, and a sustained infrastructure development pipeline. The Union Budget 2026-27 reinforces these growth drivers through continued support for agriculture, manufacturing, infrastructure, and logistics modernisation, while maintaining a clear commitment to

fiscal discipline. Risks from geopolitical conflicts, global trade fragmentation, commodity price volatility, and climate- related uncertainties remain. Indias strong domestic fundamentals, ongoing structural reforms, and investment- led growth strategy are expected to sustain economic expansion. Reflecting these strengths, the Reserve Bank of India (RBI) has projected GDP growth of 6.6% for 202627, positioning India among the fastest-growing major economies globally. 5

AGRICULTURE TRACTOR MARKET Global Agriculture Tractor Market

The global farm tractor market grew steadily in 2025, supported by wider agricultural mechanisation, rising food demand, farm labour shortages, and the greater use of advanced farming technology. Tractors remain central to modern agriculture, lifting productivity, efficiency, and precision across farm operations.

According to Straits Research, the global farm tractor market was valued at approximately USD 79.9 Billion in 2025 and is projected to grow to USD 84.5 Billion in 2026 and USD 132.2 Billion by 2034, a CAGR of 5.75% over the forecast period. Growth is driven by rising investments in farm mechanisation, supportive government initiatives, and the need to raise agricultural productivity against rising global food demand.

The industry is undergoing a technological transformation, with farmers increasingly adopting tractors fitted with GPS-based guidance systems, telematics, automation features, and precision farming capabilities. These are helping optimise input use, sharpen farm management, and lift overall productivity. Demand for medium-horsepower tractors, particularly in the 40-100 HP segment, stays firm given their versatility across a broad range of agricultural applications.

Regionally, Asia-Pacific remains the largest market, driven by strong demand from major agricultural economies such as India and China, rising mechanisation rates, and favourable government support programmes. Europe is expected to emerge as the fastest-growing regional market, supported by increasing adoption of precision agriculture, sustainability-focused farming practices, and investments in technologically advanced farm equipment. North America remains a significant market, marked by high mechanisation levels, large-scale commercial farming operations, and growing adoption of high-horsepower and precision- enabled tractors.

Wider mechanisation, the digitalisation of farm operations, and continued investment in agricultural productivity

are expected to support the markets long-term growth. As automation, connectivity, and sustainable equipment technologies come together, the industry is set to change further, opening opportunities across both developed and emerging agricultural economies. 6

Indian Agriculture Tractor Market

The Indian agricultural tractor market delivered a record performance in 2025-26, on the back of a favourable monsoon, better crop output, and rising farm incomes, with firm rural sentiment, easier credit, and supportive government policy carrying demand to its highest-ever level during the year. 7

India remains the worlds largest tractor market by volume and one of the largest tractor manufacturing hubs globally. According to the Tractor and Mechanisation Association (TM A), domestic tractor sales recorded 1,160,231 units, a 23.47% increase compared to 939,713 units in 2024-25. Tractor exports also remained resilient at over 1.05 Lakh units, highlighting the growing acceptance of Indian-manufactured tractors in international markets. Steady export offtake underlined the widening acceptance of Indian-manufactured tractors in international markets. Consequently, total tractor sales by OEMs, including domestic and export volumes, reached approximately 12.6 Lakh units during 2025-26, while tractor production exceeded 11.5 Lakh units during the year. 8

Key Growth Drivers

The Indian tractor industry continued to benefit from several structural and policy-led factors during the year:

• Strong Agricultural Fundamentals: Above-normal monsoon rainfall, healthy reservoir levels, active sowing, and higher output lifted farm incomes and tractor demand across key agricultural states

• Government Support for Mechanisation: The

Government of India continued to promote farm mechanisation through programmes such as the Sub-Mission on Agricultural Mechanisation (SMAM), which provides financial assistance of 40%-50% of equipment costs for eligible farmers. The Custom Hiring Centres (CHCs) have further improved access to advanced agricultural equipment

• Improved Credit Access: Affordable financing

through the Kisan Credit Card (KCC) ecosystem and NABARD-supported rural credit initiatives improved tractor affordability and aided mechanisation among small and marginal farmers

• Rising Labour Costs and Mechanisation Needs:

Labour shortages and increasing wage costs continued to push farmers towards mechanised solutions that improve productivity and efficiency

• Growth in Non-Farm Applications: Wider use of tractors in haulage, rural transport, construction, and infrastructure expanded the addressable market and supported replacement demand 9,10

Market Trends

The Indian tractor market continues to be dominated by the 31-50 HP segment, which suits a wide range of applications and farm sizes. Demand for higher-horsepower tractors

gained ground, aided by commercial farming operations, custom hiring centres, and non-agricultural applications.

From a driveline perspective, two-wheel-drive (2WD) tractors remain the dominant category, given their affordability and suitability for Indias fragmented landholding pattern. Demand for four-wheel-drive (4WD) tractors is rising steadily, particularly in regions with higher mechanisation intensity, horticulture, and plantation farming.

Technology adoption is also becoming an important differentiator, with manufacturers increasingly offering tractors equipped with telematics, GPS-enabled guidance systems, fuel-efficient engines, precision farming capabilities, and smart fleet management solutions. 8,10

Outlook

The long-term outlook for the Indian tractor industry remains favourable. On the demand side, rising mechanisation, continued government support, higher rural incomes, wider access to institutional credit, and greater adoption of advanced farming technologies are expected to sustain growth. On the supply side, a deep manufacturing base, a large domestic market, and improving export competitiveness position India as a global hub for tractor production and exports, opening scope for long-term expansion. 7

CONSTRUCTION VEHICLE MARKET Global Construction Vehicle Market

The global construction vehicle market is supported by rising infrastructure investments, rapid urbanisation, and expanding mining activities worldwide. The market was valued at approximately USD 401.4 Billion in 2025 and is projected to reach USD 670.2 Billion by 2036, a CAGR of 4.7% during the forecast period. 12

Demand is driven by rising investments in transportation networks, smart cities, industrial infrastructure, renewable energy, and resource extraction activities. Construction vehicles such as excavators, loaders, bulldozers, dump trucks, and motor graders remain central to the execution of large-scale infrastructure and mining projects worldwide.

The Asia-Pacific region, accounting for 40.5% of global market revenue in 2025, remains the largest market, supported by infrastructure spending and urban development across China, India, and other emerging economies. Technological advances such as telematics, AI-enabled fleet management, predictive maintenance, autonomous equipment, and the growing adoption of electric and hybrid vehicles are reshaping the industry.

Diesel-powered vehicles continue to dominate the market at a 72% share in 2025. Even so, manufacturers are stepping up investment in sustainable and intelligent equipment to improve efficiency, enhance safety, and reduce environmental impact, a shift expected to support the markets long-term growth. 11

Indian Construction Vehicle Market

The Indian construction vehicle and equipment industry remained a core enabler of the countrys infrastructure- led growth during 2025-26. Demand for construction and mining equipment drew on sustained investment across transport, urban, industrial, and energy infrastructure, keeping the sector closely tied to Indias long-term development priorities. 12

The year brought a mixed operating environment for the industry. Underlying demand held firm, but project execution was hit by delays in project awards, prolonged election-related disruptions in certain regions, and uneven capital expenditure through parts of the year. Domestic construction equipment sales fell approximately 2% year-on-year to 136,995 units, while exports rose nearly 32%, a sign of the growing global acceptance of Indian-manufactured equipment and of Indias strengthening position as a competitive manufacturing hub for construction machinery. 13

India remains one of the fastest-growing construction equipment markets globally and is the third-largest worldwide, with industry estimates pointing to it becoming the second-largest by 2030, supported by sustained infrastructure investment, rising mechanisation, and supportive government policy. Localisation has also deepened: more than 95% of equipment sold domestically is now made in India, which strengthens supply-chain resilience and lifts export competitiveness. 14

Key Demand Drivers

• Infrastructure-led Economic Growth: Government expenditure on roads, highways, expressways, railways, metro systems, airports, ports, logistics parks, and water infrastructure continued to drive demand for earthmoving, road construction, and material-handling equipment

• National Infrastructure Programmes: Large-scale initiatives such as PM GatiShakti, the National Infrastructure Pipeline (NIP), Bharatmala Pariyojana, Sagarmala, dedicated freight corridors, and urban infrastructure projects remained major contributors to equipment demand

• Urbanisation and Real Estate Development: Rising urbanisation, higher housing demand, and expansion of commercial and industrial real estate supported construction activity across both metropolitan and emerging urban centres

• Mining Sector Expansion: Higher demand for coal, iron ore, bauxite, limestone, and other minerals feeding power generation, steel production, cement manufacturing, and industrial development continued to drive investments in mining equipment and heavy- duty vehicles

• Industrial and Manufacturing Investments: Growth in industrial corridors, warehousing facilities, logistics infrastructure, and manufacturing investments under the Governments production-linked incentive (PLI) initiatives supported demand for construction machinery

• Mechanisation and Productivity Enhancement:

Contractors increasingly adopted mechanised equipment to improve productivity, accelerate project execution, enhance safety standards, and address labour availability challenges, particularly in large infrastructure and mining projects 14,12

The industry continued to evolve technologically. The adoption of telematics, fleet management systems, predictive maintenance tools, machine monitoring solutions, and automation-enabled equipment gained momentum as fleet operators sought to improve asset utilisation and reduce operating costs. Manufacturers widened their focus to fuel-efficient equipment, digital solutions, remote diagnostics, and intelligent machine controls to raise productivity and efficiency. 15

Sustainability remained an emerging theme across the sector. Equipment manufacturers stepped up investment in cleaner technologies, including electric and hybrid

machinery, in response to tightening environmental norms and customer demand for lower-emission solutions. The growing emphasis on sustainable construction is expected to accelerate innovation across equipment categories in the coming years. 14

The sectors outlook remains positive despite near-term execution challenges. With public capital expenditure sustained, domestic demand is expected to recover through the year. Beyond that recovery, it is the supply-side gains, rising exports, deepening localisation, and the adoption of advanced technologies, that are likely to strengthen the industrys trajectory and carry India towards becoming one of the largest construction equipment markets globally over the coming decade. 1314

GLOBAL BACKHOE LOADER MARKET

The global backhoe loader market is supported by rising infrastructure investments, urbanisation, and increasing mechanisation of construction activities. According to Fortune Business Insights, the market was valued at approximately USD 2.75 Billion in 2024 and is projected to reach USD 4.42 Billion by 2032, at a CAGR of 6.2%.

Backhoe loaders remain a preferred choice for construction and infrastructure projects for their versatility in excavation, loading, trenching, and material handling. Demand is supported by investments in transportation, utilities, and urban development projects, particularly across emerging economies. Technological advancements, including telematics, fuel-efficient engines, and operator-assistance features, are improving productivity and adoption. Asia- Pacific remains the largest market, driven by strong infrastructure activity in China and India. 16

INDIAN BACKHOE LOADER INDUSTRY

India is one of the worlds largest markets for backhoe loaders, supported by sustained investments in roads, railways, urban development, irrigation, and rural construction. According to IMARC Group, the Indian backhoe loader market was valued at approximately USD 0.56 Billion in 2024 and is projected to reach USD 0.94 Billion by 2033, registering a CAGR of 5.95% over 2025-2033.

The market draws on government-led infrastructure programmes and steady mechanisation, but its distinguishing feature is the contractor base: demand is

led by operators seeking a single, cost-effective machine that can excavate, load, trench, and handle material on one chassis, which makes the backhoe loader particularly suited to Indias small- and medium-scale projects. Adoption of telematics, fuel-efficient engines, and improved operator controls is adding to that pull. 17

GLOBAL TELEHANDLER MARKET

The global telehandler market is growing strongly, driven by rising demand for efficient material-handling equipment across construction, agriculture, warehousing, and industrial applications. Fortune Business Insights estimates the market at USD 5.31 Billion in 2025, rising to USD 9.93 Billion by 2034, at a CAGR of 7.2%.

Expansion is driven by infrastructure development, growth in logistics and warehousing, and rising mechanisation across agricultural operations. Telehandlers are gaining traction for their superior lifting capacity, operational flexibility, and compatibility with multiple attachments. Manufacturers are also incorporating telematics, automation, and electric powertrain technologies to improve efficiency and sustainability. Asia-Pacific leads the global market, supported by construction and infrastructure investments. 18

INDIAN TELEHANDLER INDUSTRY

The Indian telehandler market is growing steadily, driven by rising demand for efficient material-handling equipment across construction, warehousing, logistics, agriculture, and industrial sectors. According to IMARC Group, the market was valued at approximately USD 0.70 Billion in 2024 and is expected to reach USD 1.00 Billion by 2033, at a CAGR of 4.10% over 2025-2033.

Growth is supported by infrastructure development, the mechanisation of material handling, and the fast expansion of logistics and warehousing. This last driver is the distinctively Indian one: the build-out of organised warehousing and logistics parks under programmes such as PM GatiShakti, the Smart Cities Mission, and industrial corridor development is drawing telehandlers into roles once handled by cranes and forklifts, where their reach and interchangeable attachments let a single machine cover several tasks. Sustained construction and industrial investment is expected to support the sector over the long term. 19

Key Central Sector Schemes Launched by the Government of India

Initiative	Details
PM Gati Shakti National Master Plan	PM GatiShakti serves as Indias integrated infrastructure planning framework, bringing together road, rail, port, airport, logistics, and utility projects on a common digital platform. The initiative aims to improve project execution, reduce logistics costs, and accelerate infrastructure development, feeding demand for construction and materialhandling equipment. 21
National Infrastructure Pipeline (NIP)	The NIP envisages infrastructure investment of over USD 1.4 Trillion in roads, railways, and irrigation, with private participation invited in renewables, digital infrastructure, airports, and roads. The programme provides longterm visibility for infrastructure spending and remains among the largest single anchors of medium- term equipment demand. 21
Bharatmala Pariyojana	Bharatmala is one of Indias largest highway development programmes, covering economic corridors, expressways, border roads, and port connectivity projects. Its road-building focus drives sustained demand for earthmoving, excavation, and road construction equipment. 21
Pradhan Mantri Awas Yojana (PMAY)	PMAY remains the governments flagship affordable housing initiative. As of February 2026, over 125 Lakh houses had been sanctioned across urban and rural segments, sustaining residential construction activity and the compact equipment it uses. 20

Initiative	Details
Jal Jeevan Mission (JJM)	The mission aims to provide functional tap water connections to all rural households through investment in water-supply infrastructure, pipelines, storage, and distribution networks, work that draws steadily on excavation and trenching equipment. 21
AMRUT 2.0	AMRUT 2.0 seeks to improve urban water supply, sewerage, and wastewater management infrastructure with an outlay of 2.99 Lakh Crore. The programme is contributing to increased urban infrastructure development and associated equipment demand. 23
Pradhan Mantri Gram Sadak Yojana (PMGSY)	PMGSY continues to enhance rural connectivity through the construction and upgradation of allweather roads. It remains a steady source of demand for road-building and earthmoving equipment. 21
Railway Capital Expenditure Programme	The Government continues to invest heavily in railway infrastructure, including network expansion, electrification, station redevelopment, freight corridors, and logistics facilities. The Union Budget 2026-27 allocated approximately 2.93 Lakh Crore to railway capital expenditure, sustaining rail-linked construction and material-handling demand. 22

COMPANY OVERVIEW

Carraro India Limited (Carraro India; or The Company) is a subsidiary of the Italy-based Carraro Group, a global leader in the design, engineering and manufacture of driveline systems for off-highway vehicles. The Company manufactures and supplies axles, transmission systems, gears and related components for agricultural and construction equipment, serving leading original equipment manufacturers (OEMs) across domestic and international markets. With over 25

years as an independent Tier-1 supplier, Carraro India has built strong capabilities in engineering, customised product development and advanced manufacturing.

The Company operates two manufacturing facilities and an R&D centre at Ranjangaon, Pune. Its manufacturing footprint comprises an 84,000-square-metre driveline facility and a 78,000-square-metre gear manufacturing plant, with capabilities across cast machining, heat treatment, gear manufacturing, assembly, painting, prototyping and testing. During 2025-26, the Company continued to invest in capacity expansion, technology upgrades and process improvements to support future growth.

Engineering is central to the Companys positioning. Carraro India provides engineering services to external customers, also leveraging on the support of its R&D subsidiary Carraro Technologies India Private Limited. During the year, the Company strengthened its presence in advanced driveline technologies, including higher-horsepower transmissions and electric drivetrain solutions, and entered into an engineering services agreement with Montra Electric for the industrialisation and supply of e-transmissions for electric agricultural tractors.

Carraro India continues to hold a central role within the Carraro Group as its designated global centre of excellence for agricultural transmissions and one of the Groups largest manufacturing locations. Strong OEM relationships, deeper localisation, expanding engineering capabilities and continued investment in innovation position the Company to pursue growth across the agricultural and construction equipment sectors.

SEGMENT-WISE PERFORMANCE Agricultural Equipment

The agricultural equipment segment delivered a strong performance in 2025-26, supported by favourable industry conditions, firm domestic tractor demand and the accelerating shift towards 4WD tractors. This shift has been driven by the GST reduction, which has nearly equalised the pre-GST price of 2WD tractors with the post-GST price of 4WD models, lifting demand for the Companys axle and transmission products. The domestic 4WD axle market grew healthily during the year, with 4WD tractor volumes outpacing the broader industry. The Company continued to ramp up capacity to meet expected demand over the coming years.

The Company also made progress in its higher-horsepower transmission portfolio. Following prototype development, series production of a new high-horsepower transmission for an export customer commenced during the year.

Transmission programmes for customers in Turkey and India continued to progress, reinforcing the Companys position in the premium agricultural drivetrain segment. The gradual recovery in export demand for higher-horsepower tractors is also expected to support transmission offtake.

Engineering services emerged as an increasingly important driver within the agricultural segment. During the year, the Company signed an engineering services agreement valued at approximately 17.5 Crore with Montra Electric for the industrialisation and supply of e-transmissions for electric agricultural tractors. The project progressed well through 2025-26, including the receipt of a prototype order for field validation. The Company also continued to receive enquiries for higher-horsepower and advanced technology configurations, a sign of growing customer confidence in its engineering capabilities.

The Company advanced several technology-led initiatives during the year, including pilot production of Continuously Variable Transmission (CVT) units and development of higher-horsepower driveline platforms. These initiatives are expected to strengthen the Companys participation in future-ready agricultural drivetrain technologies.

For 2025-26, segment revenue rose 19% year-on-year to 10,192 Million, from 8,565 Million in 2024-25, on higher 4WD penetration and continued product diversification. The Company holds a strong position in the domestic noncaptive 4WD axle market and deepened its presence in higher-value transmission applications during the year.

Construction Equipment

The construction equipment segment delivered a strong performance during 2025-26, driven by strong export growth and the ramp-up of new product programmes. A key contributor was the continued scale-up of Tele Boom Handler (TBH) axle supplies to a major international OEM under a global sourcing programme. The TBH platform gained traction during the year and emerged as an important contributor to export growth, supported by higher production volumes and continued programme ramp-up.

The Company also progressed new TBH axle programmes with a domestic customer, building a pipeline for future growth. Exports of backhoe loader (BHL) driveline systems remained healthy, supported by improving demand across global markets and rising exports by Indian OEM customers.

The domestic construction equipment market remained relatively subdued during parts of the year due to slower infrastructure execution and project delays. The Company outperformed the broader market, supported by its diversified customer base, growing export exposure and increasing

demand for specialised driveline solutions. Sales of drivelines to domestic construction equipment customers rose during 2025-26 despite a decline in overall industry volumes.

To support expected demand growth across both agricultural and construction equipment applications, the Board approved a capital expenditure programme of approximately 623 Million to expand axle manufacturing capacity from ~134,028 units to ~154,160 units over the next 18 months.

For 2025-26, segment revenue rose 31% year-on-year to 9,837 Million, from 7,491 Million in 2024-25, driven by strong export demand, particularly from TBH and BHL applications.

Others: Gears, Spare Parts and Engineering Services

The Others segment, comprising gears, spare parts and engineering services, recorded steady growth during 2025-26. The gears business remained relatively subdued through the year, though the Company secured a business

nomination from a major OEM for bull gears, valued at approximately 15 Crore per annum from 2027-28 onwards. The Company also continued to work on new customer programmes aimed at strengthening the segments medium-term prospects.

The aftermarket business remained an area of strategic focus. During the year, the Company inaugurated its first authorised service centre in Faridabad and continued to expand its customer support and service network. These initiatives are expected to strengthen customer engagement, support spare parts sales and enhance aftermarket revenues over the long term.

Engineering services continued to build, supported by rising demand for advanced engineering solutions, electrification- related projects and higher-horsepower drivetrain development. Revenue from engineering services reached 100 Million during 2025-26, reinforcing its role as a future growth driver.

For 2025-26, segment revenue rose 25% year-on-year to 2,526 Million, from 2,019 Million in 2024-25, supported by growth in engineering services and other value-added activities despite softer demand in the gears business.

Segment Revenue Summary ( Million)

Segment	2025-26	2024-25
Agricultural Equipment	10,192	8,565
Construction Equipment	9,837	7,491
Others (Gears, Spares, and Engineering Services)	2,526	2,019
Total Revenue from Operations	22,555	18,076

OPPORTUNITIES AND THREATS

Opportunities

• Adoption of 4WD Tractors: The continued shift from 2WD to 4WD tractors, aided by farm mechanisation and supportive policy, sustains demand for the Companys axle and transmission products

• Expansion of TBH Business: The ramp-up of TBH axle programmes and development of additional projects with customers provide a strong platform for future growth in the construction equipment segment

• Higher-Horsepower Transmission: Rising demand for higher-horsepower tractors and advanced drivetrain technologies allows the Company to expand its presence in premium, higher-value product categories

• Growth in Engineering Services: Growing customer interest in advanced engineering solutions, electrification projects and product development services enables the Company to scale the engineering services business and diversify revenue

• Electrification and Emerging Technologies: The

engineering services agreement with Montra Electric and development of advanced transmission and electrification technologies position the Company to participate in electric and next-generation off-highway applications

• Increasing Localisation: Localisation of raw materials and components strengthens supply-chain resilience, cost optimisation and long-term margin improvement.

• Aftermarket Expansion: A stronger authorised service network and wider spare-parts range deepen customer engagement and grow higher-margin aftermarket revenue

• Export Growth Opportunities: Rising global sourcing from India, expanding export programmes and growing acceptance of Indian-manufactured driveline solutions widen the Companys export business and diversify revenue

• Strategic Position within the Carraro Group: The

Companys role as the Groups centre of excellence and a key manufacturing hub positions it to benefit from future product programmes, technology transfers and global sourcing

Threats

• Slowdown in Construction Equipment Demand: Delays in infrastructure spending, project execution challenges or weaker capital expenditure could affect demand in the construction equipment segment

• Global Economic and Trade Uncertainties: Geopolitical developments, trade restrictions or slower economic growth in key export markets could weaken export demand and customer spending

• Raw Material and Supply-Chain Risks: Volatility in commodity prices, logistics costs or supplier capacity constraints could raise operating costs and weigh on performance

• Product Mix Fluctuations: Changes in product mix across agricultural and construction equipment applications could compress profitability and operating margins in the short term

• Dependence on Agricultural Sector Dynamics: Tractor demand remains exposed to monsoon conditions, farm incomes, commodity prices and government policies affecting the rural economy

• Technology and Competitive Pressures: Rapid technological change and increasing competition could require continued investment in product development, engineering capabilities and manufacturing technologies

OUTLOOK

Carraro India enters 2026-27 on a strong footing, with healthy demand across key end markets, a growing export portfolio and expanding engineering capabilities. Its priorities for the year are to grow the higher-value drivetrain business, deepen customer relationships and improve operational efficiency through localisation and capacity expansion.

These priorities rest on the four drivers built up through the year: 4WD driveline demand, the Tele Boom Handler axle ramp-up, higher-horsepower transmission programmes and a rising contribution from engineering services. Continued investment in manufacturing capacity, technology and process improvements is expected to support this growth while strengthening the Companys competitive position.

The Company will also expand its aftermarket ecosystem, advance next-generation drivetrain technologies and strengthen its position within the Carraro Groups global manufacturing and engineering network. While macroeconomic uncertainties and industry-specific challenges remain, management is confident about the medium-term prospects for both the agricultural and construction equipment sectors and believes the Company is well placed to benefit from them.

DISCUSSION ON FINANCIAL PERFORMANCE

2025-26 was a year of strong growth for Carraro India, driven by healthy demand across both domestic and export markets. On a consolidated basis, revenue from operations rose 25% to 22,555 Million from 18,076 Million in 2024-25. Growth was led by firm domestic demand for agricultural driveline products, particularly 4WD axles, and export momentum in construction equipment applications, including TBH and BHL programmes.

The agricultural equipment segment recorded revenue of 10,192 Million during 2025-26, up 19% over the previous year. The construction equipment segment reported revenue of 9,837 Million, up 31 %, driven primarily by export demand. Revenue from the Others segment, comprising gears, spare parts and engineering services, rose 25% to 2,526 Million.

Consolidated EBITDA for 2025-26 increased by 33% to 2,475 Million from 1,864 Million in 2024-25. EBITDA margin improved to 10.8% from 10.2% in the previous year. The improvement reflected operating leverage, disciplined cost management, execution efficiencies and a favourable contribution from engineering services.

Profit After Tax (PAT) increased by 48% to 1,306 Million during 2025-26 from 881 Million in 2024-25. PAT margin improved to 5.7% from 4.8% in the previous year, reflecting stronger operating performance and efficient capital management.

The Company continued to maintain a healthy balance sheet and liquidity position. During 2025-26, capital expenditure of approximately 417 Million was incurred on telescopic handler axle production, a new high-performance transmission range for agricultural applications, and incremental capacity for 2025-26 sales. In addition, the board approved a capital expenditure programme to expand annual axle production capacity to approximately 154,160 units to support future growth.

Performance Review ( Million)
Particulars	2025-26	2024-25
Total Income	22,840.16	18,233.79
EBITDA	2,474.62	1,864.42
EBITDA Margin (%)	10.83%	10.23%
PAT	1,305.83	881.36
EPS ()	22.96	15.50

KEY FINANCIAL RATIOS

The table below sets out the key financial ratios required under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with comparative figures for 2024-25 and explanations for any year-on-year movement above 25%.

Particulars	As of 31 st March, 2026	As of 31 st March, 2025	Variance	Explanation if Variance is More than 25%
(a) Current Ratio (Times)	1.62	1.52	6.58%	NA
(b) Debt-to-Equity Ratio (Times)	0.27	0.42	(35.71)%	Decrease in ratio on account of decrease in debt and increase in shareholders funds
(c) Debt Service Coverage Ratio (Times)	2.92	2.53	15.28%	NA
(d) Return on Equity Ratio (%)	25.53%	21.29%	19.94%	NA
(e) Inventory Turnover Ratio (No. of Days)	67.89	81.29	(19.74)%	NA
(f) Trade Receivables Turnover Ratio (No. of Days)	53.90	53.91	(0.02)%	NA
(g) Trade Payables Turnover Ratio (No. of Days)	83.17	96.71	14.01%	NA
(h) Net Profit Ratio (%)	5.79%	4.88%	18.74%	NA
(i) Return on Capital Employed (%)	29.20%	22.78%	28.20%	Increase in ratio on accounts of increase in profit
(j) Debtor Turnover Ratio (Times)	6.77	6.77	0.02%	NA
(k) Operating Profit Margin (%)	26.57%	27.32%	(2.76)%	NA
(l) Interest Coverage Ratio (Times)	11.07	13.74	(19.43)%	NA

RISKS AND MITIGATION MEASURES

Carraro India follows a structured enterprise risk management framework under the oversight of the Board of Directors, Audit Committee and Risk Management Committee. The framework enables the Company to identify, assess, monitor and mitigate risks that could affect its strategic objectives, operational performance and financial results. Some of the key and emerging risks are highlighted below:

Risk	Impact on the Company	Mitigation Measures
Customer Concentration Risk	A large part of revenue comes from a few OEM customers. If any of them cuts orders, shifts to inhouse production, or moves to a competitor, it can significantly affect volumes and plant utilisation.	Widening the customer base through an updated product portfolio, strong LTAs/supply agreements, reliable service, cost focus, product quality, flexibility, and a competitive quality-price ratio.
Risk	Impact on the Company	Mitigation Measures
Group Dependency Risk	Reliance on Carraro Group entities for technology and procurement could limit the operational independence.	Building stronger design and testing capability within India, developing local and regional suppliers for critical parts, and setting up clear agreements with the Group on technology support and supply continuity.
Related Party Transactions Risk	High volume of intercompany transactions may raise governance and compliance concerns.	Audit Committee review of all related party transactions, periodic transfer-pricing benchmarking, and disclosure aligned with the Companies Act and SEBI LODR.
Seasonality and Cyclicality Risk	Demand linked to the farming season and to construction and commercial vehicle cycles causes revenue and plant workload to swing sharply from quarter to quarter.	Balancing the order book across segments with offsetting seasonal patterns, and using flexible manpower arrangements to match production to demand.
Industry and Technology Transition Risk	The pace of OEM investment in electrification and hybridisation remains uncertain, and continued reliance on conventional mechanical drivelines risks share loss if customers transition faster than the Companys e-axle and hybrid offering matures.	Co-developing e-axle and hybrid driveline platforms with Group R&D, tracking customer electrification timelines closely, and phasing capex to confirmed programme awards.
Raw Material and Margin Pressure Risk	Steel, alloy and other input costs remain volatile while OEM price negotiations lag cost movements, compressing realised margins.	Indexed pricing clauses wherever feasible, improving efficiency, running cost-reduction projects and delivering value-led products to enhance the financial performance.
Geopolitical and Supply Chain Risk	Shipping-route disruption, tariff actions, and concentrated sourcing for certain components expose input costs and delivery schedules to events outside the Companys control.	Strengthening dual-sourcing of critical items, holding strategic buffer stock, and scenario- based monitoring of freight and landed costs.
Cybersecurity and Data Privacy Risk	Increasing use of technology leading to cyberattacks, while DPDPA obligations add to the compliance burden around personal data handling.	Enhancing cyber-security resilience through updated IT security framework implemented across group entities. Ensuring compliance with DPDPA norms with the help and support of third- party consultants within the defined timeline.
Internal Market Overlap Risk	Competitive dynamics within the broader industry and potential overlaps with related entities may impact market positioning.	Differentiating through focused geographical segmentation and market-specific strategies. Enhancing business independence through purchase of intellectual property rights.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls commensurate with the nature, size and complexity of its operations. The internal control framework is designed to ensure operational efficiency, reliability of financial reporting, safeguarding of assets, compliance with applicable laws and regulations, and effective risk management.

The Company follows a risk-based internal audit approach, with the annual internal audit plan approved by the Audit Committee. Internal audits are conducted periodically across

key business processes, and observations are reviewed by management and the Audit Committee to ensure timely implementation of corrective actions.

The internal control framework covers manufacturing operations, procurement, inventory management, sales, finance, engineering services and information technology systems. The Companys ERP-enabled processes provide visibility, control and monitoring across business functions, supporting effective decision-making and financial discipline.

During 2025-26, the internal control environment continued to support the Companys expanding operations, including capacity enhancement initiatives, new product programmes and the growing engineering services business. Based on the reviews conducted during the year, management believes the Companys internal control systems are adequate and operating effectively.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Human capital remains a core enabler of Carraro Indias longterm growth strategy. The Company focuses on building a high-performance culture through continuous learning, technical capability building, leadership development and employee engagement.

During 2025-26, the Company continued to invest in training and skill development programmes across manufacturing, engineering, quality, supply chain and support functions. Emphasis fell on the capabilities needed for new product programmes, advanced manufacturing technologies and the growing engineering services business.

The Company remains committed to providing a safe, inclusive and collaborative work environment that supports innovation, teamwork and professional growth.

Industrial relations remained cordial and stable throughout 2025-26, with no material disruption to operations. The Company continued to maintain constructive relations with employees and other stakeholders, supporting operational continuity and business performance.

As on 31 st March, 2026, the Company employed approximately 1,800 people across its manufacturing, engineering, sales and corporate functions. The Companys people strategy remains focused on attracting, developing and retaining talent to support its future growth plans.

CAUTIONARY STATEMENT

The Management Discussion and Analysis Report contains statements regarding the Companys objectives, projections, estimates, expectations or predictions, which may be considered forward-looking statements according to the applicable laws and regulations. Actual results may differ significantly from those expressed or implied in these statements. The Company is under no obligation to publicly amend, modify, or revise any forward-looking statements, whether on account of subsequent developments, new information, events or other reasons.