CIE Automotive India Ltd Management Discussions

BACKGROUND

CIE India is a multi-location and multi-technology automotive components Company with manufacturing facilities and engineering capabilities of its own and its subsidiaries in India and in Spain, Lithuania, and Italy in the European continent as well as a plant in Mexico, North America. It has an established presence in each of these locations and supplies to automotive Original Equipment Manufacturers (OEMs) and their Tier 1 suppliers. The Company is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE) and currently has about 379 million shares listed. The Company is part of the CIE Automotive Group of Spain, which has identified our Companys Indian operations as a strategic growth driver for its global business. CIE India therefore draws from the vast and varied experience of the CIE Automotive Group in partnering and co-developing products for the rapidly evolving automotive industry. As part of CIE Automotive, CIE Indias strength lies in a solid business model, based on commercial and technological diversification, and on a strong financial culture securing high returns and high cash-flow generation.

Exhibit 1 presents a graphical representation of the Company and its subsidiaries (together referred to as the Company in this report).

Exhibit 1: Legal Structure of the Company:

The list of subsidiaries and their ownership interest is provided in Exhibit 2.

Exhibit 2: The Subsidiary Companies of the Company as on 31^st December 2024

Name of the Subsidiary	Subsidiary Companies Information Proportion of Ownership Interest	Remarks
CIE Galfor S.A.#	100%
		Collectively known as
1 UAB CIE LT Forge	100%
		CIE Forgings
2. CIE Legazpi S.A.	100%
3. CIE Forging Germany AG*	100%	Forgings, Germany
4. Metalcastello S.p.A.	99.96%	Gears, Italy
CIE Aluminium Casting India Limited	100%	(Formerly Aurangabad
		Electricals Limited)
BF Precision Private Limited**	100%
		Collectively known as
Bill Forge de Mexico S. A. de C.V.##	99.99%
		Bill Forge
CIE Hosur Limited	100%

Please note:*- Dormant company

Note: #- CIE Galfor SA is the Holding Company for all businesses in Europe and Mexico **- Under Voluntary liquidation ## - Includes Direct and Indirect holding

GROUP OVERVIEW

CIE Automotive India Limited is a large, diversified auto-components group with presence across many processes/ product lines, geographies and customers. It manufactures complex components and sub-assemblies with significant vale add. CIE India is focused on the automotive market across and operates in four segments - light vehicles, commercial vehicles, two wheelers and tractors.

Our Company has multiple manufacturing facilities in India, Europe and Mexico. The manufacturing locations are optimally located close to major automotive manufacturing hubs to facilitate supplies to customers. In certain instances, we also provide services such as value analysis and value engineering to add value to the customers products. CIE Indias unique combination of specialization in high value-added products, which is usually delivered directly to OEMs and presence across multiple production technologies, also differentiates it from other component suppliers. CIE Indialargelyoperatesintheautomotive markets of Europe and India. In Europe, the Company supplies components mainly to the light vehicles with a comparatively small business in the off-road sector. In India, The Company is more diversified and supplies components to the light vehicles segment (both passenger vehicles and light commercial vehicles), two wheelers, tractors, medium and heavy commercial vehicles, in order of dependence.

A brief description of the key businesses of the Company is presented in Exhibit 3.

Exhibit 3: Lines of Business

Geography Forgings	Product	Focus Areas	Key Customers	CY 2024 Revenue ( in Million)
India	Light Vehicles: Crankshafts , knuckles, constant velocity joints, tulips, steering shafts, steering yokes and wheel hubs 2 Wheelers: Steering races and engine valve retainers All parts are forged & machined Tractor: Crankshafts	Light Vehicles, Two Wheelers, Tractors	M&M, Maruti Suzuki, Tata Motors, Hero, Bajaj, Honda Two Wheelers, TVS, Ford, GKN, NTN, Nexteer, Rane NSK, Renault Nissan, Stellantis, ZF, Royal Enfield, Hyundai, Stellantis (EV), Ola Electric (EV)	22,788
Spain + Lithuania	Crankshafts, Common Rail, Stubs, Tulips	Light Vehicles	Renault, VW Group, Daimler, GKN, JLR, GM, Fiat, DAF, Bosch, NTN, Fau- recia, Dana, ZF, BMW	24,475
Aluminium Castings
India	Crankcase , Pump Housing, Brake panel, Housings used in EVs. (Parts made by high pressure & gravity die casting and then machined)	Two & Three Wheelers, Light Vehicles, Commercial Vehicles	Bajaj, Nidec GPM, Brembo, Bajaj (EV), TACO (EV), Bosch (EV)	11,504
Stampings
India	Panels & Assemblies, Chassis & Structural Parts, Fuel Tanks, Cross Car Beams. (Stamped parts made from sheet metal)	Light Vehicles, Commercial Vehicles and Tractors	M&M (incl. EVs), Tata Motors (incl. EVs) and Ashok Leyland	12,225
Castings
India	Differential Housings, Light Vehicles, Turbine Housings, Crankshafts, Diff	M&M, Hyundai, JCB, Ford, Commercial Vehicles, Tractors, Construction carriers Equipment & Earthmoving	6,293 Automotive Axle, Cummins, Dana, John Deere and CNH
Magnetic Products
India	Soft and Hard Magnets	Light Vehicles, Two Wheelers (Tier 1 largely)	Denso, Sumida, Varroc, Intica, Mitsuba, Lucas TVS and Sona Comstar	1,516
Composites
India	Composite Compounds and Components, Three-Wheeler Body panel Parts, Battery trays and covers	Electrical Switchgear, Light Vehicles, Three Wheelers	Lauritz Knudsen Switchgear, Novatuer, Schneider, Siemens, GE Healthcare, M&M (Three Wheeler EVs), Hyundai	2,398
Gears
India	Gears & Shafts, motor shafts, E-Drive Components, Flanges & End Yokes, Clutch Hubs	Light Vehicles, Tractors, Construction & Earthmoving Equipment	M&M (incl. EVs), Eaton, Caterpillar, American Axles, CNH, Dana	3,819
Italy	Gears & Shafts, Sleeves & Hubs, Welded Components	Tractors, Construction & Earthmoving Equipment, Light Vehicles (EVs)	Caterpillar, CNH, Meritor, General Dynamics, Allison Transmission (EV), Axle Tech (EV)	4,622

THE GLOBAL ECONOMY

In their January 2024 blog, IMF had this to say about the global economy, "The clouds are beginning to part. But the pace of expansion remains slow, and turbulence may lie ahead." The forecast turned out pretty accurate. IMF has titled its January 2025 report, "Global Growth: Divergent & Uncertain". It summarises the current global economic outlook nicely. IMF projects global growth to be 3.3% both in 2025 and 2026, below the historical (2000–19) average of 3.7%, but a healthy performance, nevertheless. Global headline inflation is expected to decline to 4.2% in 2025 and to 3.5% in 2026, converging back to target earlier in advanced economies than in emerging market and developing economies. If one looks at the global growth and inflation numbers, they seem healthy enough. But it seems that the people feel differently. More than 60 countries went to the polls in 2024 and in an overwhelming majority of these, incumbent governments were ousted or had their wings clipped. With a new administration in office in the strongest economy of the world, all eyes are on the United States and its policy changes that have the potential to disproportionately impact the global economic situation. United States is growing well (~3% in the last three years) with low unemployment but fuelled by large fiscal deficits and debt. A healthy American economy usually leads to good global demand. But the big bounce in American treasury bond & equity markets in 2024 have led to most currencies weakening against the dollar and investments being directed away from emerging markets to the United States. Add to this, the uncertainty around the enhanced tariff structure that the new US administration wants to bring in on imports. This new policy may apply to many countries and China, the second largest economy, seems to be the biggest focus. China is an export powerhouse and any changes in the tariff structure may lead to China redirecting its exports to other countries in potentially disruptive ways. The European economy grew by a subdued 0.8% in 2024 as per IMF with Germanys performance lagging that of other euro area countries. This reflects continued weakness in manufacturing and exports of goods even as consumption picked up in line with the recovery in real incomes. Some sluggish recovery is expected as the growth is forecast to increase to 1% in 2025 & 1.4% in 2026. Manufacturing in Europe has weaker than expected momentum and Europe continues to be weighed down by geopolitical uncertainties at its doorstep, in Ukraine as well as West Asia.

India has been a bright spot in the gloomy global firmament for the last few years. The Indian economy outpaced the world average handsomely in 2022 and 2023 but the growth slowed down to 6.5% in 2024 as per the latest IMF report and is expected to be at the same level in the next two years. The euphoria around the India growth story may have dialled down but an annual growth rate of 6.5% should be considered quite healthy in the current global environment. This is especially true as it is accompanied by a stable inflation rate in the range of 5%, which must be admitted is a tad on the higher side of the general publics tolerance. The balance sheets of banks & corporates are also healthy even though that of households might be a little stretched with debt. The Reserve Bank of India (RBI) has been clamping down on urban household indebtedness which may have contributed to slowing down consumption and growth.

Economists are a bit disappointed that the growth trend in India may be below what the country is capable of. There are a few cyclical factors that can explain the slowdown. Govt expenditure in the first half of 2024 was down significantly as the country went through general elections. Urban consumption slowed down as RBI took a hard look at consumer loans on offer. But there are other factors which may drive the recovery. Rural consumption recovered after a good monsoon and the festival & marriage season proved to be good for business. With the union government being voted back, the focus on infrastructure building in India that has driven the economy continues. Beyond cyclical factors, there might be some structural issues that may be shackling the Indian economy. Manufacturing has been growing slower than the nominal GDP and the share of manufacturing in the economy has reduced. The Make in India & PLI programs have made progress in few sectors like defence, automotive, electronics etc. but manufacturing in India suffers from low productivity and there is need to further improve ease of doing business. Private sector capex has lagged even though corporate balance sheets are healthy, as private consumption growth has not been enough to improve capacity utilisation. The recent household survey throws light on the consumption story. The good news is that the gap between rural and urban consumption is decreasing, perhaps helped by the many cash transfer schemes launched by state governments in the last few years. Consumption trends at the lower end of the consumer pyramid is increasing faster than others. Middle class consumption may be slowing a bit as income growth has been sluggish in the last few years given the turmoil that the economy has gone through, starting with demonetisation almost a decade ago to the implementation of GST, the covid pandemic & after. The Finance Minister while presenting the union budget for FY26 has sought to kickstart consumption by providing a hefty tax rebate to people earning upto 1.2mn per annum. A renewed bout of investment from the private sector is thus the need of the hour and what many expect. While the probable default mode of the Indian economy is optimism, there remains much to be done.

TRENDS IN THE AUTOMOTIVE INDUSTRY

The global automotive industry has been facing uncertainty for the last few years. Starting with the Covid pandemic in 2020, there have been a series of crises like the global chip shortage and the conflicts in Ukraine & West Asia that have negatively impacted the industry. The market environment continues to be volatile.

The European automotive market is struggling with a slow transition to Electric Vehicles (EV) even as pollution norms on internal combustion engine (ICE) vehicles are proposed to be made punitive. Add to this the challenge from dynamic Chinese EV companies and the European auto market is facing a prolonged medium-term uncertainty and a no growth scenario. This uncertainty in the business environment led to few European auto makers announcing plant closures in Europe, a measure that was least expected and with a potential to negatively affect the global supply chain. The Indian automotive market continues to be healthy in this turbulent scenario. The Indian economy is expected to keep growing at a fair clip. Ownership of cars, scooters and tractors are much below global averages, on a per capita basis. This ratio will continue to improve, as incomes increase on account of a growing economy and many first-time buyers benefit from increased affordability of vehicles. The global automotive industry is committed to move to low emission powertrains, in response to concerns around climate change. Electric Vehicles (EVs) are largely seen as the way forward with other options like hybrids, CNG engines etc. being seen as intermediates in the journey to EVs. The transition to EVs is not happening as smoothly as predicted. Users still have concerns around charging infrastructure, range, service, resale value and initial cost of acquisition. For some years, governments across the world have offered subsidies on buying EVs but this subsidy regime is being modified in many countries, leading to confusion. Traditional ICE vehicles are facing more stringent norms and penalties.

The European automotive industry provides an interesting case study. The Corporate Average Fuel Economy (CAFE) regulation in Europe sets limits on the average CO2 emissions of new vehicles. These limits are set to become more stringent from the beginning of 2025. Manufacturers who exceed the limits must pay stiff penalties. Thus, both customers and producers of cars and light vehicles in Europe are not sure about how the automotive industry will shape up in the medium term. This is limiting the growth potential of the industry. China is emerging as a technology leader in manufacturing cars, especially in the EV space. Chinese manufacturers are launching state of the art EVs which are being well received in every major global auto market. In a stagnating European market, traditional leaders are facing the heat and loss of market share. This creates problems for the automotive suppliers too as they need to reorient themselves to these Chinese OEMs. Policy makers in many countries are imposing or contemplating tariffs on Chinese car imports. All these moves are adding another layer of uncertainty to the automotive market. Car buyers are looking for more premium features like connected cars, space and driver assistance and not just power and pick up. Safety, comfort & lightweighting standards are advancing rapidly. Digitisation and Industry 4.0 are transforming the supply chain.

Technology is changing at a pace that is strenuous to keep up – automation, digitization, artificial intelligence etc. are reshaping businesses completely. These trends also require huge investments to be made by firms and governments alike, leading to long term cost inflation and the consequent pressure on individual incomes & ability to buy, as well as business margins.

Companies are increasingly expected to mind their carbon footprints and thus there is a push for localisation – parts being sourced from the same region rather than from far off, local for local. Near-shoring also helps minimise some of the supply chain bottlenecks that have bedevilled the automotive industry in the last few years. On the other hand, as developed nations seek to meet stringent CO2 reduction targets, some processes like steel and aluminium castings are migrating to emerging countries. We think both these issues could lead to more opportunities for our Indian operations.

COMPANY STRATEGY

The global automotive industry is throwing up risks and opportunities in ample measure as exemplified by the contrasting market trajectories of our two main markets

– Europe & India. In Europe, our strategy is to optimise and protect our margins as much as possible, adapting our factories to the new volume scenario in the medium term and look for additional business as supply chain consolidates. On the other hand, we continue to be optimistic about the medium- and long-term growth in the Indian automotive market and will continue to invest in expanding capacity in India. The CIE Group with its global presence has always followed a pragmatic approach that helps balance risks with opportunities. CIE Indias approach has been to attain an optimal balance across growth, investments and returns. We pursue a judicious mix of organic and inorganic growth. Mergers & acquisitions are targeted to fill strategic gaps in our products, customers, technology or skills portfolio. An important element is our disciplined approach to capital expenditure. Investments are key to growth but at the same time we are careful not to overextend ourselves. Thus, as a rule we aim to spend 5-6% of sales as CAPEX every year Projects where we have greater visibility and stability in terms of future order projections are prioritized. Improving operations and margins of our Indian plants is key. Lightweighting, safety and electrification are the key themes transforming the automotive industry. There is expected to be a move towards materials like aluminium forgings & castings and composites, all three of which are focus areas for us. There will be requirement for components with higher precision, closer tolerances and better quality. Our strategy is to upgrade our processes and productivity levels to best in class. In recent years, we have upgraded most of our plants in India and some of the improvements are highlighted in the section on operations. We have developed a comprehensive strategy for EVs that we will discuss in a later section. The success of our strategy can be gauged by the fact that the Company continues to have a strong balance sheet, good cash flow and healthy margins in an uncertain market environment.

ELECTRIC VEHICLES

After an initial spurt in the last few years, the European light vehicle market witnessed a stagnation in EV penetration in 2024, at 13%. Current forecasts suggest that this ratio will move up to 43% in 2029, down from earlier estimates of 56%. With European customers weighing their options between EVs & others, the overall European automotive market is expected to decline or stagnate in the next 2-3 years. We have a large dependency on forged crankshafts in our European business. There is a significant risk posed by electrification in our European operations and our mitigation plan in Europe is to substitute production of crankshafts by Aluminum forged parts and steel parts that will not be affected by transition to electric vehicles. We have interesting new orders on those, and some of them are already in production on our plants. In addition, the Gears plant in Europe is developing a healthy order book in electric vehicle transmission parts. Some of these orders have been delayed as the pace of growth of EVs in Europe and US slows down.

In India, the transition to electric mobility is expected to increase gradually. Many exciting new EV models were launched both in 4W and 2W segments in 2024 and this should spur EV penetration in India. Some of these exciting new model launches were by our anchor customers. It is expected that e4W will increase from 3% in 2024 to 18% in 2029, e2W from 5% in FY24 to 25% in FY30 and e3W from 9% in FY24 to 40% in FY30. The exposure of our India business to internal combustion engine (ICE) parts is much lower than in Europe. In India, transition to EVs is more an opportunity than a risk. Our EV order book in India is spread across aluminum & steel castings, steel forgings, gears, stampings, and composite parts for e2W, e3W and e4W segments. Our diversified technology, product and customer portfolio allows us to address the requirements and risks emerging from EV transition in an effective manner. We are working with major European and Indian OEMs and Tier 1s in the EV space across vehicle segments. As the supplier ecosystem of EVs is at a nascent stage, EV OEMs are looking to partner with suppliers who have quality and pedigree. Therefore, as a high-quality supplier of automotive parts, we consider the transition to EVs to be more of an opportunity than a risk.

THE AUTOMOTIVE MARKET

The two key geographies that we operate in are India (~68% of consolidated sales) and Europe (~32% of consolidated sales). Please note that we have a small unit in Mexico which is covered under India sales ( 3 bn).

INDIA

In India, we supply to a variety of segments with the segment wise dependence of our India sales shown in bracket – light vehicles (52%), two & three wheelers (21%), tractors (18%) and trucks (9%). Different segments of the Indian automotive market behaved differently. The exciting growth shown by the light vehicles segment has shown some tempering and the segment has grown at about 4% this year. Two wheelers has shown good growth this year at 16% but the previous two years had shown little growth. Tractors overall remained flattish albeit on a higher base. Trucks have seen degrowth of about 9% in this year. On the demand side the light vehicles and two-wheeler markets are expected to grow well and tractors will also slightly grow while the trucks segments may remain subdued.

Light Vehicles

The Indian light vehicles market has shown significant growth following the pandemic. The market has grown by the market which has seen a slew of new launches has been buoyant due to the demand for all new models being strong. Higher inventory levels in the retail chain has slowed down the overall demand in the second half of the year.

Light Vehicles (Production Million Units)

Period	2024	2023	Change
Full Year	5.65	5.45	3.8%
Oct-Dec	1.34	1.29	3.2%
Jul-Sep	1.42	1.46	-2.5%
Apr-Jun	1.37	1.30	4.8%
Jan-Mar	1.52	1.39	9.9%

Source: IHS

Most agencies have estimated positive forecasts for the Indian passenger vehicle market with IHS in its latest update forecasting the Indian light vehicle to grow by 5.8% in CY25. The light vehicle segment is expected to grow on the back of continuous improvement of economic activities, increasing average income and affordability of vehicles along with recovery of entry level consumer sentiments. Despite subdued sentiments among entry-level buyers which continue to face income constraints and regulatory factors that have caused entry-level cars to become significantly expensive, the strong traction in the UV segment is expected to support growth. The long-term picture for the car market remains healthy, given the current low ownership levels and as per capita income continues to grow, it will increase the Indian households ability to afford a car. IHS global, expects the Indian light vehicles (less than 6T) to grow at a CAGR of 4.6% over a period of 2024-29 which will mean new highs every year for annual production. Crisil expects the long-term growth to be even higher.

Battery Electric Vehicles (EVs) were still less than 1% of overall market in CY 24 and are expected to increase to 4-5% by CY25. The number of models available has increased to 12 from just 3 last year, which should spur sales. Crisil also expects EV penetration to increase in the next few quarters, supported by increase in charging stations, lower cost of acquisition and newer model launches from OEMs.

Two Wheelers

The two-wheeler industry production has shown a strong recovery in growth of 16.0% in CY24 as compared to the previous year (source: SIAM). The quarter-wise performance reveals that there was a bit of a pent up demand at the start of the year which over the quarters has stabilised and customers coming to terms with the higher cost of acquisition. The next year is also forecasted to show double digit growth by CRISIL research.

Two Wheelers (Production Units)

Period	2024	2023	Change
Full Year	23,561,393	20,312,955	16.0%
Oct-Dec	5,917,177	5,481,195	8.0%
Jul-Sep	6,260,137	5,563,997	12.5%
Apr-Jun	5,859,186	4,898,422	19.6%
Jan-Mar	5,524,893	4,369,321	26.4%

Scooter sales are to be supported by robust urban incomes and rising demand for scooters in rural market. Premiumization is also another driver for volumes across both scooters and motorcycles. Exports which are roughly 16% of total production are also projected to grow in the high teens adding to the production growth due to the improved demand in Africa and Latin America. Crisil forecasts a healthy CAGR of 7-9% between FY24-29 for domestic two-wheeler sales. An important point to be noted is that a major part of this growth will come from Electric Vehicles (EVs) and not from Internal Combustion Engine (ICE) vehicles. ICE 2 wheelers are forecasted to grow at a CAGR of 3-5% and EV 2Wheelers at 35-40% between FY24-29. EV penetration has started to increase in this segment and is expected to jump to 10% by CY26 from the current 6% (to check), as customer acceptability of these vehicles is rapidly increasing and there are many new launches in this segment.

Tractors

Tractor production in India has remained flattish at about -0.4% in CY24 albeit on a high base (source: Tractor Manufacturers Association/ TMA). This year as well, the tractors cumulative production is almost 1 million which is a strong showing for the industry. Replacement demand is a major portion of sales (70%+) and its growth is dependent on the economic health of the farming community who are the main buyers.

Tractors (Production Units)

Period	2024	2023	Change
Full Year	982,146	985,968	-0.4%
Oct-Dec	219,211	195,466	12.1%
Jul-Sep	282,677	274,009	3.2%
Apr-Jun	261,628	259,038	1.0%
Jan-Mar	218,630	257,455	-15.1%

Source: TMA

Domestic tractor sales were buoyed by an above normal monsoon and this has resulted in a recovery in growth in the second half of CY24. Favourable rainfall boosted kharif crop output, with higher reservoir levels expected to aid rabi crop. Government measures, including increased crop procurement and higher minimum support prices (MSP), will boost farmers cash flow thereby leading to healthy retail momentum. On the other hand, the level of farm mechanization in India is still sub optimal and there is large scope for growth. CRISIL projects domestic tractor sales to expand at 4-6% compound annual growth rate (CAGR) between FY24-29. Exports which account for about 10% of Tractor sales are also projected to grow at a CAGR of 3-5% in the same period. Tractor sales are cyclical and we may need to factor in a few years of erratic monsoon during the period.

Medium & Heavy Commercial Vehicles (MHCV)

Heavy truck production in India declined by 9.4% in 2024 on a base which was already significantly lower than the historical high achieved pre pandemic in 2018.

MHCV (Production Units)

Period	2024	2023	Change
Full Year	380,980	420,647	-9.4%
Oct-Dec	104,134	119,286	-12.7%
Jul-Sep	87,659	96,616	-9.3%
Apr-Jun	90,638	91,442	-0.9%
Jan-Mar	98,549	113,303	-13.0%

Source: IHS

A shift towards higher tonnage vehicles accompanied amidst increasing efficiencies in the logistics sector might be a possible explanation. Recent studies by the National Council of Applied Economic Research (NCAER) suggest that logistics spend as a percentage of Indias GDP had declined by almost 1% in recent years due to rising efficiencies in the sector.

IHS has forecast that in CY25 MHCV production in India would grow by 13.5% albeit on a lower base. For the longer term, IHS estimates this to grow at a conservative rate of 6.8% CAGR over CY24-29. Crisil again is similarly forecasting a CAGR of 1-5% for FY24-FY29.

EUROPE

In Europe our operations cater largely to the light vehicle market (83% of sales of our European business), with a small portion of the revenue being supplied to the off-highway, farm equipment and tractors market.

Light Vehicles

This year the light vehicle market in Europe has seen a consistently growing decline in the demand a trend continued from the slowing in Q4 last year.

Period	2024	2023	Change
Full Year	15.75	16.79	-6.2%
Oct-Dec	3.89	4.31	-9.7%
Jul-Sep	3.40	3.62	-6.0%
Apr-Jun	4.15	4.41	-5.8%
Jan-Mar	4.30	4.45	-3.3%

Source: IHS Global

For light vehicles (<3.5T incl. cars, utility vehicles & light commercial vehicles), the data from IHS shows that the production in Europe has dropped cumulatively by 6.2% in CY24 v/s CY23 to 15.7mn units. In the second half of CY24 the demand was even more down as compared to H1 of CY24. There seems to largely be a confusion in the consumers mind on what is emerging in the industry, as they have postponed purchases and extended their purchase cycles. Also, as per IHS data the passenger vehicle market in Europe is forecasted to slow in degrowth to -4.8% in CY25 v/s CY24 to 14.99 mn units. However, the to be reached in the coming years with IHS forecasting production to be in the range of 15-16mn units per year till 2030. Electric powertrains in Europe has seen a bit of a slowdown in their growth trajectory due to the confusion in the consumers mind and the early adopters already having purchased their EVs. We are waiting to see what will emerge though Electrification is still the future.

OPERATIONAL PERFORMANCE & STRATEGY INDIA

The light vehicle market growth slowed down to single digits in 2024 vis-a-vis the previous year after a strong recovery post Covid which saw 20%+ growth rates in 2021 and 2022 and high single digit growth in 2023. The pent up demand following the pandemic drove some of the earlier high growth and is now petering out. There has also been a declining trend in urban consumption. We expect the growth rate in 2025 in the light vehicles segment to be similar to the previous year. The two wheeler segment, on the other hand, bounced back with double digit growth, after posting lacklustre numbers over the past few years. We expect this segment to have good growth in 2025 as well. Some boost to demand for cars & two wheelers could also come due to expected increase in consumption on account of the tax rebates announced in the union budget for FY26. Tractors and trucks saw negative growth in 2024 though both segments are expected to recover in the coming year. The slowing automotive markets across the globe resulted in our export business being sluggish in 2024. Some of our new orders have been delayed, especially export & EV related orders. The growth of our India business closely mirrored these market trends. After handsomely outgrowing the market in 2021, 2022 & the early part of 2023, our India business has largely followed the market after that. We expect to get back to being ahead of the market soon. We continue to be optimistic about the medium-term growth in the Indian automotive market. The order book situation in India is good and new orders generated in a year amount to 15-20% of our sales generally. We will continue to invest in expanding capacity in India to support these new orders. In 2024, we expanded our capacity in all our verticals. To safeguard margins and returns, the Company is focusing on improving plant operations and increasing labour productivity through optimising plant layouts, automating machines and especially material handling, improving cycle times, eliminating unnecessary operations & manning and digitizing data capture so that quality and production data other issues can be detected at an early stage. To keep expanding the order book, emphasis is being laid on improving new product development and the skills required for it. We have identified two verticals where there will be specific focus on improving margins – aluminum die casting and the Hosur plant of Forgings. Teams from the parent CIE Automotive provide all help in terms of know-how transfer in these projects.

India is one of the priority global markets identified by our parent CIE Automotive and the Indian operations will continue to be a focus area. In CY 24, our Indian operations grew by 5% and generated an EBITDA margin of 17.9% (vs 16.7% in CY23). The share of the India business in the overall sales of CIE India stood at 67% in CY24.

EUROPE

The European automotive market experienced negative growth in 2024. The year began with a good first quarter but the growth trends turned negative in the second half of the year. The off-highway market (which is served by Metalcastello) also remained depressed, especially the US market. These adverse trends have led to a decline in sales at our European business by 14% in C24. We have maintained a healthy EBITDA margin of 16.1% in C24 despite a steep decline in sales. The European light vehicles production was in the range of 19-22mn units every year between CY2010-19. IHS expects the demand five years ahead forecasted to be in the range of 16-17mn units. These forecasts are lower than what they had put out the previous year. The stagnation in demand is accompanied by a penetration of EVs but not at the rapid pace that was forecasted earlier. There is a big delay at the customer in all our EV related projects. The off-highway market, especially in the US, is expected to experience a revival towards the end of 2025. This market has always seen cycles with steep highs & big lows. This factor has always to be considered while forecasting trends in this segment.

The uncertainty in the markets served by our European business is accompanied by a lingering Inflation in electricity prices and other costs. Our response is to protect our margins as much as possible, adapting our factories to the new volume scenario and focus on EV components development.

FINANCIAL PERFORMANCE

The financial performance of the entity for the year ended 31^st December 2024 and 31^st December 2023 is presented below:

CIE Indias abridged P&L Statement for the Financial Year 2024

Particulars	Standalone Year Ended		Consolidated Year Ended
	December ‘24	December ‘23	December ‘24	December ‘23
	Audited	Audited	Audited	Audited
1 Income from operation
(a) Revenue from operations	45,634.70	45,698.43	89,640.67	92,803.49
(b) Other Income	1,728.00	1,504.09	1,396.47	820.10
Total Income	47,362.70	47,202.52	91,037.14	93,623.59
2 Expenses
(a) Cost of material consumed	23,223.29	24,171.73	46,470.12	48,533.60
(b) Change of inventories of finished goods and work-in progress	66.52	86.94	234.86	574.69
(c) Employee benefit expenses	4,490.54	4,278.21	10,104.73	9,944.15
(d) Finance cost	116.73	109.83	775.98	1,073.68
(e) Depreciation and amortization expenses	1,436.6	1,357.19	3,306.45	3,221.96
(f) Other Expenses	10,534.89	10,033.37	19,325.24	19,512.15
Total expenses	39,868.57	40,037.27	80,217.38	82,860.23
3 Profit/(loss) from operation share of profits of associates, exceptional items and taxes (1 - 2)	7,494.13	7,165.25	10,819.76	10,763.36
4 Share of profit / (loss) of associates	-	-	26.97	(4.85)
5 Profit/(Loss) from ordinary activities before exceptional items	7,494.13	7,165.25	10,846.73	10,758.51
6 Exceptional items	-	-	-	-
7 Profit/(Loss) from ordinary activities before tax (7-8+9)	7,494.13	7,165.25	10,846.73	10,758.51
8 Current Tax	1,642.35	1,502.58	2,643.46	2,741.89
Deferred Tax (Credit) / Charge	17.65	39.23	0.21	40.32
9 Net Profit/(Loss) for the period from continuing operations	5,834.13	5,623.44	8,203.06	7,976.30
10 Discontinued operations Profit/ (Loss) from discontinued operations	-	-	72.08	5,340.53
Loss on fair valuation of assets and liabilities of Discontinued operations	-	-	-	(1,536.45)
Profit/ (Loss) before tax from discontinued operations	-	-	-	3,804.08
Current tax	-	-	-	257.29
Deferred tax expense/ (reversal)	-	-	-	271.60
Tax expense on discontinued operations	-	-	-	528.89
11 Profit/ (Loss) from discontinued operations (after tax)	-	-	72.08	3,275.19
Net Profit/(Loss) after taxes	5,834.13	5,623.44	8,275.14	11,251.49
12 Paid - Up equity share capital (Face value of 10 per equity share)	3,793.62	3,793.62	3,793.62	3,793.62
13 Earnings per share (after extraordinary items) (of 10/- each)
(a) Basic	15.38	14.82	21.81	29.66
(b) Diluted	15.38	14.82	21.81	29.66

Information for our Indian and Overseas operations are summarized in the table below: Segment wise results for 2024

	Year ended
Particulars	31st December 2024	31st December 2023
	Audited	Audited
1 Segment Revenue
a) India	60,589.66	59,459.08
b) Europe	29,097.77	44,570.80
Total	89,687.43	104,029.88
Less: Inter Segment Revenue	(46.76)	(473.98)
Net Sales / Income from Operations	89,640.67	103,555.90
Less: from discontinued operations	-	10,752.41
Net/Sales income from continuing operations	89,640.67	92,803.49
2 Segment Profit/(Loss) before tax and interest from
a) India	8,146.95	7,087.84
b) Europe	3,547.86	10,161.74
Total	11,694.81	17,249.68
Less: from discontinued operations	(72.08)	(5,417.49)
Profit/ (loss) before tax and interest from Continuing operations	11,622.73	11,832.19
Less:
(i) Un-allocable expenditure	775.98	1,073.68
(ii) Un-allocable income	-	-
Total Profit Before Tax	10,846.73	10,758.51
3 Capital Employed
(Segment Assets- Segment Liabilities)
a) India	66,901.19	63,260.23
b) Europe	30,784.03	34,358.91
Total	97,685.22	97,619.14
4 Segment Liabilities
a) India	16,322.68	21,669.00
b) Europe	15,594.70	16,070.73
Total	31,917.38	37,739.73

The Key Financial Ratios of the Company are given as below:

Ratio	Standalone		Consolidated
	CY-24	CY-23	CY-24	CY-23
(i) Debtors Turnover (Days)	35	39	28	27
(ii) Inventory Turnover (Days)	43	44	52	54
(iii) Interest Coverage Ratio (times)	65	66	15	11
(iv) Current Ratio (times)	2.6	2.2	1.6	1.0
(v) Debt Equity Ratio (times)	-	0.01	0.08	0.13
(vi) Operating Profit Margin (%)	20.8%	20.3%	17.3%	17.1%
(vii) Net Profit Margin (%)	13.4%	13.2%	9.5%	9.1%
(viii) Return on net worth (%)	10.9%	11.4%	12.6%	18.8%

Interest Coverage Ratio:

Improvement due to debt reduction in Mexico.

Current Ratio:

Cash generated during the year has resulted in the current ratio improving, both in Standalone and Consolidated results.

Debt Equity Ratio:

Improved due to reduction of debt in Mexico.

Return on Net Worth (RONW):

While standalone RONW has dropped marginally, the consolidated RONW drop is largely due to the exceptional profit (write back of foreign currency translation reserve of 2,090 Mio) made in discontinued operation in the year 2023. RONW from continued operations has shown marginal drop to 12.5% (PY 13.3%) during the year due to the very difficult situation in Europe.

HEALTH & SAFETY

The Company is deeply committed to ensuring the health and safety of all employees and workers at its manufacturing sites, with a goal of achieving zero incidents. Prioritizing health and safety is vital not only for the well-being of employees but also for enhancing operational efficiency.

The Company focused on several key initiatives in CY 2024. These initiatives include ongoing training programs, thorough safety audits, safety culture assessments, and the adoption of advanced safety technologies, all aimed at preventing incidents and fostering a strong safety culture throughout the organization. The "Back to Basics" safety campaign, launched across all plants, aimed to maintain the momentum and motivation of shop floor employees, emphasizing the importance of discipline in manufacturing facilities. The successful program on

12 Life Saving Rules, introduced in 2023, continued in CY 2024, with the addition of an E-module for refresher training to ensure sustained awareness and adherence. Recognizing that safety performance cannot be solely improved by better infrastructure and technology, the Company undertook a safety cultural assessment. This evaluation was designed to measure the effectiveness of past safety initiatives and identify areas where further interventions and programs were necessary to advance the Companys position on the safety cultural ladder. All plants achieved ISO 45001 and ISO 14001 certifications, demonstrating a commitment to both occupational health and safety and environmental management. To further bolster safety measures, the Company underwent a series of external audits, including those for electrical safety, chemical safety, fire safety, energy efficiency, and compliance with IS14489 standards. In terms of employee well-being, the Company implemented a range of health initiatives, including annual health check-ups, yoga sessions, stress management workshops, and a de-addiction program for workers. The overarching focus throughout the year was on continuous training, regular communication, employee recognition, and the active involvement of shop floor employees in safety activities. These efforts were instrumental in working toward the achievement of safety targets and fostering a culture of safety at all levels of the organization.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS CLIMATE

CIE India is focused on improving our people management practices to promote greater employee engagement and enhanced employee experience. Our working environment is harmonious, and employees are provided with numerous opportunities to build upon their skills. The organization has put in place a Diversity, Equity and Inclusion framework to build a more inclusive working environment and has incentivized achieving higher levels of gender diversity. Our Employee Value Proposition is centered on four pillars of Care & Wellness, Advancement opportunities for Career Growth, Respect & Dignity and Structured Reward and Recognition. While CIE India is well integrated with the people strategy of our parent Company, CIE Automotive, we would like to highlight some specific initiative that we have undertaken at our Indian business.

In India, the Company has implemented a comprehensive ‘HR Scorecard which measures HR Performance across all plants covering all HR processes and initiatives. This year, as a part of standardizing practices across locations, we have successfully put in place a common gradation structure. Employees can now seamlessly move across divisions and locations. In accordance with our Employee Value Proposition, we have rolled out career development programs for employees in India through Individual Development Action Plans (IDAPs). One key element of the IDAP program is close collaboration with CIE teams worldwide for continuing training and skill upgradation. Coaching has been introduced in the organization; senior managers have been trained as coaches who in turn coach the employees on their IDAPs. 268 employees have designed their career aspirations through IDAPS, and 56 managers have been trained as coaches. The process for succession planning has been designed, implemented and rolled out across the organization. We have specially crafted annual learning plans for young engineers who have been hired as freshers from campuses. We plan to create a cohort of trained engineers to support the Companys future plans. We have inducted 34 Graduate trainee Engineers in the current year. This year we also implemented the HR-MT program wherein 5 young HR graduates were hired from campus. They are being groomed to strengthen the HR function in the future. A portion of our permanent labor workforce in certain locations in India is part of labor unions. We have signed collective bargaining and other agreements with labor unions at several plants where we have agreed to certain guaranteed bonuses, guaranteed wage increases, and wages linked to productivity. A detailed breakup of the composition of the workforce in India is provided in the BRSR report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Under Indian regulations, a Company has to mandatorily spend minimum 2% of the profit on social projects. While this may be a regulatory requirement, the Company views it as an opportunity to improve the lives of the communities among whom we operate. We have multiple plants in India and many of these are located in semi urban and rural areas and our CSR projects are a small effort to help the communities living around our plants. Our CSR projects focus primarily on four areas: (1) Promoting Education & Skill Development; (2) Improving Health & Sanitation; (3) Contributing to Environmental Sustainability & (4) Rural Development. Some of the key CSR projects in 2024 are as follows. Our Bill Forge division has built a modern school in suburban Bengaluru. At Pune and Chhatrapati Sambhajinagar, the Company has planted more than 15,000 trees, thus improving the ability of forests to sequester carbon, helping to mitigate the impacts of climate change and improving air quality. Similarly, our Company is implementing Waste Management projects at Rajkot and Chhatrapati Sambhajinagar to ease the burden of accumulated wastes on the community. Some other impactful CSR initiatives of our Company are: Training programs for school children on Green Education, Training on Water, Sanitation & Hygiene, Providing Indian Sign Language (ISL) training to hearing impaired students, Awareness programs for rural women towards Menstrual hygiene, Retrofitting of Washroom facilities in rural schools etc. A snapshot of images of our CSR projects is shown in the early pages of the annual report. We engage with competent delivery partners to implement these CSR projects. Each project is assessed to evaluate if it has made the desired impact on the target audience. The CSR plan and performance is monitored by the CSR committee of the board every quarter.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) APPROACH

Stakeholders growing expectations have placed sustainability performance under scrutiny. Simply having good intentions about ESG is no longer enough—delivering measurable outcomes is critical to long-term success and credibility.

As a subsidiary of CIE Automotive, we are committed to a 5-year Strategic ESG plan, adhering to 79 KPIs across four pillars: CIE Culture, Ethical Commitment, Eco-Efficiency, and Active Listening. These pillars align with the UNs 17 Sustainable Development Goals. Apart from this India Specific ESG Goals & targets have been formulated as a roadmap towards achieving our identified Sustainability Goals.

CIE India is dedicated to several key ESG initiatives, including building a responsible supply chain with local sourcing and environmental assessments of identified partners, and promoting a circular economy by reducing raw material consumption, managing waste, minimizing environmental impact, and enhancing energy efficiency. TheCompanyiscommittedtoachievingcarbonneutrality by 2050, adopting ISO 14001 and ISO 50001 standards, and focusing on renewable energy, material circularity, and responsible resource use. In CY 2024, CIE India conducted Life Cycle Assessments for six strategic products, provided ESG awareness training for all identified junior, middle, senior management levels including the Board of Directors. In CY-2024, we conducted Zero Waste to Landfill gap assessment across all plants. Additionally, mandatory sustainability projects were completed, high-energy intensive units have certified for Energy Management System i.e. ISO 50001:2018. 57% of energy was sourced from renewables and 24,305 trees were planted within plants and through CSR activities. These efforts reflect CIE Indias commitment to sustainability and ESG goals.

DIGITALISATION & IT STRATEGY:

Digital transformation in the automotive industry helps manufacturers to optimize manufacturing processes, improve supply chain management, enable predictive maintenance, enhance product development and create data-driven insights for better decision-making. Companies are leveraging technologies like IoT, big data analytics, machine learning, and cloud computing to increase efficiency, quality, and customer satisfaction. Automotive companies aim to consolidate their competitive advantage and attract new customers by embracing digital transformation.

CIE India has successfully implemented "Hyperconverged Technology" in 2024. This system combines computing, storage, and networking into a single software-defined platform. Its a modern way to manage data centers, and it can improve scalability, flexibility, and performance. In 2024 the Company moved to SAP RISE platform and has started to upgrade the SAP version to enhance data security and reliability.

We have automated the logistics function by implementing the transport management system which provides an online vehicle utilization report. It also enables the Company to reduce its carbon footprint. Automating such processes is also helping us move towards paperless offices that is an important part of our green initiative.

The Company has started the use of Power BI tools for various analytical dashboards like Sales, Inventory etc. and for various process control monitoring systems. This enables the real time availability of information about a process for the person in charge.

RISK MANAGEMENT

The business has a specific set of risk characteristics whicharemanagedthroughaninternalriskmanagement practice. The first line of defence in the risk practice are the operational managers who are tasked with identifying risks and reporting breaches that can put the Company at risk. The second line are processes and policies that are assessed periodically by the board and its audit & risk management committees. Key processes and policies include internal controls, data security & privacy, statutory compliances, and ethical framework (code of conduct & whistleblower policies). Internal audit process is the third line of defence that continuously reviews the efficacy of the first two lines. The senior management periodically reviews the risk management process as well as the actual management of risks identified. They report their findings every quarter to the risk management and audit committees of the board. The risk management committee reviews the identification, assessment, management, and monitoring of risks. The audit committee closely looks at the processes associated with risk management. Both these committees report to the board which provides directions to strengthen the overall risk management practice.

The process to identify risks is also well defined. Senior executives of CIE Automotive across the globe participate in an annual risk assessment survey to identify key risks associated with the business. This is supplemented by periodic internal assessment to identify risks under different categories – strategic & reputational, commercial, technological, operational, financial, people related, regulatory/compliance and ESG (Environmental, Social & Governance), etc. Risks under these categories are classified as short term and long term and monitored periodically.

Risks are prioritized based on the following criteria:

Probability of occurrence: based on past experience and analysis of the future.

Impact along three dimensions of economic, organisational and/or reputational.

From the standpoint of residual risk: considering the controls already in place to mitigate the potential impact of their materialisation.

Some of the key risks identified by CIE Automotive India Limited globally for 2025 are as follows:

Market trend change: The Company is highly dependent on the performance of the automotive industry in India and Europe. The automotive industry is going through a phase of uncertainty and the market situation can be quite volatile. The European light vehicle market is projected to stagnate or degrow in the next few years. We evaluate market trends carefully and proactively optimise costs to protect our margins.

Geopolitical situation: The geopolitical situation continues to be grim with both the wars in Ukraine

& West Asia continuing. There has also been a leadership change in the USA, the largest economy in the world, and the new President is expected to change quite a few existing US policies including on tariffs and work visas. The policies that US adopts will have a large bearing on how the global economy will fare in the near future.

Cybersecurity and data privacy & reliability: As digitization & automation increase in the business, there is a growing concern around data being breached by inimical third parties. The Company attaches great importance to securing its digital & IT systems and the IT team strives to deploy the available best practices in countering such threats.

Green supply chain: ESG has become an imperative aspect of business and investors are paying attention to this along with financial performance of the Company. The Companys ESG strategy is detailed in an earlier section of this management discussion. The detailed BRSR report also shows the importance that the Company attaches to ESG.

Human capital for Companys growth: As the automotive industry goes through the throes of change, volatility & uncertainty; the challenges thrown up can only be met by a team that is both skilled and motivated. There is strong competition for talent in some of the key auto hubs in India that we operate in viz. Pune & Bengaluru. Our HR strategy to meet this challenge is detailed in an earlier section of this management analysis.

Along with the above, the Company has identified the following other risks that can affect its growth & profitability:

The loss of certain principal customers or a significant reduction in purchase orders from certain customers or delay in ramp up of our existing orders could adversely affect business, results of operations, financial condition and prospects.

The dependence on a few key customers & vehicle platforms in some business verticals is high and leaves these verticals reliant on the performance of these OEMs – the Stampings business in India and Gears business in Italy are two examples. Overall, both the Indian and European operations of the Company are now well diversified and customer concentration risk is pertinent to a few verticals as stated above.

Potential inability to pass-through to its customers increase in costs like labour, energy, etc. could reduce future profitability.

As part of its growth strategy, the Company aims to develop many new parts for both existing and new customers. Managing the new product development process in an efficient manner is a key challenge.

As part of our strategy, we strive to invest in incremental capacity in an optimal manner. Nevertheless, volatility in market demand could be such that we end up in situations of either overcapacity or not enough capacity. In both these situations, our ability to maintain growth and profitability will be impaired.

Implementation of the new labour code in India may lead to increase in minimum wages for workmen that can potentially have a negative impact on margins.

To summarise, the risks to growth and capex efficiency are the key ones to monitor in India in CY25 while in Europe we need to protect our margins in an uncertain market environment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

In the opinion of the Management, CIE India has adequate internal audit and control systems to ensure that all transactions are authorized, recorded and reported correctly. The internal control systems comprise extensive internal and statutory audits. The Corporate Governance practices instituted by the Company are discussed in detail in the chapter on Corporate Governance of this Annual Report. Report on statutory compliances has also been provided.

LOOKING AHEAD

The automotive industry is faced with significant uncertainty both in the immediate and long term. The European automotive industry is facing stagnating demand and the challenges of rising costs, transition to Electric Vehicles (EVs) and competition from China. While the medium-term demand situation in the Indian automotive market continues to be strong, there are short term challenges in some of the segments like trucks. The automotive industry is faced with multifarious technological challenges. The three most important are as follows. The transition to EVs is not happening as smoothly as predicted. Automotive customers are looking for more premium features and for better safety & comfort. The supply chain is being transformed by digitisation and Industry 4.0. We strive to be future ready as many new opportunities and risks emerge in this changing environment. Our approach has been to optimally balance growth, investments and returns to actively manage the uncertainties surrounding these changes.

CAUTIONARY STATEMENT

Certain statements in the Management Discussion

& Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those express or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.