Cosmo Ferrites Ltd Management Discussions

Industry Structure & Developments:

The Company is in the business of manufacturing soft ferrites cores. Major applications of ferrites are inverter transformers, EV charger, Energy Meter, Mobile Charger, SMPS, pulse transformers, line filters, choke, noise suppressors etc. The industry is witnessing a decent growth rate, and it is expected to grow at a faster rate in the near future as well, in both Domestic and Exports industry. The rapid urbanization and increase in usage of products using soft ferrites has given a big fillip to the soft ferrites industry in recent years.

The continuous shift of manufacturing facilities from high-cost locations like US & European countries to low-cost countries like India & China has provided a lucrative opportunity to the manufacturers in these countries. Increased EV consumer electronics production and power infrastructure development in Asia, Africa, and Latin America are boosting regional demand.

However, unlike hard ferrite, soft ferrite is more complicated both in terms of manufacturing process and characteristic requirements. Further the continuous technological advancements pose a threat to companies unable to cope with these changes.

As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regula EVtions, details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in Return on Net Worth of the Company therefore are given below:

There are no significant changes (i.e. 25% or more) in other key financial ratios viz. Current Ratio and Inventory turnover Ratio.

The revenue from operation is Rs 8566 Lacs against Rs 9776 Lacs in the previous year. The Earnings before interest, tax, depreciation and amortization (EBITDA) are Rs 394 Lacs against 1013 Lacs in the last year. This downturn was primarily driven by reduced volumes and realization in both domestic and export markets. The domestic market faced significant pressure due to the dumping of low-priced soft ferrite cores from China, while the export market was impacted by the prevailing economic climate in Europe following recent geopolitical events.

In a significant positive development, the company welcomes the recent announcement by the Central Government, through Gazette Notification no. 04/2025-CUSTOM(ADD) dated March 18, 2025, imposing an anti-dumping duty of up to 35% on imports of soft ferrite cores originating from China. This duty, effective for five years, follows Cosmo Ferrites proactive request for an investigation into the unfair trade practice of dumping.

We have already initiated steps towards automation and have placed orders for automated machinery in our press and coating sections. These initiatives are expected to substantially reduce overall process rejections and manpower costs. We anticipate that the combined effect of the imposed anti-dumping duty, our automation efforts, and stringent cost control measures will significantly improve our revenue and EBITDA margin in FY26 and beyond."

The Company deals in Soft Ferrites Core and Transformer.

The outlook for the industry and the company looks bright and new markets in the global arena are being developed by the Company. The Company is also focusing on cost cutting and increased productivity to enhance its competitiveness.

Global Market Size, Forecast, and Trend Highlights over 2025-2037 Ferrites Core Market size was estimated at USD 4.77 billion in 2024 and is expected to surpass USD 10.05 billion by the end of 2037, rising at a CAGR of 5.9% during the forecast period, i.e., 2025-2037. In 2025, the industry size of ferrites cores is assessed at USD 5.05 billion.

The ferrites cores market expansion is driven by the expanding demand for electronic devices, the growing usage of renewable energy sources, and the rising popularity of electric vehicles. Transformers, inductors, power supply, and filters are just a few of the many electricals devices that require ferrites cores. It is anticipated that the growing usage of renewable energy resources, electric vehicles, and industrial automation will fuel ferrite core demand in the upcoming years.

The rising emphasis of manufacturers is to produce components in India, with a focus on Made in India. Since ferrites are frequently utilized in electrical components, the manufacturing industry needs to place greater attention on and value them. Cosmo Ferrites, which is already a leader in soft ferrites in India and exports to more than 50 countries worldwide, will keep assessing and growing to secure a respectable portion of the global market given the strong drive to enhance electronics production in India.

The management cautions readers that the risks outlined below are not exhaustive and are for information purposes only. Investors are requested to exercise their own judgment in assessing various risks associated with the company.

The production of ferrite cores relies heavily on materials like iron oxide, manganese, zinc, and nickel. These materials are subject to price fluctuations and supply chain disruptions. For instance, China controls over 70% of global rare earth element production, including materials essential for Mn-Zn ferrites, amplifying risks of export restrictions or trade disputes.

The ferrites industry is capital intensive industry. In a free market environment, new capacities are created depending upon demand supply situation and return on investment. Industry is cyclical in nature and at times there is over supply situation leading to a decline in operating margins.

We are mitigating the above risk by increasing our exports presence, developing niche products, exploring new markets and new customers. The domestic market caters to the lower end segment of the ferrites market and poses no threat to the company. The company has a good image with local customers.

All customers are sensitive to quality, delivery and price. The above risk is mitigated by developing value added niche products, customer schedule adherence and improved quality standards. This enables us to build long term relationships with various customers by providing them with a good value proposition.

Raw material prices have a significant impact on operating margins.

Since, raw materials prices are volatile in international markets especially Ferric Oxide, the company is in the process of strong inventory management, taking out lower realization products and customers, increasing sales realization and exploring new markets where realizations are high.

High Quality human resources are vital to the success of our business. People are valuable assets of the company. The company has been working towards providing challenging high growth environment for its employees. The company follows good HR practices, which include various schemes for employee welfare and motivation.

The company has a strong appraisal system. It has successfully worked its compensation policy to team and individual performances. The company provides good opportunities to deserving candidates. The company believes in growth of its managers to leaders and has structured training programs to that effect.

With excellent performance track record as well as best HR practices we are able to attract and retain people for growth of our business.

Operations could be disrupted due to natural, political and economic disturbances.

Running a business exposes the company to a number of risks.

The company has taken adequate insurance cover on its insurable interests. These include:

1. Fire Risk

2. Marine risk

3. Burglary risk

4. Group Personal Accident Policy

5. Other Miscellaneous Policies.

The company has also taken steps to strengthen the IT security system as well as physical security system at all our locations.

The Company is exposed to foreign exchange risk mainly due to imported raw materials and finished products. However, being importer and exporter both the foreign currency risk is partially Mitigated through a natural hedge

The details of the financial performance appear in the financial statements appearing separately. The highlights of the same are also mentioned in the Directors Report.

The Statutory Auditors assess the adequacy of internal control every quarter and report to the Board of Directors accordingly. The Company has adequate internal control procedures commensurate with the size of the company and the nature of its business.

Human resources are considered as vital strength of the company. There was unity of purpose among all levels of . employees i.e. to continuously strive for the improvement in work practices & productivity.

. As a leader in ferrite industry, Cosmo Ferrites acts as a socially responsible corporate citizen. We are not just committed to providing a conducive environment to all our stakeholders, we also believe in advocating for positive change in our world.

Certain statements in the Management Discussion & Analysis describing the companys views about the industrys expectations/ predictions objectives etc. may be forward looking within the applicable laws and regulations. Actual results may differ materially from those expressed in the statements. A companys operations may be affected by the . demand and supply situations, input prices and their availability, changes in Government regulations, tax laws and other factors such as industrial relations and economic developments etc. Investors should bear the above in mind.