Craftsman Automation Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Schedule V to the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis Report covering business performance and outlook (within limits set by the Companys competitive position) is given below:

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Global Economy

The International Monetary Fund (IMF) has adjusted its global economic outlook for 2025, projecting a growth rate of 2.8%, a downward revision from the earlier estimate of 3.3%. This change reflects escalating trade tensions, notably due to the U.S. administrations implementation of century-high tariffs, which have prompted retaliatory measures from major trading partners like China.

The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era. Existing rules are challenged while new ones are yet to emerge. Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near-universal levies on April 2. The US effective tariff rate surged past levels reached during the Great Depression, while counter-responses from major trading partners significantly pushed up the global rate.

Global Growth: The revised projection of 2.8% marks the slowest growth since 2020 and is significantly below the pre-pandemic average of 3.7%.

Inflation Trends: Global inflation is anticipated to decline to 4.2% in 2025 and further to 3.5% in 2026, with advanced economies returning to their inflation targets sooner than emerging markets.

Regional Outlooks:

• United States: Growth is expected to decelerate to 1.8% in 2025, down from 2.7% in 2024, influenced by trade policy uncertainties and reduced consumer demand.

• China: The economy is projected to grow at 4.0% in 2025, reflecting challenges in the housing market and reduced export demand.

• India: Growth remains robust at 6.2% in 2025, supported by strong domestic demand and structural reforms.

To counter slow economic growth and fiscal pressures, the IMF recommends policies that promote healthy aging, bridge gender disparities, and improve the alignment of migrants skills with local labor market demands. Investments in infrastructure and human capital are also emphasized to bolster productivity and long-term growth.

Indian Economy

As of April 2025, the Reserve Bank of India (RBI) projects a real GDP growth rate of 6.5% for the fiscal year 2025-26 (FY25-26), revised downward from the earlier estimate of 6.7%. This adjustment reflects concerns over global trade tensions, particularly the imposition of reciprocal tariffs by the United States, which could impact Indias export sector and overall economic momentum.

The RBIs outlook suggests that while domestic demand remains resilient, external factors such as global trade disruptions and geopolitical tensions could pose challenges to Indias growth trajectory. The central bank emphasizes the importance of maintaining macroeconomic stability and implementing structural reforms to bolster the economys potential.

Monetary Policy Measures

In response to easing inflation and to support economic growth amid global headwinds, the RBIs Monetary Policy Committee (MPC) reduced the policy repo rate by 50 basis points to 5.50% in June 2025. This marks the third consecutive rate cut, following a similar reduction in February & April. The MPC also shifted its policy stance from accommodative to neutral, indicating that there is no strong bias for any rate action.

Automobile Industry in India

• According to Society of Indian Automobile Manufacturers (SIAM), Passenger vehicle sales reached a record 4.3 million units, marking a modest 2% year-on-year growth. This growth was primarily driven by robust demand for utility vehicles (UVs), which accounted for 65% of total PV sales, up from around 60% in the previous year.

• Two-wheeler sales experienced a strong recovery, contributing to the overall 73% domestic growth in the auto industry. Three-wheeler sales also showed positive momentum, supported by increased urban mobility needs.

• The commercial vehicle segment faced challenges, with sales remaining nearly flat. Factors such as financing constraints and global trade uncertainties impacted demand.

• The industry remains vigilant about global geopolitical tensions, evolving supply chain dynamics, and fluctuating commodity prices, which could impact future performance.

Automobile Industry Outlook

• Automobile industrys performance was driven by healthy demand, infrastructure investments, supportive Government policies, and continued emphasis on sustainable mobility. Sound economic policies and positive market sentiment helped in maintaining growth.

a. Commercial Vehicle (CV)/ Medium & Heavy

Commercial Vehicles (MHCV)

• Commercial Vehicles experienced a slight de-growth of (-) 1.2% in FY 2024-25 compared to the previous year. However, the last quarter of FY 2024-25 posted a growth of 1.5%.

• Though the overall trucks segment has witnessed a slight de-growth, but the requirement of freight movement has been suitably served with fleets migrating towards higher GVW vehicles. The expanding highways and expressway network is playing a crucial role in reducing logistics costs, enhancing regional connectivity, which is auguring well with the performance of this segment.

• However, the infrastructure development has helped in driving sales of buses for inter-city travels and a focus on mass- mobility in intra-city routes has also helped this segment.

b. Two-Wheeler (2W)

• Two-Wheelers with sales of 19.6 million units registered a good growth momentum of 9.1% in FY 2024-25 over FY 2023-24.

• Improved rural demand and resurgence in consumer confidence is helping the segment to recover.

c. Passenger Vehicle (PV)

• Passenger Vehicles also saw their highest ever exports in FY 2024-25 of 0.77 million units registering a growth of 14.6% as compared to FY 2023-24. Growth in exports have been driven by demand of global models being manufactured from India in markets of Latin America and Africa. Some companies have also commenced exporting to Developed markets.

• Utility Vehicles (UVs) continued to drive growth, now contributing 65% of total PV sales compared to about 60% in FY 2023-24.

• Three-Wheelers posted its highest ever sales in FY 2024-25 of 74 Lakh Units with a growth of 6.7% as compared to previous year, surpassing the previous peak of FY2019.

• Growth is primarily driven by the demand of Passenger sub-segment.

Aluminium Market

Global Aluminium Casting Market reached approximately US$ 100 billion in 2024 and is expected to reach US$ 160 billion by 2034, growing with a CAGR of 5.7% during the forecast period 2025-2034.The aluminium casting market in India is forecasted to grow by USD 10.6 billion by 2029, accelerating at a CAGR of 11% during the forecast period.

The aluminium casting market is poised for continued growth, supported by advancements in casting technologies and the increasing demand for lightweight components across industries. The emphasis on sustainable and recyclable materials further bolsters the markets prospects.

The push for lightweight and fuel-efficient vehicles has amplified the demand for aluminium cast components. The automotive parts aluminium die casting segment in India is projected to register a CAGR of 8.8% during the forecast period.

Industrial & Engineering Market

As per the present estimates of the GOI, the Capital Goods industry contributes about 1.9% of GDP. The Heavy Engineering and Machine Tool sector (capital goods industry) consists of the following major sub-sectors: Dies, Moulds and PressTools; Plastic Machinery; Earthmoving and Mining Machinery; Metallurgical Machinery; Textile Machinery; Process Plant Equipment; Printing Machinery; and Food Processing Machinery. The production of the capital goods sector has increased from Rs 2.30 Lakh Crores in 2014-15 to Rs.4.29 Lakh Crores in 2023-24.

Based on the recommendations of The National Capital Goods Policy, 2016, for increasing the budgetary allocation and scope of the Scheme on Enhancement of Competitiveness of Capital Goods, which included setting up of Centers of Excellence, Common Engineering Facility Centers, Integrated Industrial Infrastructure Park and Technology Acquisition Fund Programme. These recommendations were incorporated in Phase II of the scheme. The Union Budget for 2024-25 increased the overall capital expenditure allocation, which encompasses investments in the capital goods sector.

Storage Solutions Market

The Warehousing Development and Regulatory Authority (WDRA), under the Government of India, has recently undertaken several initiatives to enhance the warehousing sector, aiming to reduce logistics costs and improve storage infrastructure across the country which is currently stand at 14-18%, compared to the international benchmark of 8%.

Rising demand for automation in warehousing and supply chain management is driving the growth of the automatic storage and retrieval systems market in India, addressing major challenges like labour shortage, inefficiency, and rising operational costs.

The Automated Storage and Retrieval System (ASRS) Market size is projected to reach a CAGR of 6.6% to 11.7% between 2025 to 2030. Automated storage & retrieval systems are inventory management systems commonly used in manufacturing centres, distribution facilities, and warehouses.

. OPPORTUNITIES AND THREATS Opportunities

• The automotive industrys focus on reducing vehicle weight for better fuel efficiency and performance boosts the demand for aluminum components.

• Increasing demand for vehicles, especially in emerging markets, can lead to higher demand for powertrain components.

• Government initiatives and investments in infrastructure can lead to increased demand for industrial and engineering products.

• Expanding into new industrial sectors can reduce dependence on the automotive industry.

• Government initiatives in the warehouse industry offer good potential for the storage segment.

Threats

• Stricter emission norms and environmental regulations could impact the demand for conventional powertrain systems.

• The aluminium components market is competitive, with several players vying for market share.

• The industrial sector is sensitive to economic cycles, which can affect demand.

C. OUTLOOK

A relentless focus on cost management, fiscal prudence, value engineering and customer partnering has enabled the Company to record a creditable performance demonstrating its Engineering Advantage.

The Company is confident that it can utilise future opportunities and face future challenges with agility in order to meet the shareholders expectation of sustainable growth and profitability. The key focus areas are:

• Improve working capital efficiency.

• Optimize Capital Structure through Targeted Debt Reduction

• Maintain Robust EBITDA Margins through Operational Discipline

• Improve Profitability in Aluminium and Storage Solutions Businesses

• Diversify Revenue Streams by Growing NonAutomotive Portfolio

• Broaden Business Base through Strategic Diversification Initiatives

D. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Highlights of the Companys performance is provided below:

• Turnover grown by 20% and stands at Rs.3,84,795 Lakhs.

• PBT for the year stands at Rs.12,755 Lakhs.

• PAT for the year stands at Rs.9,369 Lakhs.

• EBITDA for the year stands at Rs.58,858 Lakhs.

E. THE DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Particulars	Unit	FY 2024-25	FY 2023-24	% Change
Debtors Turnover	Times	792	8.30	(5%)
Inventory Turnover	Times	4.22	4.28	(1%)
Interest Coverage Ratio*	Times	3.05	4.24	(28%)
Current Ratio	Times	0.94	1.03	(9%)
Debt Equity Ratio*	Times	0.59	0.91	(35%)
Operating Profit Margin* (%)	%	8%	13%	(38%)
Net Profit Margin* (%)	%	3%	6%	(50%)
Return on Net Worth*	%	3 %	13%	(77%)

 

Ratios*	Reason for changes
Interest Coverage Ratio	Increase in interest cost.
Debt equity ratio & Return on Net Worth	Increase in Equity on account of QIP raised during the year.
Operating Profit Margin	One-time Expenses for Acquisitions, Initial losses on Greenfield Projects.
Net Profit Margin

F. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

	FY 2024-25		FY 2023-24
Segment	Sales	EBIT	Sales	EBIT
	Rs. Crs	%	Rs. Crs	%
Powertrain	1,683	15%	1,558	19%
Aluminium Products	1160	10%	917	14%
Industrial & Engineering	838	2%	732	6%
Others	167	1%	-	-

Powertrain segment

• The Company continues to be a leading player in the precision machining of critical engine and transmission components, serving the M&HCV, tractor, passenger vehicle (PV), and off- highway segments. The company has built strong relationships with key OEMs, leveraging its technical capabilities and consistent quality.

• The Company is in the development of the new off- highway components facility, marking a significant step towards scaling up its presence in this high- potential segment.

• In a major strategic move during the current year, the company acquired assets of Fronberg Guss GmbH. The move brings not only capacity and capabilities, but also a skilled workforce and longterm customer relationships in Europe, which will play a crucial role in Craftsmans strategy to diversify geographically and climb the value chain in iron castings and engineered systems.

Aluminium Products segment

• Aluminium usage in the automotive sector is expected to grow steadily, driven by the structural trend of vehicle light weighting, a response to stringent emission norms and fuel efficiency standards. While India continues to trail developed markets in aluminium adoption electrification, and global platform integration is expected to significantly increase aluminium content per vehicle in the coming years.

• The Aluminium Products segment has expanded its footprint with the strategic inclusion of DR Axion & Sunbeam, broadening the product portfolio and enhancing the Companys machining and casting capabilities. This move has provided synergies in operations and access to new customer segments, giving a strong impetus to consolidated growth.

Industrial & Engineering segment

• A substantial share of revenue in this segment comes the rapidly growing storage solutions business, as well as from the High End SubAssembly & Precision Component Manufacturing.

• The Company has successfully expanded beyond the e-commerce segment, securing large orders from pharma, automotive, and cold chain industries, thereby broadening its sectoral exposure and de- risking revenue streams.

• The Company has commenced its cast iron manufacturing operations with green energy and machine tool parts.

G. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains adequate and effective internal control systems commensurate with its size and complexity. It also ensures that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles, along with the assets of the Company being adequately safeguarded against significant misuse or loss.

In the opinion of the Management, the Company has adequate internal audit and control systems to ensure that all transactions are authorized, recorded and reported correctly. An independent internal audit function is an important element of the Companys internal control systems. This is supplemented through an extensive internal audit programme and periodic review by the management and the Audit Committee. 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 which forms part of the Annual Report.

H. RISKS AND CONCERNS

The Risk Management Committee maintains an active oversight of the risk and the effectiveness of the risk mitigation strategies and plans put in place by the Company.

Identified key risks of the Company includes Strategic Risk, Operational Risk, Environment, Safety and Governance (ESG) Risk and Information & Cyber Security Risk.

The Company has a robust risk mitigation plan to minimize identified risks through continuous monitoring and mitigating actions as may be required.

I. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING THE NUMBER OF PEOPLE EMPLOYED

Human Resource development continues to be our top-focused area. The emphasis was on reskilling and upskilling to enable the teams in navigating change and remaining compliant with evolving processes. Industrial Relations with employees remained cordial throughout the year under review.

As on 31^st March 2025, the Company has employed 2893 permanent Employees and workmen.