DCM Shriram International Ltd Management Discussions

The Companys business comprises of industrial fibre and defence-related products. Its manufacturing facility is located at Kota (Rajasthan). Directors Report gives segment-wise/ product-wise performance and outlook of these operations and also deals with internal financial controls, their adequacy, risks, and concerns.

The industry situation and competitive scenario of different segments of operations of the Company are given below:

The unit exports its products to major international tyre manufacturers across multiple geographies and has established itself as a specialized supplier of technically demanding reinforcement materials.

The Unit is actively expanding its customer base across additional geographies and diversifying into new applications beyond tyres, with high-strength yarn and fabrics developed for non-tyre industrial applications with improved realization compared to traditional products and this segment offers long term growth potential.

In the industrial rayon yarn segment, the Company maintains a meaningful market presence alongside established international producers. The industry is characterized by high entry barriers due to lengthy customer approval, field trial and certification processes, typically spanning two to three years, as well as substantial capital investment requirements for greenfield manufacturing facilities and pollution control infrastructure, which significantly increases project costs. These factors limit the entry of new participants and contribute to enhance long-term stability due to strong customer demand for established players. In this context, the Unit continues to expand its market share through the acquisition of additional approvals from both existing and new customers.

The current prices of agro-fuel are contributing to higher energy costs, which are expected to remain a continuing challenge. To address this, the Unit is actively exploring and implementing following additional energy conservation measures by:-

Installation of a new 40 TPH boiler, which will enhance fuel efficiency, increase captive power generation and reduce reliance on grid supply, thereby mitigating the risk of supply interruptions.

Installed a husk pellet machine to convert loose mustard husk into pellets, offering key benefits such as removal of dust and stones during processing, the ability to store pellets in bunkers, reduced open storage requirements, continuous conveyor-based fuel feeding, lower manpower requirements and reduced suspended particulate matter emissions, this initiative reduces operating costs while improving environmental performance.

A 2.11 MW solar power plant, commissioned earlier, continues to operate successfully, supplementing captive and grid power while reducing the carbon footprint.

Giving a Hydrogen Gas Project for R & D to a Research Centre.

These initiatives contribute to improved revenue generation, greater cost efficiency, reduced energy dependence and enhanced environmental sustainability. Overall profitability is expected to improve as these measures progress.

The Unit has the capability to supply treated fabric, a ready-to-use product widely preferred by tyre manufacturers, and this capability has been further strengthened through the upgradation of the dipping facility, resulting in improved product quality and operational e_ciency. During the year share of treated (dipped) fabric in total exports to tyre Companies was more than 80%, reflecting a strong base of high-value-added products, overall product mix and profitability profile.

On the raw material side, due to middle east situation prices of sulphur and sulphuric acid increased significantly during the year, with further increases expected in the coming period. Prices of caustic soda and charcoal also saw a marginal rise and are expected to remain at similar levels. Husk prices were higher during the year, though some softening is expected in the current year.

Logistics/insurance costs had increased due to macroeconomic conditions and geopolitical factors. These are being monitored closly.

The global economy has faced supply chain disruptions, geopolitical uncertainties and tariff-related challenges, however, despite these headwinds, India has demonstrated resilient economic growth momentum.

The Company has expanded its scope from the production of industrial yarn to engineering capabilities. During the year, it partnered for the supply of fuel cubes to the Europe and USA markets. Additionally, the Company entered into a contract manufacturing agreement for the supply of hydro-optic disinfectant UV water treatment solutions for Israel based customer.

The Indian defence sector is transitioning into a self-reliant industry, achieving a production milestone of Rs.1.51 lakh crore in 2025. Over 65% of defence equipment is now produced domestically to reduce foreign import reliance. Exports hit a record Rs.38,424 crore in FY26, primarily driven by aerospace, electronics, and land systems.

The government has introduced 5x Positive Indigenisation Lists to restrict imports and allows 74% FDI via the automatic route. To boost local manufacturing, Defence Industrial Corridors (DICs) have been established in Uttar Pradesh and Tamil Nadu. The industry is driven by couple of government-managed Defence Public Sector Undertakings (DPSUs) and major private corporations like Tatas, Adani, and L&T.

Rising government expenditures and the "Make in India" policy present significant growth potential, especially in high-value segments like aerospace and electronics. A growing focus on exporting to Southeast Asia and Africa is establishing India as an emerging global player. Increased participation from startups and the private sector is enhancing innovation in emerging fields like AI, drones, and cyber warfare. Expansive modernization plans and long-term capital acquisitions for Indias large security forces provide a steady pipeline of opportunities.

India remains heavily reliant on foreign suppliers, such as Russia, France, Israel, and the United States, for critical technologies on advanced materials and engines. This import dependence exposes the country to supply chain disruptions, geopolitical risks, and high lifecycle costs. Bureaucratic procurement processes, multiple approval layers, and complex compliance requirements lead to significant delays.

Projects led by institutions like the Defence Research and Development Organisation frequently experience cost overruns and missed deadlines, risking technological obsolescence by the time of deployment. The continued dominance and preferential treatment to public sector entities, such as Hindustan Aeronautics Limited, creates an uneven playing field that discourages private investment and competition. The domestic ecosystem is still hindered by skill gaps, regulatory uncertainty, and technological lags in areas like jet engines and advanced electronics.

Robust internal controls remain a cornerstone of our operational efficiency, accountability, and overall preparedness. We are continuously building upon our established digital tracking systems for sensitive inventory, with targeted initiatives underway to implement real-time monitoring and seamless cross-unit integration, which will further elevate our operational agility. Similarly, our core financial control framework is firmly in place, and management is proactively strengthening forecasting capabilities and accountability measures to optimize cost efficiencies and drive value. Recognizing that our people are the driving force behind these systems, we are actively investing in comprehensive training programs and collaborative change-management initiatives. These efforts are designed to empower our workforce, overcome transitional hurdles, and foster a highly adaptive, resilient control environment.

Your company is fully engaged in taking advantage of the Liberalised industrial atmosphere of the Sector.

Following are ratios for the current financial year and their comparison with preceding financial year:

Note: During the current year, the sales volume declined due to lower demand and the geopolitical situation in the Middle East, resulting in reduced profitability and consequently impacting the Companys net profit and related financial ratios.

The companys HR philosophy centers on the belief that a dedicated, enlightened, and contented workforce is essential for achieving business goals. We recognize that our employees are our greatest strength. Our HR focus is consistently on developing a skilled workforce capable of meeting present and future challenges. We actively recruit fresh and youthful talent across various disciplines with a long-term vision, and we are committed to addressing the needs of our employees as a cornerstone of our organization. The implementation of SAP RISE has significantly improved data flow and accuracy, enhancing efficiency, particularly in the accounts and finance departments.

Throughout the year, industrial relations remained positive across all operations. As on 31.03.2026, the total number of employees on the companys payroll was 1037.

Corporate Social Responsibility is an integral part of our business policy. We undertake and support various activities in the communities where we operate to maximize the benefit of our CSR initiatives. These programs align with Schedule VII of the Companies Act, 2013. In the fiscal year 2024-25, the Company has spent Rs.148.19 lakh.

The Company is committed to our motto: "Green, breathe clean, stop polluting the environment, and save our planet." This aligns with the global call to address climate change. We prioritize environmental protection in all areas of our operations. Alongside installing state-of-the-art effluent treatment and waste disposal plants, we focus on tree plantation in Kota to improve air quality and reduce greenhouse gas emissions. Our emphasis remains on using environmentally friendly agrofuels for power generation instead of fossil fuels. We have progressively shifted from fossil fuels to agrofuels.

We actively pursue research and innovation to find solutions that minimize emissions and maintain our environmental responsibility.