Disa India Ltd Management Discussions

Your Company is operating in an environment marked by significant global uncertainty. In this context, the Directors offer their assessment of the current business landscape and its potential implications.

Domestic Outlook

Indias macroeconomic fundamentals are relatively robust comparable to the previous year. However, the West Asia conflict and its impact on global fuel prices have introduced considerable uncertainty for FY 2026-27. There is a broad expectation of rising inflation, which may lead to cost escalation in both ongoing and new projects. Additionally, delays, postponements, and cancellations of large projects are being observed as we enter 2026. This uncertainty is expected to persist in the near term, as indicated by various external reports. The Reserve Bank of India (RBI) has taken proactive policy measures to maintain liquidity and economic stability amid global challenges, with borrowing rates remaining unchanged over recent quarters. Despite these challenges, there remains a positive outlook driven by strong demand in the automotive sector and continued infrastructure investments across railways, energy, roads, airports, and shipbuilding. The GST reduction in the second quarter of the financial year has been welcomed by the consumers across all sectors of business, automotive, agriculture, infrastructure, railways, and engineering continue to drive industry momentum

Global Challenges

The financial year began with significant disruptions due to U.S. tariffs, which have continued to create global headwinds, affecting our ability to access U.S. markets. Both Indian exports and our own export performance have experienced subdued demand due to ongoing tariff uncertainties, which remain unresolved. Export growth is expected to face challenges in the near term. Although our current exposure to the U.S. market is limited, evolving trade policies may impact future expansion plans. The Indian foundry industry derives approximately 10-15% of its business from exports, and future outcomes will depend on developments in global trade negotiations and geopolitical conditions.

Impact of Geopolitical Tensions

Ongoing conflicts in Europe and West Asia have contributed to global economic slowdown, affecting business sentiment worldwide, including in India. While our direct exposure to conflict regions is limited, market sentiment-particularly in the Middle East-plays a significant role. We continue to monitor developments closely to mitigate potential indirect impacts.

Company Outlook

Given the prevailing global and domestic uncertainties, we anticipate a cautious outlook for the upcoming financial year, with relatively subdued demand across key industries. We remain mindful of challenges such as capacity underutilization, liquidity constraints in the capital goods sector, and extended project completion timelines. However, we are well-positioned to address these challenges with agility and resilience. To mitigate risks, we continue to explore new markets and diversify revenue streams. Our initiatives-such as geographic expansion, application-driven product development, and adoption of digital solutions through the Norican Group-align with our long-term strategic vision. Our ability to remain vigilant, flexible, and responsive continues to be a key strength.

The Indian foundry industry continues to evolve despite global and domestic challenges. Increased competition is being driven by new entrants and diversified investments. Large forging groups have entered the sector through acquisitions of ferrous foundries and by establishing new capacities. Customer expectations for product quality are rising, with Indian standards increasingly aligning with global benchmarks. Overall, the outlook remains cautiously positive and growth-oriented, though at a moderate pace compared to previous years. India currently produces approximately 15 million tonnes of castings annually, making it the second-largest producer globally after China. In the short term, demand is expected to grow steadily at 3-4% annually.

Sector Trends and Opportunities

The automotive sector has shown strong growth, supported in part by GST reductions in the previous financial year. Most segments-including commercial vehicles, passenger cars, two-wheelers, and tractors-have experienced double-digit growth.

Competitive Landscape

The industry continues to face strong competition, particularly from Chinese players, who have been aggressive in both the foundry and shot blasting segments. Despite this, our strong engagement with key customers and global partners has enabled us to maintain leading market share in the foundry industry.

Industry Challenges Key challenges include:

Adoption of cleaner and sustainable technologies, shortage of skilled labour and high attrition, long gestation periods for greenfield projects. These factors are driving gradual adoption of automation, though progress remains slow.

DISA Indias Strategic Position

DISA India has invested in a greenfield production facility near its existing plant in Tumkur. This expansion is designed to meet growing domestic demand as well as global requirements from the Norican Group. The new facility increases production capacity substantially and is expected to support the next phase of growth over the next decade. The introduction of SIMPSON technology in India through local manufacturing has received strong market acceptance and is expected to drive further innovation. The Norican Group continues to play a vital role in supporting the India business through technology transfer across DISA, Wheelabrator, and Simpson product lines. Investments in R&D, including the Norican Competency Center in Bengaluru, further strengthen engineering capabilities and global integration.

Customer-Centric Approach

"Exceeding Customer Expectations" remains our core principle. Our "Full Foundry" concept has been strengthened through the integration of SIMPSON solutions and digital platforms such as Monetizer.

Aftermarket Service Model

Our services performance engagement model has completed seven years in India. Long-term service contracts enhance customer productivity and operational efficiency. Our aftermarket distribution network ensures proximity to customers, providing a significant supply chain advantage in the Indian foundry sector.

Outlook for FY 2026-27

Indias GDP growth for FY 2026-27 is projected at 6.3%-6.5%, lower than previous years but still indicative of a growing economy. Despite a challenging environment, we remain encouraged by strong customer confidence and continued support from the Norican Group. Built on a strong foundation of customer-centricity, we are prepared to navigate both opportunities and challenges in the coming

As required by the Listing Regulations, the Company is required to furnish the details of significant changes (i.e., change of 25% or more as compared to the immediate previous Financial Year) in key financial ratios, along with detailed explanations for the changes.

The Company has identified the following ratios as Key financial ratios:

During the year, there were favorable changes in the above ratios. The improvement in operating profit margin reflects enhanced operational efficiencies, better cost management, and improved business performance across core operations. Decrease in Debtors turnover ratio is indicative of higher business volumes. The improvement in inventory turnover ratio indicates better inventory planning, efficient stock management, and improved demand fulfillment during the year.

The details of return on net worth at standalone and consolidated levels are given below:

Return on net worth is computed by dividing the net profit by year end net worth.