Divgi Torqtransfer Systems Ltd Management Discussions

Global economic overview

The global economic growth remained stagnant at 3.5% in 2024 and 2025, as the effects of the war in the Middle East were largely offset by accelerated demand-driven momentum in the global technology cycle, powered by advances in artificial intelligence (AI) and its adoption. The impact has varied widely across countries - energy exporters outside the conflict zone benefited from favourable terms of trade, while economies integrated into the technology value chain saw stronger activity even where they were energy importers, whereas energy importers with limited participation in the technology upturn, a group that includes many low-income countries, experienced weaker activity.

Advanced economies witnessed a marginal increase in growth, remaining broadly stable at 1.9% in both 2024 and 2025, while emerging market and developing economies also held steady at 4.5% in 2025 compared to 4.5% in 2024. Global inflation moderated sharply in 2025, declining to an estimated 4.1% from 5.8% in 2024, continuing the multi-year disinflation trend that had been in place since the beginning of 2024.

Regional growth (%)	2025	2024
World output	3.5	3.5
Advanced economies	1.9	1.9
Emerging and developing economies	4.5	4.5

(Source: IMF, un.org)

Performance of the major economies, 2025

(Source: IMF April 2026 Outlook, World Bank)

Outlook

Given the challenge of forming stable, real-time assumptions for projections, the IMF World Economic Outlook Update assumes that the reopening of the Strait of Hormuz begins in mid-July 2026, with conditions broadly returning to the prewar state of affairs by March 2027, consistent with commodity price assumptions based on market pricing as of June 10, 2026.

Under this outlook, global growth is projected at 3.0% in 2026, before recovering to 3.4% in 2027. Global inflation is expected to rise to 4.7% in 2026, as the disinflation trend since 2024 stalls, before easing to 3.9% in 2027.

(Source: IMF World Economic Outlook Update - July 2026, World Economic Forum, Federal Reserve, Bank of England, European Central Bank, Bank of Japan)

Indian economic overview

The Indian economys real GDP grew at 7.7% in FY 2025-26, compared to 7.1% in FY 2024-25. This growth was driven by strong consumption and increasing investments, reaffirming Indias position as the fastest-growing major economy. Indias Real GDP at Constant Prices was estimated at H323.12 lakh crore in FY 2025-26, compared with H299.89 lakh crore in FY 2024-25.

Growth of the Indian economy

	FY23	FY24	FY25	FY26
Real GDP growth (%)	7.0*	7.2	7.1	7.7

E: Estimated. Note: FY24 figure restated under new base year 2022-23. (Source: MoSPI)

* The FY23 figure (7.0%) is from the old base year series (2011-12) as the new series back-data for FY23 will only be available after December 2026.

Growth of the Indian economy quarter by quarter, FY 2025-26

	Q1FY26	Q2FY26	Q3FY26	Q4FY26
Real GDP growth (%)	6.7	8.4	7.8	7.8

Note: Q2 revised upward from 8.2% and Q3 from 7.35% under the new base year 2022-23 series released February 27, 2026. Q4 remains an estimate. (Source: MoSPI)

In fiat ion, policy and currency dynamics

Inflation remained benign through much of FY 2025-26, with full-year CPI estimated at an exceptionally low 2.1%. This created room for 125 basis points of cumulative rate cuts, supporting consumption and investment.

However, macro stability was accompanied by currency volatility. The Indian rupee depreciated sharply by 9.88% during FY 2025-26 - its steepest fall since FY 2011-12 - touching H94.83 against the US dollar. This reflected global capital flows, a strong dollar environment, and geopolitical uncertainties.

Capital flow s and market behaviour

Foreign portfolio investors remained risk-averse, withdrawing a record H1.8 trillion during FY 2025-26 - the largest outflow in 36 years. However, strong domestic institutional inflows of H8.50 trillion provided a crucial counterbalance, highlighting the growing maturity and depth of Indias domestic capital markets.

Indias market capitalisation declined 8% year on year in FY 2025-26 to Rs. 4.5 trillion from Rs. 4.83 trillion in FY 2024-25, marking the sharpest drop since FY 2022-23. The BSE Sensex declined 7% or 5,467 points in FY 2025-26, against a gain of 5.1% or 3,763 points, in FY 2024-25. Similarly, the Nifty 50 fell 5%, or 1,188 points, in FY 2025-26, compared to a gain of 5.3% or 1,192 points, in FY 2024-25. against a gain of 5.34%, or 1,192 points, in the corresponding period. The downturn was largely driven by the ongoing West Asia conflict and concerns around potential tariff measures under Donald Trump, which weighed on global investor sentiment.

Gold prices surged 64.1% during FY 2025-26 reflect ing global risk aversion and safe-haven demand.

Indias net direct tax collections rose 5.12% to Rs. 23.40 lakh crore in FY 2025-26, though this fell short of the Revised Estimate of Rs. 24.21 lakh crore by approximately H80,000 crore. Corporate tax collections came in at Rs. 10.99 lakh crore against a target of Rs. 11.09 lakh crore, while personal income tax (including STT) stood at Rs. 12.41 lakh crore against a target of Rs. 13.12 lakh crore - the larger of the two misses, partly reflecting the income tax relief extended to the middle class in the Union Budget 2025-26

Banking sector

Indias banking sector reflected improving financial health, with the gross non-performing asset ratio declining to a robust 2.1% as of September 2025, indicating stronger asset quality and disciplined lending practices. This stability was mirrored in profitability metrics, as scheduled commercial banks reported a return on assets of 1.3% and a return on equity of 12.5% during the first half of 2025-26, underscoring sustained operational efficiency and a healthier balance sheet trajectory.

Indias growth story

Real Gross Value Added (GVA), which measures economic output excluding taxes and subsidies, grew 7.9% in FY 2025-26, compared with 7.3% in FY 2024-25. At current prices, nominal GVA rose 9.1% to H314.87 lakh crore from H288.54 lakh crore a year earlier.

The tertiary services sector remained a key growth driver, expanding by 9.0% in FY 2025-26 and increasing its share in nominal gross value added to 54.3% from 52.8% in FY 2024-25, supported by broad-based momentum across segments.

During FY 2025-26, financial, real estate, IT and professional services grew by 9.9%, while trade, hotels, transport, communication and broadcasting recorded a strong 10.1% growth, and public administration and other services expanded by 5.8%.

The secondary sector grew 9.1%, accelerating from 8.0% in the previous year, driven by manufacturing alongside construction growth of 7.1%. This combination of services-led scale and manufacturing acceleration is shaping a more balanced and resilient economic structure.

Consumption and investment

During FY 2025-26, Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) maintained above-7% growth, reflecting a well-balanced demand composition across household spending and investment activity.

Growth catalysts

Policy-led consumption boost: The Union Budget FY 2026-27s tax relief measures-particularly income tax exemptions up to H12 lakh-are expected to stimulate discretionary spending and reinforce consumption-led growth.

Anticipatory Pay Commission impact: The 8 th Pay Commission, though expected to be implemented from FY 2027-28, is already shaping consumer sentiment, creating a forward consumption impulse.

Monetary stability: The Reserve Bank of Indias calibrated stance, with the repo rate at 5.25%, balances inflation risks with growth support, ensuring macroeconomic stability.

Credit expansion: Improved banking health and liquidity conditions are expected to sustain strong credit growth across MSMEs, housing, and retail segments.

Fiscal prudence with growth focus: The Union Budget maintains fiscal discipline while prioritising infrastructure, MSME support, skilling, and innovation-key levers for long-term productivity.

Outlook

The year under review underscores a defining divergence: a world grappling with uncertainty, and an India navigating it with confidence.

In a global environment marked by fragmentation and caution, India stands out as a rare convergence of stability, scale and structural opportunity. The World Bank has revised its FY 2026-27 growth estimate upward to approximately 6.6%, reflecting resilient domestic momentum even as growth moderates from the previous year. India is expected to retain its position as the fastest-growing major economy.

Growth will be shaped by a combination of strong domestic demand and resilient private consumption, supported by low inflation and GST rationalisation, alongside stable export performance with improved access to key markets. This momentum is further reinforced by sustained policy support, ongoing economic reforms, and a favourable demographic advantage.

While risks persist, particularly from elevated energy prices, subsidy pressures on government spending, and uncertainty in global demand, Indias macroeconomic fundamentals remain strong.

Over the medium term, sustained consumption, gradual investment recovery, and expanding global trade linkages are expected to reinforce Indias position as a key driver of global economic growth. (Source: Upstox, Economic Times, India Today, 5paisa, Livemint, The Logical Indian)

Global automotive industry overview

The global automotive market is projected to expand from USD 4,543.97 billion in 2025 to USD 7,458.15 billion by 2034, reflecting a steady CAGR of 5.66% over the period. This growth is being supported by strong demand for midrange hatchbacks in emerging economies, alongside accelerating investments by automakers in electric vehicle (EV) manufacturing. The industry is also witnessing increased momentum from the rise of automotive startups across markets such as India, Vietnam, China, and Canada, coupled with sustained focus on research and development to enhance engine performance and efficiency.

The integration of Advanced Driver Assistance Systems (ADAS) and ongoing advancements in solid-state battery technologies are expected to unlock new growth avenues, further shaping the future of the automotive sector. North America continues to lead in innovation, driven by strong demand for electric vehicles (EVs) and advanced safety systems, with vehicle electrification significantly reshaping the regional landscape. The Asia-Pacific region is witnessing rapid growth, supported by increasing integration of smart technologies and expanding automotive innovation.

Sustainability is emerging as a critical priority, influencing both consumer preferences and regulatory frameworks across regions. The rise of electric mobility and advancements in autonomous driving remain key growth drivers globally. The industry is increasingly shaped by digitalisation, sustainability, and the adoption of artificial intelligence, with strategic alliances gaining importance as companies collaborate to navigate evolving complexities. Competitive differentiation is also shifting from price-based competition to a focus on innovation, technology, and supply chain resilience, highlighting the need for continuous adaptation to changing market dynamics.

The automotive industry is undergoing a structural transformation driven by rapid technological advancements and shifting consumer preferences. The growing adoption of electric vehicles, supported by rising environmental awareness and government incentives, is redefining how vehicles are designed, manufactured, and marketed. At the same time, the integration of autonomous features and connected car ecosystems (a ~ Rs. 568 billion opportunity by 2035) is enhancing safety, intelligence, and convenience. In parallel, sustainability has evolved into a core business imperative, with manufacturers increasingly embracing circular economy practices and environmentally responsible production methods.

(Source: Towards Automotive, Market Research Future, SP Global)

Indian automotive industry overview

Indias automotive industry remains one of the most dynamic in the world, with the country firmly established as the third largest automobile market globally, behind only China and the United States. Within this ranking, India leads in three wheelers and two wheelers, holds a strong third position in passenger vehicles, and ranks among the top global producers in medium and heavy commercial vehicles. The sector has benefited from low cost skilled labour, a robust steel and auto component base, and increasingly sophisticated R&D capabilities, turning the country into a global export and manufacturing hub for both ICE and electric vehicles.

Over FY 2024-25 and FY 2025-26, the industry has continued to expand, albeit at a slightly moderated pace compared with the high single digit growth of FY 2023-24. Retail automobile sales grew by around 6.5% in FY 2024-25, driven by a 5% rise in passenger vehicle sales, an 8% increase in two wheeler volumes, and a 5% uptick in commercial vehicle sales. This marked a slowdown from the approximately 10% industry wide growth recorded in FY 2023-24, reflecting normalisation after the post pandemic demand surge. By FY 2025-26 (April 2025-March 2026), trade data based projections indicate that total vehicle production is on track to cross over 28 million units, with strong growth in passenger vehicles and steady performance in commercial segments. In the first half of FY 2025-26 alone, industry bodies report more than 1.65 crore (16.5 million) vehicles produced, underscoring solid underlying demand.

Indias passenger vehicle market has reached a new milestone, with annual PV sales crossing roughly 5 million units in calendar year 2025, and the sector on course to sustain or exceed that level in FY 2025-26. With this trajectory, India consolidates its position as the third largest passenger vehicle market globally. The broader automotive industry outlook remains optimistic: recent studies estimate the Indian automotive market at about USD 137-148 billion in 2025-26, with projections suggesting it could reach around USD 210-215 billion by 2031, implying a compound annual growth rate of roughly 7-8% over the next several years. Another analysis points to a 6.5% CAGR from 2025-2030, with an incremental size increase of about USD 52 billion between 2026 and 2030, reflecting continued investment in manufacturing, digitalisation, and electrification.

A key driver of this growth is the electric vehicle (EV) revolution. In FY 2025-26, passenger EV sales exceeded 199,000 units, representing a year on year growth rate of over 80%, while electric two wheeler registrations crossed about 1.15 million units in FY 2024-25, growing at around 20-21% YoY. Across all vehicle categories, EVs accounted for approximately 7% of total sales in Q3 FY 2025-26, signalling a steady rise in penetration. Looking slightly longer term, EV registrations have grown at a striking 63% CAGR over the past six years, and cumulatively reached nearly 2 million EV units by FY 2024-25, including more than 100,000 passenger EVs and over 1 million electric two wheelers. Policy and industry estimates project that the domestic EV ecosystem-encompassing vehicles, charging infrastructure, and related services-could grow at a high teens to low 30% CAGR through 2026, with the EV battery segment alone expanding at around 30% annually.

From a financing and employment standpoint, the EV transition is expected to unlock substantial opportunity. Scenario based analyses suggest that the EV related employment ecosystem in India could generate up to 5 million jobs by 2030, spanning manufacturing, battery production, charging infrastructure deployment, and after services. In parallel, the EV finance industry is projected to scale to about USD 50 billion by 2030, underpinned by growing demand for EV loans, leasing, and fleet financing products. These figures align with the India Automotive Mission Plan 2047, unveiled in mid 2025, which sets a strategic vision for India to become a global hub for automotive manufacturing and R&D. The plan envisions adding around 4 million additional passenger vehicle production capacity by 2032, much of it oriented toward EV focused assembly and component localisation.

Beyond capacity, the mission plan also targets a 30% share of electric vehicles in new vehicle sales by 2030, alongside a strong push toward shared mobility and connected vehicle platforms. With India already leading in two and three wheelers and firmly positioned in the top three passenger vehicle markets, the FY 2025-26 period reflects a critical inflection: the industry is shifting from a largely internal combustion driven growth model to a dual track system where EVs, exports, and digital enabled mobility services jointly define the next decade. Over the same horizon, the broader automotive market is projected to grow from about 5.1 million vehicle units in 2023 to around 7.5 million units by 2030, with passenger vehicles alone expected to reach roughly 6 million units annually, reinforcing Indias role as a core global automotive market and a key testbed for future mobility technologies.

(Source: Morder Intelligence, SIAM, IBEF, Auto Car Pro, Auto Car India)

Global auto components industry overview

The global auto parts manufacturing market reached USD 2,302.2 billion in 2025 and is expected to grow to USD 2,818.9 billion by 2034, reflecting a CAGR of 2.21% over 2026-2034. Growth is driven by rising vehicle production, tightening safety and emission norms, increasing EV penetration, and growing demand for lightweight, advanced components. OEMs dominate the sales channel with a 62.4% share, while passenger cars lead the vehicle segment at 52.3%. Regionally, Asia Pacific holds the largest share at 38.4%, led by China, Japan, South Korea, and India, followed by North America (22.6%) and Europe (21.3%), supported by strong premium vehicle demand and established supplier ecosystems.

Automotive components include essential systems such as the engine, transmission, suspension, braking, steering, electricals, and body parts - each critical to vehicle performance, safety, and functionality. Rising global vehicle demand is driving innovation, efficiency, and quality across the industry, supported by close collaboration between component manufacturers and automakers.

Growth is further fuelled by increasing urbanisation, infrastructure development, and the expansion of the global automotive aftermarket. Higher replacement demand for aging vehicles and a strong shift toward energy-efficient and lightweight components are accelerating industry momentum. India, in particular, has emerged as a competitive hub for automotive and component manufacturing, boosting export demand.

The automotive components market is witnessing strong growth and innovation driven by the rise of autonomous vehicles. Self-driving technology has increased demand for advanced systems such as LiDAR, cameras, radar, ultrasonic sensors, and high-performance processors required to process real-time data and enable autonomous functionality.

The advancements in robotics and additive manufacturing are transforming production. These technologies enable design flexibility, support the use of innovative materials, and accelerate the development of next-generation components. They also enhance efficiency, reduce costs, and help manufacturers remain competitive, driving faster evolution across the auto components industry.

Artificial intelligence (AI) is transforming the auto components market by improving manufacturing efficiency and product quality. AI-driven machines and robots execute complex tasks with high precision and speed, reducing production time and boosting productivity. AI-enabled inspection systems identify defects early in the process, ensuring consistent quality and minimising recalls and warranty costs. AIs predictive analytics help forecast demand, enabling better inventory management and reducing waste, ultimately strengthening operational efficiency and customer confidence.

(Source: IMARC, Data Intelo)

Indian auto components industry overview

Indias auto components market is projected to grow by USD 85.85 billion between 2025 and 2030, registering a robust CAGR of 14.8% over the forecast period.

Indias automotive industry is expected to see a normalisation in wholesale volume growth, with moderate expansion of 3-6% across segments in FY 2026-27, following a high-growth phase in the latter half of FY 2025-26 driven by post-GST factors and strong rural demand.

Passenger vehicle (PV) volumes are projected to grow 4-6% YoY, supported by steady demand, while two-wheelers (2W) are likely to expand by 3-5% on a higher base. Commercial vehicles (CVs) are expected to grow 4-6%, led by economic activity and strong bus segment demand, with buses likely to grow faster at 7-9% due to replacement cycles. In the PV segment, growth is estimated at 5-7% in FY 2025-26 before moderating to 4-6% in FY 2026-27 amid elevated inventories. Utility vehicles continue to outperform, while the share of alternative powertrains - CNG, hybrids, and EVs - is steadily increasing.

Indias auto component industry is undergoing a structural shift, driven by electrification, tighter safety norms, and rapid digital integration. The sector is evolving from traditional mechanical manufacturing into a hub for advanced electronic and technology-led components. Growth is supported by rising middle-class demand for vehicles and stringent regulations such as BS-VI norms, which require more sophisticated emission and fuel systems. This transition is creating opportunities in areas like power electronics, battery management systems, and ADAS. At the same time, increasing technological complexity is fostering deeper collaboration between Tier-1 suppliers and OEMs to develop integrated solutions such as steer-by-wire systems. However, global supply chain volatility - especially semiconductor shortages - remains a key challenge. In response, companies are focusing on localisation and adopting digital supply chain strategies to enhance resilience and ensure continuity.

(Source: Economic Times, Research and Markets, Technavio)

Financial analysis FY 2025-26:

Balance Sheet

Working capital management

Current assets as on March 31, 2026 stood at H4502.29 million compared to H3,954.14 million as on March 31, 2025. Current ratio as on March 31, 2026 stood at 5.04 compared to 7 as on March 31, 2025. Inventories increased from H387.31 million as on March 31, 2025 to H587.83 million as on March 31, 2026. Current liabilities stood at H892.91 million as on March 31, 2026 compared to H565.11 million as on March 31, 2025. Cash and bank balances stood at H2945.20 million as on March 31, 2026 compared to H2,848.33 million as on March 31, 2025.

Key ratios

Particulars	2025-26	2024-25
	( Rs. in lakhs)	( Rs. in lakhs)
EBITDA/turnover	24.60	24.39
EBITDA/net interest	297.50	153.31
Debt-equity ratio	0.00	0.00
Return on equity (%)	7.62	4.14
Book value per share (Rs.)	207.8	195.13
Earnings per share (Rs.)	15.34	7.98

Risk management at Divgi - TTS:

Key risks and their explanation	Mitigation measures
A shift in consumer demand could pose a risk to the company\u2019s concentrated focus on a specific niche segment.	The company is strategically diversifying its portfolio across a broader set of products and applications, spanning passenger vehicles, commercial vehicles, tractors, and construction equipment, while also expanding its presence across multiple customer segments and geographies.
An economic slowdown could adversely impact the company\u2019s performance, as reduced automobile demand may directly translate into lower revenues.	To reduce reliance on a single market, the company has expanded its footprint across four countries and diversified product applications, thereby limiting dependence on a narrow set of markets.
Intense global competition is largely driven by pressures around cost efficiency and scale of production.	Divgi\u2013TTS is a leading player in the market, recognised for its strong cost optimisation driven by the adoption of lean manufacturing practices.
Global OEMs are increasingly emphasising carbon footprint evaluation and life cycle assessments of supplier products, resulting in more stringent screening and selection criteria.	The company has strengthened its network of knowledge partners while maintaining a strong focus on environmental responsibility. It holds multiple years of ISO 14000 certification and follows the Global Reporting Initiative (GRI) framework for sustainability reporting. Additionally, it is at the forefront of developing energy- efficient vehicle solutions, collaborating closely with leading global automotive brands.
Key risks and their explanation	Mitigation measures
The company\u2019s long-term success and sustainability could be at risk if it is unable to attract and retain skilled talent.	To address this, the company promotes a positive work culture and provides strong opportunities for professional growth and development.
The use of child labour can damage the company\u2019s reputation and goodwill by creating negative public perception.	The company has established strict policies to prohibit child labour, reflecting its commitment to ethical practices and a strong code of conduct.
Stricter environmental regulations could pose a challenge to the company\u2019s growth trajectory.	The company is addressing this through investments in advanced R&D aimed at lowering environmental impact, alongside enhanced lean manufacturing practices that reduce raw material consumption.
Innovations may render existing technologies obsolete.	To stay competitive, the company consistently invests in technological upgrades.
Global OEMs are placing greater emphasis on reducing costs while simultaneously improving quality.	In response, the company has strengthened quality standards through a vendor development program based on CMM and a supplier quality improvement initiative, alongside investments in complementary capital equipment to enhance cost efficiency.

Human resource management

The company fosters a positive, high-performance work culture anchored in customer-centricity, innovation, and strong quality standards. It makes significant investments in employee training and development to enhance operational efficiency and capability. Focused on attracting and retaining talent, the company offers robust growth opportunities supported by progressive policies, including recognition and reward programs, employee engagement initiatives, and work-life balance efforts. Industrial relations have remained stable and harmonious across all plants throughout the year. As on 31 March 2026, the Company had a strength of 278 employees and a retention rate of over 13.07%.

Internal control system and their adequacy

The company has a strong internal control system in place, ensuring proper authorisation, recording, and reporting of transactions, while also protecting its assets. This system is essential for effective risk management and governance. Designed to fit the companys size and operational complexities, it is well-defined and robust. Over the past year, the system has functioned effectively, with both internal and external auditors regularly testing and certifying the controls across all offices, factories, and key business areas. Additionally, cross-functional teams within the factories play a vital role in controlling production operations, while system certifications further strengthen these controls.