Eastern Treads Ltd Management Discussions

Industry Structure and Developments

The tyre tread manufacturing industry forms an integral part of the global tyre value chain, supplying tread rubber for both original equipment manufacturer (OEM) tyres and the retreading market. In India, the industry plays a crucial role in the automotive sector. Demand for tyre tread products is primarily driven by growth in the automotive sector, expansion of commercial transportation, increasing replacement tyre demand, and the rising adoption of tyre retreading as a cost-effective and environmentally sustainable solution. Key segments of the Treads industry includes Commercial Vehicles (CV), Passenger Vehicles (PV) and Two-wheeler segment (TW). The CV segment remains dominant due to high demand for retreaded tyres in freight and logistics whereas the PV segment is emerging as a result of increased vehicle ownership and a focus on cost-saving measures by consumers. The TW segment includes both scooters and motorcycles, with a focus on cost-effective solutions for a rapidly growing segment.

Tyres plays a crucial role in ensuring vehicle safety and performance, making them an essential component of the automotive ecosystem. In recent years, the market has witnessed several key drivers that have propelled its growth. With the rising disposable income and growing middle-class population, there has been a surge in demand for passenger and commercial vehicles. This has directly translated into increased demand for tyres. Additionally, government initiatives such as "Make in India" and the push for electric vehicles have further contributed to the markets growth.

The Indian tyre Market is experiencing robust growth of 8.71% CAGR during the forecast period 2023-2030 and is projected to reach USD 25.50 billion by FY2031 from USD 13.11 billion in FY2026 mainly owing to the rapidly growing automotive industry in the country. The market was valued at USD 14.45 billion in 2025.

The Indian Retread Tyre Market is anticipated to register a CAGR of 5.10% during 2026-2034. The market was valued at USD 1.30 billion in 2026 and is projected to reach USD 2.07 billion by 2034. Retread tyres play a crucial role in Indias cost-sensitive and high-usage transportation ecosystem, offering fleet operators a significantly lower cost-per-kilometer compared to new tyres.Indias commercial vehicle sector, which accounts for more than 40% of total fuel consumption and logistics movement, continues to rely heavily on retread solutions to control operating expenses. A retread tyre typically costs 40-55% less than a new tyre while delivering up to 80% of original tread life when applied correctly.

The key drivers to the market include rising vehicle numbers, technological innovations, cost-saving preferences, and regulatory support for sustainable practices. The industry is influenced by government policies on waste management and recycling, as well as automotive safety standards. Innovations in retreading technology, including improved materials and processes, enhance the performance and durability of retreaded tyres. Another important driver is the focus on road infrastructure development.

Domestic tyre demand growth is estimated at 6-8% in FY2026 driven by stable replacement demand. Original equipment (OE) growth in estimated to be driven by two-wheelers (TWs), while commercial vehicle (CV) and passenger vehicle (PV) segments are likely to clock a modest, low single-digit growth.

The tread manufacturing industry is facing a rapidly changing global business environment, with geopolitical conflicts, supply-chain disruptions, rising raw-material prices, and increasing transportation costs creating significant challenges for manufacturers. Wars and international tensions have disrupted established trade routes and affected the smooth movement of raw materials across countries. In India, fluctuations in crude oil availability and petroleum-based raw materials have added further uncertainty to production costs, particularly for synthetic rubber and other chemical-based inputs. At the same time, the prices of natural rubber, synthetic rubber, carbon black, chemicals, energy, and other essential materials continue to place pressure on manufacturing expenses. Logistics has become another major concern, as higher fuel costs, container shortages, port congestion, longer shipping routes, and increased freight charges have made both domestic and international transportation more expensive. These challenges are forcing tread manufacturers to improve supply-chain planning, explore alternative sources of raw materials, optimize production costs, and build greater flexibility and resilience to remain competitive in the global market.

Our Countrys freight transportation sector is rapidly expanding to satisfy the rising demand for goods among a growing consumer base. Currently, road transport, mainly through trucks, dominates the movement of goods, handling 67% of domestic freight. Heavy and medium trucks are central to this system. As road freight continues to grow, the truck fleet is expected to increase to approximately 17 million by 2050. This growth will also drive up demand for tyres in both the Original Equipment Manufacturer (OEM) and replacement markets.

Adoption of newer technologies such as improved vulcanization processes and high-performance tread compounds is on the rise. These advancements are aimed at enhancing the durability and performance of retreaded tyres. Increased use of automation in production lines and digital tools for quality control and inventory management are improving operational efficiencies. There is a growing emphasis on environmental sustainability, with companies adopting more eco-friendly materials and processes. The government is also encouraging recycling and waste management practices.

Currently, 60% of truck and bus tyres are radial, and this trend is steadily increasing. Radial tyres are stronger and can support multiple retreads. Additionally, there is a growing demand in the retreading sector from bus owners seeking high-quality retreads.

Natural rubber makes up over 30% of the raw material mix, with carbon black at 25%, synthetic rubber at 20%, nylon tyre cord fabric at 10%, and other rubber chemicals making up the rest. Since many of these inputs are derived from crude oil, their prices generally follow oil price trends, though with some delay, in addition to being influenced by their own supply and demand conditions.

The tread manufacturing industry in India is poised for growth in FY 26-27, driven by technological advancements, increased market demand, and supportive regulatory frameworks. Companies are adapting to the evolving market landscape through innovation, strategic expansion, and a focus on sustainability. Despite facing challenges such as raw material costs and regulatory compliance, the industry is well-positioned to capitalize on emerging opportunities and continue its growth trajectory.

Opportunities and Threats

Opportunities

• Rising Demand for Automobiles: Indias automobile demand increased significantly in FY 2025-26, supported by strong economic growth. Indias real GDP grew by 7.6% during the year, indicating continued expansion in economic activity and consumer demand. The growth in passenger vehicles, commercial vehicles and two-wheelers has also increased the need for replacement tyres. Retread tyres help meet this demand by extending the life of used tyres at a lower cost than new tyres, while reducing operating costs and conserving raw materials. Thus, rising GDP and automobile demand are creating greater opportunities for Indias tyre- retreading industry.

• Cost-Effectiveness: Retreaded tyres offer a cost-effective alternative to new tyres, making them attractive to budget-conscious consumers and businesses.

• Environmental Sustainability: Retreading helps in reducing tire waste and the environmental impact associated with tyre disposal. This aligns with growing environmental concerns and regulations. Further the industry can capitalize on its eco-friendly image by emphasizing its role in recycling and waste reduction.

• Regulatory Support: Evolving regulations that promote environmental sustainability and recycling can create a more favorable business environment for retreading companies.

• Infrastructure Development: India has the second largest road network in the world.With the governments focus on infrastructure development, the demand for vehicles is likely to increase, driving the demand for tyres. This enhances connectivity and boost economic activity, leading to increased tyre sales and replacement demand.

Threats

• Volatility in Raw material Cost: Fluctuations in the prices of key raw materials, such as rubber can impact production costs and profit margins for of Treads.

• Intense Competition: The industry faces competition from both domestic and international manufacturers, which can put pressure on prices and margins.

• Meeting ESG standards: The industry faces significant challenge in meeting Environmental, Social and Governance (ESG) Standards, particularly with Europe accepting ESG- Compliant companies. This shift towards sustainability and responsible business practices requires tyre manufacturers to adapt their operations, supply chains and products to meet the stringent ESG criteria. Non compliance may lead to exclusion from key markets, impacting exports and revenue.

• Technological Risks: Rapid technological advancements in tyre manufacturing and retreading could render existing technologies obsolete or less competitive. Significant investment in new technology and equipment may be required to stay competitive, posing a financial risk. Alternative technologies, such as airless tyres, could potentially reduce the demand for retreaded tyres.

Segment-wise or product-wise Performance

The Company manufactures Pre cured tread rubber, Conventional Tread Rubber, Black Vulcanizing Cement and Bonding Gum. The contribution of these products to the current years turnover is 48.74 %, 27.66%, 13.21 %, and 10.39% respectively.

Outlook

With the increased competition in Tyre and related industries, the companies in this sector are slowly moving from product offering companies to service offering companies. This helps the customers to get better services of the product and improves efficiencies. The companies are able to get long-term relationships and usage of high end efficient products, which due to cost escalations customers are unable to afford. This also helps tyre related industries to offer service which the unorganized sector is unable to offer, thereby improving the market penetrations and helping customers building trust on the products. Our company has also taken various initiatives to place our brand as a cost effective service provider, with high quality products and services to fleet, based on cost per kilometer approach.

We are on the path to build comprehensive and industry leading capabilities that would generate long term opportunities in India and worldwide. With an increasing distribution presence and high quality products and services, the company is hopeful of enhancing its share of the various markets it addresses. Our main objective is to become a one-stop shop for our customers requirements and deliver substantial economic returns to their businesses.

Over the years, our company has invested aggressively in educating and growing the market, benefits of which will be seen in the medium to long term. We have achieved Pan-India presence with an extensive network and are further expanding our distribution footprint. We also have presence in overseas markets, catering to higher global demand for tread rubber. All these initiatives are expected to give ETL the platform from which we can achieve success in expanding our business.

During the FY 2025-26 we have marked our presence in global markets such as United States, Mexico and South Africa. New investments were carried out to improve the quality, consistency and reduced cost of operations. The company further invested in new moulds for fresh patterns to cater domestic and export markets.

Risks and Concerns

Risks and opportunities are inevitable and inseparable components of all businesses. The Companys Directors and management take proactive decisions to protect stakeholder interests. The Company has in place a Risk Management Policy covering risk, risk exposure, potential impact and risk mitigation process. Major risks identified by the business and functions are systematically addressed through mitigating actions on continuing basis. These are monitored and reviewed by the board.Various departmental heads meet regularly to identify processes which are exposed to risks.

The board, periodically reviews the risks in the organization, identifies new risk areas, develops action plans and monitors and reports any deviations if any, from the policy.

The Companys performance primarily depends on the performance of the tyre replacement market. This market has several growth levers like growth of the economy, development of infrastructure, commercial vehicle sales and other trends relating to the transportation sector. The Companys Board of Directors perceives the following risks as current high risks areas:

& Financial Risk

In the course of our business activities, financial risks may arise from changes in interest rates, exchange rates, raw material prices, or share and fund prices The financial risks are managed in accordance with the risk management policy/practices. We use cash and carry, advance payments and bank guarantees to mitigate credit risk on account of material supplied to customers and payments received. There is an ongoing follow-up, which arrests any delay of payments from customers.

& Fluctuation in Raw Material Price and Other Input Costs

Risks can arise due to unexpected changes in commodity prices, which are following the global move can impact margins. We purchase a variety of raw materials and products, which we use in our production. Major risks could arise from a few raw materials, which we use such as Natural Rubber, Synthetic Rubber and Carbon Black. The Company manages this by actively managing the sourcing and private purchases.

As we import many categories of products, we are also exposed to foreign currency fluctuation, which could lead to a significant fluctuation in these raw material costs. We have maintained raw material inventories to mitigate this risk, which adversely impacted working capital and put pressure on interest costs. We generally factor in normal variations of raw material prices and input costs when fixing product prices with customer but any exceptional fluctuations in input costs combined with market pricing patterns may have an adverse impact on profitability.

& Changes in Governments Policies

Unanticipated changes in Government policies may affect the companys financial position.

& Operational Risk

Preventive maintenance is carried out periodically to achieve increased machine availability. Adequate inventory of stocks at each stage of operation is maintained to run production schedules uninterrupted.

& Product Risk

Research and development efforts are undertaken to continuously develop new products categories and expand the portfolio, along with improved service and value to our customers.

Internal Control System and their Adequacy

The company has implemented suitable controls to ensure the achievement of its operational, compliance and reporting objectives. The Company has adequate policies and procedures in place for its current size as well as the future growing needs. The Company has a well-defined and structured internal control mechanism, commensurate with the size and nature of the business and complexity of its operations. Internal audit is conducted periodically to provide comprehensive risk-based combined assurance plan.

These policies and procedures play a pivotal role in the deployment of the internal controls. They are regularly reviewed to ensure both relevance and comprehensiveness, and compliance is ingrained into the management review process. The company follows stringent procedures to ensure accuracy in financial information recording, asset safeguarding from unauthorised use, and compliance with statutes and laws. All employees adhere to high standards of ethical conduct inspired by formally stated and regularly communicated policies.

The internal control is supplemented by an extensive audit by internal and external audit teams and periodic review by the top management, Audit Committee and Board of Directors. The Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations. During the year, the Company has taken steps to review the adequacy and operating effectiveness of internal controls.

Nonetheless, your Company recognises that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audits and review processes ensure that such systems are reinforced on an ongoing basis. The statutory auditors, as part of their audit process, carry out a systems and process audit to ensure that the ERP and other IT systems used for transaction processing have adequate internal controls embedded to ensure preventive and detective controls.

During the period, external agencies were appointed as internal auditors. The internal audit reports were reviewed quarterly by Audit Committee as well as by the Board. Internal audit supports in assessment of Internal Control Systems and identification of other important issues as a powerful tool for risk control and governance. The system has designed to adequately ensure the reliability of financial and other records for preparing financial information and other data and for maintaining accountability of our assets. Further, the Board reviews the effectiveness of the Companys internal control system. Further Secretarial Audit is applicable for the company and the auditors evaluates legal and compliance issues.

The Directors and Management confirm that the Internal Financial Controls (IFC) are adequate with respect to the operations of the Company, evaluations and reinforcement actions were taken for better controls. The external auditors have evaluated the system of internal controls in the Company and have reported that the same is adequate and commensurate with the size of the Company and the nature of its business. A report of Auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of Internal Financial Controls is annexed with the Auditors report.

Operational Performance

Besides the products for trucks and busses which are the major customer for the Company as well as competitors we have also developed specialised compound formulation for the growing LCVs, cars and two wheeler markets.. With the mining industry opening up, the Company which is dominant in this sector hopes to get good growth opportunities. With the reduction in Chinese low cost tyres in the market the demand for retreaded tyres is also expected to grow further.

With the demand for services over products growing up, most of the tyre manufactures have started offering tyre management services for various fleets. Our company has also started supporting some of those tyre manufacturers who do not have retreading business in retreading their one time used tyres. Besides this the Company has its own fleet management service for selected customers with pay-per kilometre model.

Financial Performance

Overall, the financial performance has improved from loss of Rs.(313) lakhs in FY 2024-25 to profit of Rs.16 lakhs in FY 2025-26. This has significantly improved the cash from operations to Rs.240 lakhs in FY 2025-26 from Rs.46 lakhs in FY 2024-25. Also the company has increased investments in capital assets during the FY 2025-26 which will result in better operational performance in the coming years.

The Company continues to undertake cost saving initiatives and is moving into more profitable areas of business, based on higher value-addition to customers.

Significant financial highlights in Financial Year 2025-26 are as follows;

^ Revenue

Total Revenue reported Rs. 6275.95 lakhs compared to the previous years figure of Rs.6062.56 lakhs. Revenue has increased by 3.5%. Revenue increased due to increase in export during the financial year.

& Earnings Before interest, Tax, Depreciation and Amortization (EBITDA)

During the financial year 2025-26 EBIDTA has increased to Rs. 113.3 lakhs when compared to the previous years figure of Rs. (48.44) lakhs.

& Profit Before Tax (PBT)

PBT stood at Rs.(199.21) lakhs in the current financial year compared with Rs. (378.41) lakhs in the previous financial year

Profit After Tax (PAT)

PAT stood at Rs.8.56 lakhs in FY 2025-26 as compared to Rs. (303) lakhs in the previous FY 2024-25. & Earnings Per Share (EPS)

EPS in FY 2025-26 increased to Rs. (0.16) from Rs. (5.79) in previous FY 2024-25.

Key Financial Ratios

Key financial ratios, are as given in Note No. 39 of the Financial Statement.

Human Resource Development and Industrial Relations

The Company recognises that a committed, empowered and thinking team is the most important asset to maintain the companys progress and to retain its leadership position in the industry. Development and retention of talent, providing employees with cross functional experiences, extending enriched learning, an array of awards and recognition programme, and supporting personal and professional aspirations are some leading HR practices being followed at the Company. Hiring of apt talent and ensuring role optimization to improve efficiencies has been a key focus area. The Company recognizes the need for change management and talent management throughout the business and their criticality to its future growth and success as any other element of its commercial strategy.

We pursue management practices designed to enrich the quality of life of our employees, developing their potential and maximizing their productivity. Cordial and harmonious relationship is maintained between the management and employees at every location. We continue to organize various training programs with experts engaged to interact with our employees at various levels. A significant emphasis is placed on training personnel, increasing their skill levels, and fostering ongoing employee engagement and recognition with a holistic development perspective. In addition to casual workers, the company had 179 permanent employees as on March 31,2026.

Cautionary Statement

Statements in this Annual Report, particularly those that relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations, may constitute ‘forward-looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.

Important factors that could influence the Companys operations include economic developments within the country, global and domestic demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors such as litigation and industrial relations. The Company assumes no responsibility in respect of the forward-looking statements, which may undergo changes in future on the basis of subsequent developments, information or events.