EL Forge Ltd Management Discussions

Overview

The objective of this report is to convey the Managements perspective on the external environment and forging industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities and internal control systems and their adequacy in the Company during the FY 2025-26.

This should be read in conjunctions with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Integrated Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS)complying with the requirements of the Companies Act, 20213 as amended and regulations issued by the Securities and Exchange Board of India (‘SEBI) from time to time.

Global Economy

In FY26, the global economy experienced moderate growth, influenced by persistent inflationary pressures, tight monetary policies in developed markets, ongoing geopolitical uncertainties, and conflicts in the Middle East toward the end of the financial year. These developments contributed to volatility in global oil and energy prices, leading to higher input costs for businesses and inflationary pressures in energy importing economies. Amid these challenges, global growth remained resilient at ~ 3.3%.

The latest World Economic Outlook reports slowing global growth and renewed inflationary pressures. Policies need to be agile, carefully manage the trade-offs involved in ramping up defense spending, and lay the foundation for a sustained recovery.

Global growth is projected at 3.2 percent for 2027, revised slightly up since the October 2025 World Economic Outlook. Technology investment, fiscal and monetary support, accommodative financial conditions, and private sector adaptability offset trade policy shifts. Global inflation is expected to fall, but US inflation will return to target more gradually. Key downside risks are re - evaluation of technology expectations and escalation of geopolitical tensions. Policymakers should restore fiscal buffers, preserve price and financial stability, reduce uncertainty, and implement structural reforms.

Indian Economy

Indias economy hit its highest growth in three years, with FY26 Gross Domestic Product (GDP) expanding 7.7 percent and Gross Value Added (GVA) at 7.9 percent, surpassing both FY24 and FY25, highlighting the economys strengthening momentum heading into an uncertain FY27 due to the lingering effects of the war in West . Source: Press Information Bureau (PIB)

Private consumption and capital formation both hit a three year high in FY26 at 7.7 percent and 8.2 percent respectively, signalling a more balanced growth story even as government spending eased slightly from the previous year. Gross fixed capital formation (or investment) maintained its share at roughly 32 percent of GDP for the third straight year, while the import share declined to 23.7 percent. - Forbes India.

While there are challenges to the near-term outlook, Indias growth remains stronger than that of other major economies . While global trade headwinds persist, growth is expected to continue at a measured pace, aided by policy reforms and a supportive interest-rate environment. The country is seeking to navigate rising trade uncertainty through gradual market diversification and the pursuit of new trade partnerships.

FY26 for the automotive industry evolved as a "tale of two halves". In the first half of the year, demand relatively muted, consumer sentiment remained cautious, and growth was largely supported by underlying demand trends and festive build-up. In September 2025, the rollout of GST 2.0 marked a structural shift, simplifying tax slabs and reducing GST on small cars and compact SUVs to 18% while eliminating cess. This led to lower prices, improved affordability, and a sharp revival in demand, especially during the festive season and thereafter. The second half witnessed a strong rebound in volumes and dealer retail momentum, clearly shifting the trajectory of the industry. As a result, the Passenger Vehicle (PV) segment recorded sales of ~47 lakh units in FY26, reflecting about 8% year- on-year growth. The PV market also saw continued premiumization, with utility vehicles accounting for over 60% of total sales, indicating a structural shift in consumer preferences. Demand remained relatively strong in mid and premium segments, while entry level vehicles faced affordability challenges, particularly in the earlier part of the year before GST-led price corrections. Government initiatives such as the Production Linked Incentive (PLI) scheme and PM E - Drive (formerly FAME scheme) continued to support investments in advanced automotive technologies and electric mobility. Electric passenger vehicles maintained strong growth momentum, with industry volumes nearing ~2 lakh units and penetration levels at ~4% of total PV sales in FY26, supported by policy incentives, new launches, and expansion of charging infrastructure. 12.0% 10.0% 8.0% 7.6% 6.0%

Outlook

The Indian economy is projecting a measured but robust real GDP growth of 6.6% to 7.0% in 2026. While the economy is moderating from last years historic highs, driven by ongoing global tariff uncertainties and Middle East geopolitical shocks, it remains one of the fastest-growing major economies globally.

Headline inflation is hovering comfortably near the Reserve Bank of Indias (RBI) target at around 4%.

Against the backdrop of turbulent global environment, the Indian economy is expected to continue to demonstrate resilience in FY26 supported by robust sectoral performance and improving consumption trends. The RBI projects 6.5% growth in Indias real GDP in FY26 supported by strong momentum in domestic demand amid cooling food inflation, tax benefits and lower borrowing costs.

External factors such as rising US tariffs and global trade pushback will be the headwinds. The uncertain and volatile global environment could further defer the much-anticipated revival in private capex The India Development Update says that despite significant downside risks stemming from the conflict, the economys strong macroeconomic fundamentals and policy buffers offer some insulation. Substantial foreign reserves, low inflation, predominantly rupee-denominated public debt, a healthy financial sector, and trade diversification efforts play a major role in providing resilience from external headwinds.

The Vikas Bharat Scheme of the Govt.of India ensures investment and creation of jobs at scale in priority sectors like energy and infrastructure, manufacturing, tourism, health care and agribusiness,

Indian Auto Industry

Indias auto components industry is a rapidly expanding global powerhouse, currently contributing 2.3% to the national GDP and accounting for about 35% of the manufacturing GDP. The sector achieved a turnover exceeding Rs. 6.73 lakh crore (US$ 88.20 billion) and is heavily bolstered by massive domestic demand and a booming aftermarket.

Opportunities in Auto Industry are expanding in India as

a) focus shifting on electric cars to reduce emissions.

b) Government aims to transform India into an R&D hub.

c) India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles.

d) The electric vehicles industry is likely to touch Rs. 20,00,000 crore (US$ 234 billion) and will create around five crore jobs by 2030.

e) India offers 10-25% operational cost savings for auto firms compared to Europe and Latin America.

f) The automobile sector attracted Rs. 2,64,456 crore (US$ 39.7 billion) in equity FDI Inflow between April 2000 - December 2025.

g) India is set to become the largest EV market by 2030, with an investment potential exceeding US$ 200 billion over the next five years.

h) The PLI scheme for automobiles and auto components received Rs. 2,818.9 crore (US$ 325.6 million) in FY26.

i) Automotive Mission Plan 2016-26 is a mutual initiative by the Government of India and the Indian automotive industry to lay down the roadmap for the development of the industry.

Opportunities & Threats

• The government has developed numerous programs to help manufacturers, such as the Production Linked Incentive (PLI) Scheme, which is a cornerstone of the governments endeavour to achieve an Atmanirbhar Bharat The schemes goal is to stimulate domestic manufacturing in strategic and emerging areas, improve the cost competitiveness of domestically-made goods, and increase local capacity and economies of scale

• Domestic producers are given a preference in the defence sector which will provide new opportunities to the industry .

A faster shift to electric vehicles, will have a impact on our business • Several new companies are entering the market, and existing rivals in adjacent product categories are also increasing their offerings. Under utilisation of the installed capacity resulting in increasing fixed costs of the company, growing cost of key raw materials may impact revenues and profitability of the company.

Risk Management

The Company has a well-devised risk management process aimed at identifying, prioritizing, mitigating and monitoring risks. The key risks impacting its business include economic, foreign exchange, raw material, technology, funding, talent and cyber security risks. The Company has undertaken measures to mitigate these risks.

Commodity Price Risk

The Steel prices have increased substantially during the year and continues to be on the upward spiral. The increases are compensated from customers. Other input costs are also increasing and the company deals with obtaining compensation from customers on a case to case basis.

Financial and Operational Performance:

The Company has undertaken numerous operational initiatives to improve performance and reduce material loss. Undertaken impactful actions to make its quality control process robust and reduce cost of production. We have implemented strict control on raw material purchase and implemented productivity measures, both manpower and machine productivity. Also a number of cost control and cost management measures were initiated during the periods of slowdown this year to improve the financial performance.

Key Financial Ratios:

In accordance with the SEBI (listing Obligations and Disclosure Requirements) Amendment Regulations, 2018 the Company is required to give details of significant changes (changes of 25% or more as compared to immediately previous financial year) in financial ratios are as follows.

Manpower Development in HR and Industrial relations:

Over the years Company has maintained consistency in its efforts in training and developing its human resource with a view to face the competition. Industrial relations were in order throughout the year and there was satisfactory co-operation between the management and the workers in working towards the overall objectives of the Company.

Financial Review (Amount in Rs. Lakh Lakhs)

Revenues

The revenues are from the sale of forgings. During the year there has not been any income from sale of land.

Costs

Material Costs :The material cost for the year was at 57.83% of the sale value.

Staff Cost :There is a marginal increase in the staff costs in order to maintain and retain talent with the company.

Other expenses :The management has made constant efforts to control costs .

Depreciation :

The depreciation has been charged according to the provisions of the companies Act, 2013 Summary of Balance Sheet is given below : (Amount in Rs. Lakh Lakhs)

Summary of Cash Flow Sheet is given below : (Amount in Rs. Lakh Lakhs)

Human Resources

El Forge has always been a people driven Company and its employees remain its most valuable asset. Our employees have always extended full cooperation and support in good as well as difficult times, and have unstintingly helped to deliver on all our commitments. The Human Resources practices at your Company empowers the employees through greater knowledge, opportunity, responsibility, accountability and reward. Emphasis is laid on identifying & nurturing talent. Continuous improvement techniques are followed for betterment of the skills in the organisation by implementing TQM & other training programs and there exists an excellent system of assessment of the employees based on the sound HR practices.

During the year under review, there were 146 employees on the rolls of the company.

Foreign Exchange Risk

The Company is exposed to foreign exchange risks on account of its exports. Your Company has formulated a hedging strategy for foreign currency exposures.

Internal control systems and their adequacy

The Company has an internal control system that is geared towards achieving efficiency in operations, optimum utilisation of resources effective monitoring and applicable laws and regulations. The have in place adequate compliance with all company a proper and term an operations provide reason of internal controls commensurate with its size nature to enable assurance that all assets are safeguarded, transactions are authorised, recorded and stated properly and applicable statues and corporate policies are duly complied with.

Cautionary Statement

The information and opinion expressed in this Report may contain certain forward-looking statements, which the management believes are true to the best of its knowledge at the time of its preparation. The management shall not be liable for any loss, which may arise as a result of any action taken on the basis of the information contained herein. Prior written permission of the Company may be obtained for furnishing this information to any person