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 2024-25.

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

The International Monetary Fund (IMF) projects global economy to grow at 2.8% in CY2025, significantly lower than the historical (2000-19) average of 3.7%, largely due to increasing trade tensions and surge in policy uncertainty. Weaker global economic growth could lead to slowdown in global trade, investment, and overall economic activity, potentially impacting business sentiments, employment conditions and consumer spending. With growth varying across economies and last-mile disinflation proving sticky, global central banks are likely to take varying paths of monetary policy.

The geo political risk remains elevated. With the outcome of the US election , inflationary trade and immigration policies are expected to slow the pace of credit easing. Bond yields have already moved up in response to the fears of mounting federal debt and higher inflation. Any major shift in tariffs in the US could trigger retaliatory measures.The forecast thereafter depends heavily on the pace of tariffs and whether we see a full-blown trade war erupt - Source KPMG Global Economic Outlook.

Indian Economy

During FY25, growth in real GDP (Gross Domestic Product) turned out to be much lower than anticipated, largely due to lower government spending and extreme heatwave conditions. In Q2- FY25, real GDP growth slowed to a seven- quarter low of 5.6%, led mainly by a substantial deceleration in industrial growth due to subdued performance of manufacturing companies, contraction in mining activity and lower electricity demand. In the subsequent quarter, however, growth in real GDP recovered to 6.2% supported by robust rural demand and increased government expenditure.

The second advance estimate of the National Statistical Office puts Indias real GDP growth at 6.5% for FY25 (compared to 9.2% in FY24), reflecting strong recovery in H2-FY25. On the demand side, private consumption expenditure is estimated to grow by 7.6% in FY25 driven by a rebound in rural demand and pick up in government expenditure in H2-FY25. While rural consumption demand remained resilient, considerable slack in urban demand was observed due to factors such as high interest rates, elevated food inflation, subdued growth in inflation-adjusted salary levels, elevated unemployment levels and preemptive regulation-induced slowdown in retail credit growth. On the supply side, real GVA (Gross Value Added) is estimated to grow by 6.4% in FY25 (vs. 8.6% in FY24), mainly driven by strong recovery in the agriculture & allied sector and resilient services sector while growth in industrial sector moderated.

Outlook

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

On the inflation front, the RBI projects retail inflation at 4% in FY26 which will provide policy space for further rate cuts to support economic activity. Second advance estimates of agricultural production projects kharif and rabi food grain output to increase by 6.8% and 2.8%, respectively which suggests a benign outlook for food inflation. Moreover, according to the IMD (India Meteorological Department), south-west monsoon is expected to be ‘above-normal in 2025 which will support reigning in inflation. Upside risk to inflation, however, could emanate from global uncertainties leading to pressure on Rupee and imported inflation.

Indian Auto Industry

India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world. Indias annual production of automobiles in FY23 was 25.9 million vehicles. India has a strong market in terms of domestic demand and exports. In December 2024, the total production of passenger vehicles*, three-wheelers, two-wheelers, and quadricycles was 19,21,268 units.

In FY23, total automobile exports from India stood at 47,61,487. This sectors share of the national GDP increased from 2.77% in 1992-1993 to around 7.1% presently. It employs about 19 million people directly and indirectly.

India is also a prominent auto exporter and has strong export growth expectations for the near future. In addition, several initiatives by the Government of India such as the Automotive Mission Plan 2026, scrappage policy, and production-linked incentive scheme in the Indian market are expected to make India one of the global leaders in the two-wheeler and four-wheeler market by 2022.

To keep up with the growing demand, several auto makers have started investing heavily in various segments of the industry during the last few months. The automobile sector received a cumulative equity FDI inflow of about Rs. 3,22,015 crore (US$ 36.21 billion) between April 2000 - September 2024. India is on track to become the largest EV market by 2030, with a total investment opportunity of more than US$ 200 billion.

The Government of India encourages foreign investment in the automobile sector and has allowed 100% FDI under the automatic route.

One of the recent initiatives taken by the Government of India are:

The Centre has launched the PM E-DRIVE scheme with a budget of US$ 1.30 billion (Rs. 10,900 crore), effective from October 1, 2024, to March 31, 2026. The initiative aims to accelerate the adoption of Electric Vehicles (EVs), establish charging infrastructure, and develop an EV manufacturing ecosystem in India.

Government has introduced various schemes for promoting the Auto Industry in India especially for the EV sector. Some important schemes are Electric mobility promotion Scheme, production linked incentive scheme for Electric vehicles, incentives for electric vehicle purchases, FAME India Scheme where subsidy is provided to EV manufacturers etc.

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.

Particulars	2024-25	2023-24	Reasons for deviation
Inventory Turnover Ratio	45.79	34.03	Adjustments made in line with orders.
Trade Receivables Turnover Ratio	13.17	14.81	Change in Collection pattern
Trade Payable Turnover Ratio	8.98	8.57	Payments made as per credit terms.

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. Lakhs)

Particulars	2024-25	2023-24	Increase / (Decrease) in%
Income
Revenue from operations (incl.excise duty )	7612.96	6832.24	11.43%
Land Income
Other income	58.76	40.52	45.01%
Total	7671.72	6872.76	11.63%
Expenditure Cost of materials and services consumed	4414.00	3771.53	17.03%
Changes in inventories of finished goods, stock-in-trade and work-in-progress	(2.05)	84.04	-102.44%
Total	4411.95	3855.57	14.43%
Cost of Land Sold
Employee benefits expense	1103.03	991.01	11.30%
Finance costs	47.92	47.84	0.18%
Depreciation and amortisation expense	183.80	184.20	-0.22%
Other expenses	1695.24	1487.79	13.94%
Total	7441.94	6566.41	13.33%
Profit/ (Loss) before exchange gain/ (loss) on swap contracts, exceptional items and tax	229.78	306.35	-24.99%
Exchange gain/ (loss) on swap contracts	0	0	0
Profit/ (Loss) before exceptional items and tax	229.78	306.35	-24.99%
Exceptional Items [ Income / (Expenses) ]	0	150.00	-100%
Profit/ (Loss) before extraordinary items and tax	229.78	156.35	46.96%
Extraordinary Items	0	6955.85	-100%
Profit/ (Loss) before tax	229.78	7112.20	-96.77%
Tax expense:
(a) Current tax expense	0	0	0
(b) (Less): MAT credit	0	0	0
(c) Short / (Excess) provision for tax relating to prior years	0	0	0
(d) Net current tax expense	0	0	0
(e) Deferred Tax	0	0	0
Tax expense	0	0	0
Profit for the year from continuing operations	229.78	7112.20	-96.77%
Basic Earning per Share	1.13	34.99
Diluted Earning per share	1.13	34.99
Face Value (Rs.).	10	10

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 57.5% 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. Lakhs)

Particulars	As At 31/03/2025	As At 31/03/2024	Inc/(Dec) %
Source of Funds
Share holders Funds	2477.75	2247.97	10.22%
Non current Liabilities	468.98	468.98	-%
Current Liabilities	975.34	1078.55	-9.57%
Total	3922.07	3795.50	3.34
Application of Funds
Fixed Assets	2143.20	2200.78	-6.25%
Investments	0.01	0.01	44.60%
Loans & other Non Current Assets	170.17	164.94	24.87%
Current Assets	1608.69	1429.77	16.35%
Total	3922.07	3795.50	3.34%

Summary of Cash Flow Sheet is given below :

(Amount in Rs. Lakhs)

Particulars	2024-25	2023-24
Profit / Loss (-) for the year	229.78	7112.20
Operating profit before working capital changes	424.30	7320.14
Cash generated from operations	240.48	121.96
Income tax paid	0.00	0.00
Net cash flow from operating activities [A]	240.48	121.96
Net cash flow from investing activities [B]	-89.02	-8.37
Net cash flow (used in) financing activities [C]	-47.92	-47.84
Net cash Inflow [A+B+C]	103.54	65.75
Opening cash and cash equivalents	298.30	232.55
Closing cash and cash equivalents*	401.84	298.30

 

1 Inventory	FY 2024-25	FY 2023-24
Opening	167.42	234.14
Closing	165.10	167.42
Total	332.52	401.57
Average	166.26	200.78
Turnover	7,612.96	6,832.24
Ratio	45.79	34.03

 

2 Trade Receivable	FY 2024-25	FY 2023-24
Opening	544.23	378.32
Closing	612.14	544.23
Total	1,156.37	922.55
Average	578.19	461.27
Ratio	13.17	14.81

 

2 Trade Payable	FY 2024-25	FY 2023-24
Opening	4,913.19	4,041.96
Closing	845.92	749.15
Total	849.64	845.92
Average	1,695.56	1,595.08
Ratio	5.80	5.07

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, account-ability 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 forwardlooking 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