Electrotherm (India) Ltd Management Discussions

The objective of this report is to convey the Management’s perspective on the performance of the company for financial year 2024-25. This Report should be read in conjunction with the Company’s financial statements, the schedules and notes thereto and other information included elsewhere in the Annual Report 2024-25. The Company’s financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") complying with the requirements of the Companies Act, 2013, as amended and regulations issued by the Securities and Exchange Board of India ("SEBI") from time to time.

INDIA OUTLOOK

India’s economic outlook for 2025-26 remains positive, with projecting robust growth despite global uncertainties. Real GDP growth is expected to be around 6.3% to 6.5% and expected to retain its position as the fastest-growing major economy. While there are some potential challenges, growth outlook for FY 2025-26 is likely to be supported by resilient domestic drivers, India’s strong domestic demand, government initiatives like personal income tax cuts and the RBI rate cuts, and digital transformation are expected to help the country navigate the global uncertainties and maintain a positive growth trajectory. The Union Budget announced cuts in personal income tax amounting to 1 trillion. Consumer confidence has shown an uptrend, and the RBI’s policy easing and liquidity support will strengthen private consumption, driven by rising real incomes that are helped by moderate inflation, recent tax cuts and a strengthening of the labour market. Investment will be supported by declining interest rates and substantial public capital spending. Inflation will remain contained at around 4% as economic activity grows around trend.

The Government of India remains focused on fiscal consolidation, employment generation, and boosting capital investment. Central government capex is budgeted at 11.2 trillion for FY 2025-26, versus the revised estimate of 10.2 trillion for FY 2024-25, this depicts the share of capital expenditure in central government spending has continued to rise, playing a critical role in eventually contributing to industrial development.

India, the world’s second-largest steel producer recorded a robust steel consumption growth of 11.5% in FY 2024-25 with steel demand expected to grow by 8% in 2025. The consumption scenario in India was robust, however, domestic steel pricing was under pressure in FY 2024-25 amidst high lower priced imports attributed to weak global prices. India’s steel demand is expected to reach 200-210 million tonnes by 2030, driven by strong expansion in infrastructure, industrialization, housing, and renewable energy.

BUSINESS OVERVIEW

Electrotherm (India) Limited ("Electrotherm") a reputed engineering and steel company, remains a most trusted brand for steel melting equipment. The company’s core philosophy in business is customer satisfaction through high-quality products and excellent customer service has always put its products on preferred segment. The company’s steel facilities are well connected to rail, roads and ports, which provides natural competitive advantages in terms of reliable and cost-efficient sourcing of raw materials and delivery of finished steel products to the market. The company focuses on efficient utilization of resources and cost optimization during FY 2024 25 included a focus on regional sourcing of raw materials reducing logistics costs while the Company also optimized the usage of waste heat generated from DRI plant which reduced to lower energy cost.

A. ENGINEERING & TECHNOLOGIES DIVISION:

The division remains top-notch brand in India having export footprints in over 73 countries. What make Electrotherm ahead of other manufacturers is its commitment to high quality products. The company has a quality chain where all the parts of operations are bound together, from raw material sourcing to processing, from research and development to production, from stage-wise quality inspection to delivery. Every time the company delivers an equipment, it is custom-designed satisfaction, and this builds a long and mutually rewarding industrial relationship. We continue to monitor the performance of our equipment through frequent client interactions and feedback. This enables us to continuously upgrade our abilities and satisfy even the most demanding customer.

The steel sector’s relentless pursuit of sustainable practices and reduced carbon footprint has led to the adoption of eco-friendly production techniques, wherein Electrotherm sets a new standard in lower energy consumption, contributing towards greener environment and reducing direct expenses of its customers. Entire product range of the company equipment are the least energy consumers while the company manufactured most effective Air pollution Control Equipment. Our engineers & technicians are most valuable assets in the company their expertise in power electronics and material science are driving innovation.

In India, induction furnace market size is forecast to increase at CAGR of 7.2% for next five years, the Induction Furnace Market is witnessing significant growth, driven by the escalating demand for steel and alloys in India’s burgeoning infrastructure and manufacturing sectors. The Equipment as a Service business model is gaining traction, enabling smaller enterprises to access advanced induction furnace technology without substantial upfront investment.

The induction technology provides high thermal efficiency, precise temperature control, and cost optimization. The significant increase in demand for steel and alloys in India serves as the primary market driver. Induction furnaces’ ability to achieve precise hardness testing and maintain deep conditions throughout the melting process is a significant advantage for manufacturers also provides cost optimization by reducing the need for extensive post-production processing.

B. SPECIAL STEEL DIVISION:

The TMT steel bar market size is forecast to increase globally at a CAGR of 4.3% in upcoming five years being highly competitive market regionally. The Indian ductile iron pipes market is estimated to grow at a CAGR of 12.50%.

Driven by the government projects, the DI Pipe industry witnessed demand surge in from first half quarter of FY 2023-24 to first half of FY 2024-25. However, the industry has been witnessing a declining trend since 3^rd quarter of FY 2024-25 due to slowed Government spending on water supply projects. Notwithstanding the current subdued demand outlook, the medium to long term outlook is optimistic due to ongoing Government projects, including a higher budget allocation for the Jal Jeevan Mission in FY 2025-26, Smart Cities Mission, Narmada Valley Development Project and upcoming river linking projects. The Union Budget 2025-26 has allocated 74,226 crore for the Department of Drinking Water and Sanitation, with a 67,000 crore is earmarked for the Jal Jeevan Mission, which aims to provide tap water connections to all rural households.

The Indian TMT bar and steel industry is poised for growth driven by infrastructure development, urbanisation, and economic expansion. The esteemed infrastructure projects like Bharatmala Pariyojana, Sagarmala, a freight corridor and many others including Smart Cities Mission will give sustainable growth to steel industry. Government initiatives on infrastructure and technological advancements present significant opportunities, while there are challenges in this segment such as fluctuating raw material prices, stringent environmental regulations, and global competition.

Rising demand for Epoxy Coated TMT Bar in coastal region is the upcoming trend in the market. These bars offer superior qualities making them ideal for long term structures in bridges, dams, industrial complexes, commercial and residential buildings. Electrotherm possess one of the kind units having fully integrated manufacturing facilities for epoxy coated TMT bars and remains a market leader in Gujarat for the supply of high-quality TMT bars.

In financial year 2024-25 finished steel and pipe prices were on declined trend, however, the Special Steel Division of Electrotherm could maintain its topline in line with previous financial year with increased capacity utilization and sales of value-added products like epoxy coated TMT bars and Cut & Bend (C&B) TMT bars.

C. ELECTRIC VEHICLE DIVISION:

FY 2025 with 1.96 million units and 17% YoY growth has turned out to be another record fiscal of electric vehicle sales in India. The two-wheeler segment, which comprises scooters, motorcycles and mopeds, is the biggest contributor to India EV Inc. It is also the most affordable of all the segments which includes e-three-wheelers, passenger vehicles and commercial vehicles.

At nearly 1.15 million units retailed, the electric two-wheeler segment registered strong 21% YoY growth (FY 2024: 948,508 e2Ws). The Indian electric two-wheeler industry will be looking forward to a new fiscal with much optimism even though the subsidy levels have been watered down. Most of the leading OEMs have outlined plans to launch new products. This, along with the increased coverage of EV charging infrastructure, both private and public, will act as a catalyst for growth.

At Electrotherm, with a strong focus on technological innovation, new product development, and after-sales services, the Company emerged as a preferred brand in many parts of India. Riding on its past experiences and new technological advancements, today the electric vehicle brand of the Company "Yo Bykes" has over one and a half lac satisfied customers and a string of dealerships and servicing networks across the country and the future for "Yo Bykes" is full of learning and infinite possibilities.

FINANCIAL LIABILITY STATUS

Originally the Company had 19 lenders and ten of them have assigned their debts to Edelweiss Asset Reconstruction Company Limited ("EARC"), Invent Assets Securitisation & Reconstruction Pvt. Ltd. ("Invent ARC") and Rare Asset Reconstruction Limited ("Rare ARC"). As a part of debt resolution with lenders, the Company has One Time Settlement arrangement, wherein entire settlement amount had been paid to ICICI Bank, UCO Bank, Vijaya Bank, Syndicate Bank, International Finance Corporation, Standard Chartered Bank, Union Bank of India (including debt of Corporation Bank), Central Bank of India and Invent ARC (for debts of Oriental Bank of Commerce). Except pending settlement with Rare ARC (assignee of Indian Overseas Bank), the Company has entered into revised settlement / restructuring with all three ARCs.

Segment-Wise Performance:

The business segment of the Company comprises of Engineering & Technologies Division, Special Steel Division and Electric Vehicle Division. The Segment wise performance of the Company for all the three divisions for the year ended on 31^st March, 2025 is as under: (Rs. In Crore)

Particulars</b>	Engineering & Technologies Division	Special Steel Division	Electric Vehicle Division
Revenue from operations	1,194.50	2,931.83	24.91
Segment Profit / (Loss) Before Finance Cost & Tax	158.77	234.64	(10.07)
Capital Employed	266.61	822.87	20.65

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Revenue from operations:

The revenue from operations of the Company for the financial year ended on31 ^st March, 2025 was Rs. 4115.37 Crore as compared to Rs. 4271.50 Crore of previous financial year.

Cost of Materials consumed including purchase of traded goods:

The cost of materials consumed including purchase of traded goods for the financial year ended on 31^st March, 2025 was Rs. 2779.35 Crore as compared to Rs. 2988.63 Crore of previous financial year. Depreciation and amortization for the financial year endedon31 ^st March, 2025 is Rs. 44.39 Crore as compared to Rs. 45.23 Crore of the previous financial year.

Finance Costs:

Finance costs for the financial year ended on 31^st March, 2025 is of Rs. 45.52 Crore as compared to Rs. 59.82 Crore of previous financial year. Indian Overseas Bank had classified the loan account of the Company as non-performing assets during August 2011, which was subsequently assigned to Rare Assets Reconstruction Limited ("Rare ARC"), but with whom the settlement terms have not been entered into. Further, the Hon’ble Debt Recovery Tribunal (DRT), Ahmedabad has passed judgment against Company & personal guarantors for recovery along with future interest on the amount due @12.75% p.a. with monthly rests. As per the details available with the company, the amount of unprovided interest, on approximate basis, on the said loan is Rs. 131.80 Crore for the year under consideration and the total amount of such unprovided interest till 31 ^st March 2025 is Rs. 916.51 Crore.

Profit / (Loss) Analysis:

The Profit before Finance Costs, Depreciation and Amortisation was Rs. 379.59 Crore as compared to Rs. 424.48 Crore of previous financial year. The net profit for the current financial year (excluding exceptional items & deferred tax) was Rs. 289.68 Crore as compared to net profit of Rs. 319.43 Crore of previous financial year.

Key Ratios:

Pursuant to Regulation 34 of the SEBI LODR Regulations, 2015, the details of the key financial ratios of the Company and comparison to previous year has been provided in Note No. 51 to standalone financial statements of the Company.

RISK AND CONCERNS

The Company has established a well-defined process of risk management, wherein the identification, analysis and assessment of the various risks, measuring of the probable impact of such risks, formulation of risk mitigation strategy and implementation of the same takes place in a structured manner. Though the various risks associated with the business cannot be eliminated completely, all efforts are made to minimize the impact of such risks in the operations of the Company.

At present, there are elements of risks in the nature of various legal cases including for recovery of dues and attachment of certain properties which may threaten the existence of the Company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Internal Control System is designed to prevent operational risks through a framework of internal controls and processes. The Company has in place adequate system of internal control and internal audit commensurate with its size and the nature of its operations. Our internal control system ensures that all business transactions are recorded in a timely manner, resources are utilized effectively and our assets are safeguarded. Internal Audit is conducted by experienced Chartered Accountants in close coordination with company’s Finance, Accounts and other departments of the Company. The findings of the Internal Audit team are discussed internally with the Executive Directors as well as in Audit Committee Meetings and their suggestion for improvement & strengthening is reviewed by the Audit Committee / Board. The Company is in process to strengthen its internal control system by implementing Standard Operating Procedures (SOP) for all its major areas under the guidance of Audit Committee / Board.

DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

The employees are the most valuable assets of Electrotherm. The Company on regular basis takes initiatives to provide training to its employees on environment, health and safety and also provide training on soft skill up-gradation to improve their skills as may be relevant to the respective functions. We are sincerely grateful to all employees for their close and constructive cooperation in the year 2024-2025. We were able to achieve progress against many strategic challenges and continuing that partnership will be a key to implementing the significant changes announced under Human Resource Development Strategy. The Company also hire contract labour on time-to-time basis for success and growth of the Company. As on 31^st March, 2025, there were 2610 Permanent employees employed by the company. Further, Human Resource Development organizes an outing for all on-roll employees to boost morale, strengthen team bonds and provides a refreshing break from the usual work environment which creates a memorable experience that enhances employee engagement and fosters a positive work environment. During the year 2024-2025, we could

(i) achieved 6.39 training man-days per employee covering 81.7% employees,

(ii) trained 41 customer service engineers on product knowledge & automation

(iv) achieved overall skill % of plant @ 67%

(v) contractual manpower pipeline is more skilled with 30 Level-3 & 148 Level-2 operators under various skill sets.

The Company develops the training programs by assessing required skills and imparting such skills to fulfil the skill gaps which make directly contribute to the human & machine efficiency & to our overall business performance. On TEI front, employee participation is 100% & our Kaizen team Maestro won Gold Trophy at ICQCC 2024 organized by SLAAQP Sri Lanka, held at Colombo.

The Human Resources Development Strategy provides transparency on the company’s employee metrics and how we are translating our strategic priorities into action. It helped to achieve the goals in organizational culture; diversity and inclusion; talent and development; talent acquisition; compensation and benefits; managing change; and collaboration with our social partners.

For Electrotherm, investing in our employees remains of paramount importance. The success of Human Resource Development Strategy will depend in part on our ability to retain, motivate, develop, and continue to attract employees with the skills and experience to help the challenges and make the most of opportunities.

HEALTH & SAFETY

We value the human life and believe, all injuries are preventable. Our aim is zero accident. We are committed to conduct all our operations in a manner, so as to avoid harm to employees, contractors, workmen, visitors, local public and the environment. This responsibility starts with each one of us.

The Company has made necessary arrangement to ensure that the employees and stakeholders are safe and comfortable at work place. We provide safe machines and need based Personal Protective Equipments to employees to reduce risk at work place. We create awareness among employees / vendors / contractors through training and partner to demonstrate our commitment and involvement, responsibility and accountability to achieve HSE performance and provide a safe and healthy work environment for all employees. During the year 2024-2025, we conducted 28 safety related training programs.

CORPORATE SOCIAL RESPONSBILITY (CSR)

The Company strives to be a socially responsible company and strongly believes in development which is beneficial for the society at large. We also wish to keep the environment clean and safe for the society by adhering to the best industrial practices, adopting best technologies and investing in greener initiatives, and so on. It is our intent to make a positive contribution to the society in which the Company lives and operates. CSR is an evolving business practice at Electrotherm that incorporates sustainable development into a company’s business model and leaving a positive impact on social, economic and environmental factors.

At Electrotherm our purpose is to improve the quality of life of the communities, we serve and we also believe in returning to the society, what we earn. We also focus majorily on rural development and environment friendly initiatives, providing healthcare facilities to nearby villagers, focusing on education, and much more. Our CSR approach stands for eradicating extreme poverty & hunger, health & sanitation, basic needs fulfillment (sharing & caring), ensure environment sustainability, animal welfare activities in nearby villages etc. Being Social cause, during the year 2024-25, the Company has undertaken ‘Oxygen Park’ Garden Development Project, in consultation with Ahmedabad Municipal Corporation (AMC), at South Bopal, Ahmedabad, Gujarat with aim to promote environment sustainability and enhance community well-being. The Company has also undertaken CSR activities related to provide medical / health care facilities through Shree Jalaram Abhyuday Sadbhavna Trust, Ahmedabad, by providing ‘Fresenius Kabi Apheresis Machine’ for medical treatment of children suffering from Thalassemia. The said trust focuses on improving the lives of children with blood disorders, particularly thalassemia. Further, the Company has also undertaken CSR activities related to promoting education and promoting & preventing health care through Vishv Umiya Foundation, Ahmedabad.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis detailing Company’s objectives, projections, estimates, expectations or predictions may be "forward looking statements" with the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include global and Indian demand supply conditions, finished goods prices, raw material availability and prices, cyclical demand and pricing in the Company’s principal markets, changes in government regulations, tax regimes, economic developments within India and the countries within which the company conducts its business and other factors such as litigation.