Enkei Wheels India Ltd Management Discussions

Amid a challenging global economic landscape and deteriorating geopolitical conditions, the Indian economy achieved remarkable growth. The Indian economy has weathered recent geopolitical upheavals, including the prolonged Russia- Ukraine war resilient consumer spending and significant public investment will largely counter the effect of higher US tariffs. According to the National Statistics Office (NSO), the Ministry of Statistics and Programme Implementation (MOSPI), Indias growth trajectory remains favourable, with real GDP estimated to grow by 7.4% in FY 2025-26 from 6.5% during FY 2024-25. In 2025, India surpassed Japan to become the fourth-largest economy in the world, with a size of $4.18 trillion.

The government has set an ambitious vision, targeting a US$ 30-35 trillion developed economy by 2047. Continued government spending on infrastructure, advancing digital infrastructure and a calibrated monetary stance are expected to support industrial activity and consumption-led sectors. Indias Union Budget FY 2026-27 emphasises public investment by raising the capital expenditure (capex) outlay to a record ^12.2 lakh crore. This nearly 9% increase from the previous years estimate of ^11.2 lakh crore is intended to sustain economic momentum and fulfil the governments "Viksit Bharat" vision for a developed India. Capital expenditure is prioritised in the budget, with allocations directed towards roads, railways, ports, airports, power transmission and urban infrastructure.

(Source:https://www.fortuneindia.com/economy/india-to-be-third-largest-economy-by-2027-on-track-to-achieve-3035-trillion-goal-by-2047-says-piyush-goyal/130508)

The Company has made its mark in the favourable economic landscape in India and remains committed to contributing its efforts towards the economic growth of the nation, striving to shape a more self-sufficient and prosperous India in the future. We aim to strengthen our local supply chains, invest in homegrown research and development and enhance our manufacturing capabilities to effectively cater to domestic demands.

Despite ongoing supply-side challenges, total automobile dispatches recorded a strong growth across all segments. Demand for two-wheelers and passenger vehicles increased significantly, supported by consumer sentiment amid rising vehicle and fuel prices. Passenger vehicle sales rose 12.6% year-on-year to 4,49,616 units in January 2026, compared with 3,99,386 units in January 2025. Within the two-wheeler segment, scooter sales rose 36.9% to 7,50,580 units, while motorcycle sales increased 20.3% to 11,26,416 units. Moped sales grew 16.1% 48,607 units.

The Indian automobile industry demonstrated strong growth in FY2025-26, underscoring its position as the worlds third- largest. Domestic sales, production, and global exports largely drive the growth. The sector is expected to grow from US$ 137.06 billion in 2025 to US$ 147.58 billion in 2026 and is forecast to reach US$ 213.74 billion by 2031 at 7.69% CAGR over 2026-2031. This buoyant demand can be attributed to population-led growth, rising household incomes, policy- backed electrification, demand for sustainable mobility and a strong manufacturing base. The passenger vehicle (PV) segment witnessed a surge in domestic sales in CY 2025. Passenger vehicle retail sales in February 2026 stood at 3,94,768 units, with urban markets growing 21.12% yoy and rural markets growing 34.21% yoy. Passenger vehicle exports rose to 8,62,233 units, up 16% in 2025 as compared with 7,43,979 units in 2024. Apart from evolving consumer preferences, the Indian Governments initiatives such as The Production Linked Incentive (PLI) Scheme, PM EDRIVE Scheme, Electronics Components Manufacturing Scheme and India Semiconductor Mission 2.0.

The Two-Wheeler segment crossed the 20-million-mark sales with 20.50 million units, with a growth of 4.9% in CY 25. The implementation of GST 2.0 has improved the affordability of Two-Wheelers and boosted household disposable income, enabling growth. Supportive macroeconomic measures, including multiple reductions in repo rates and income tax relief in 2025, also provided the necessary traction for this segment. While growth has been observed across both urban and rural markets, the current trend has been led primarily by urban demand. During CY 2025, 4.94 million units of Two-Wheelers were exported, which is the highest exports of the calendar year period, with a growth of 24.2%, as compared to CY 24. Overall, the growth in exports during the quarter was driven by a combination of improving macro-economic conditions in key markets of Africa, steady demand from South Asian markets and industry-wide recovery in motorcycle demand.

The Indian automobile industry is projected to maintain a steady growth in CY 2026, strengthened by domestic demand and continued policy support. Overall vehicle sales are expected to grow moderately, driven by stable macroeconomic conditions, mobility needs and ongoing investment in manufacturing and Technology.

The passenger vehicle segment is likely to witness steady growth, led by customer preferences for SUVs and feature- rich models. Automakers are introducing new variants with advanced technology, safety features and fuel efficiency, supporting demand across urban and semi-urban markets.

The commercial vehicle segment is anticipated to improve gradually, owing to infrastructure spending, logistics expansion and construction activity. Growing e-commerce and freight movement will strengthen demand for medium and heavy-duty commercial vehicles.

The two-wheeler segment is expected to remain resilient, supported by rural income, financing access and the introduction of cost-efficient models. Increasing demand for personal mobility and electric two wheelers are likely to support this expansion.

The sector is also undergoing a structural shift towards electric mobility and cleaner technologies. Electric vehicle adoption continues to expand, with EV sales reaching nearly a 20% rise in total volume, led by government incentives, charging infrastructure and reducing battery costs. Looking ahead, the outlook for the Indian automotive industry remains promising.

The automobile industry is dependent on various factors such as the availability of skilled labour at low cost, robust R&D centres, and low-cost steel production. The industry also provides great investment opportunities and direct and indirect employment to skilled and unskilled labour. The electric vehicle industry is likely to create five crore jobs by 2030. The Automotive Industry is one of the key drivers of economic growth in India, with robust backward and forward integrations. The Indian automotive sector has exhibited resilience amid global economic challenges and inflation. The contribution of this sector to the National GDP has risen to about 7.1% in 2025. It is also poised to occupy a strong position globally by 2030, led by initiatives such as the PLI scheme for automobiles and auto components. The PLI Scheme for Automobile and Auto Components is a ^25,938 crore initiative (2022-2027) designed to boost Indias manufacturing of Advanced Automotive Technology (AAT) products, including

EVs and hydrogen fuel cells. It incentivises companies to increase domestic production and reduce import dependence.

During the financial year 2025, the Company completed the upgradation of the MAP 2 facility into the MAT facility, which is the most advanced technical process, led to reducing the manufacturing time of 4W Wheels. This MAP2 facility will increase the production capacity of the Company by around 20,000 pieces per month.

The Company is continuously striving to improve the production process, aiming to reduce production time, minimise wastage and increase overall productivity.

A key strength of the Company is its emphasis on improving production by adopting advanced technologies, installing modern machinery and leveraging the technical expertise of its skilled workforce.

High energy and labour cost, along with rising raw material prices, remain key constraints for the Company as this can lead to increased operating expenses, carrying cost and working capital interest expenses.

Consistent government support through various policies and initiatives provides significant growth opportunities for the Company. Increasing consumer preferences in electric vehicles and advanced vehicle components, such as alloy wheels, reflect positive industry trends. Additionally, initiatives aimed at promoting domestic manufacturing and MSME such as a PLI scheme, Make in India, Ease of Doing Business and Atmanirbhar Bharat, continue to strengthen the business environment.

A significant increase in raw material and energy costs, along with economic slowdowns in domestic and global markets, may pose challenges to the Companys growth.

Operating Profit Margin Ratio: In FY 2025, the Company achieved a good Net Profit in comparison to last Year. The Net profit has increased in line with the increased revenue, and in consequent net profit margin has increased compared to last year. The Company is consistently striving to increase the Operating revenue and profit, and to reduce fixed costs by way of the repayment of long-term loans, aiming to further enhance the Operating profit Margin.

Net Profit Margin Ratio: In FY 2025, the Company achieved a good Net Profit in comparison to last Year. The Net profit has increased in line with the increased revenue, and in consequent net profit margin has increased compared to last year. The Company is consistently striving to increase the Operating revenue and profit, and to reduce fixed costs by way of the repayment of long-term loans, aiming to further enhance the Net profit Margin.

Return on Net Worth: In FY 2025, the Company achieved a good Net Profit in comparison to last Year due to increased revenue from operations. Hence, the return on net worth has been increased.

The Companys business is exposed to several internal and external risks. To address these challenges, it has implemented strong systems, processes, and a review mechanism to monitor, manage and mitigate potential risk. The key existing and emerging risks faced by the Company are outlined below:

Your Company has a robust internal control system in place, adequate for the size and complexity of the organisation. A comprehensive review of all internal control systems has been conducted to monitor the Companys expanding size, corresponding needs, compliance with legal obligations and adherence to the Companys policies and procedures. This ensures a high degree of system-based checks and control, with continuous monitoring of the effectiveness of these controls.

An independent firm of chartered accountant has been appointed to audit the internal control system in consultation with statutory auditors. The audit committee considers suggestions, improvements and concerns raised by internal auditors and ensures their implementation in accordance with the committees instructions.

The audit findings and managements resolution plans are reported to the Audit Committee of the Board on a quarterly basis. The committee is headed by a Non-executive Independent Director.

Based on its evaluation, the Audit Committee has concluded that the internal financial controls were adequate and operating effectively as of December 31, 2025.

The Company operates in a people-driven industry and therefore places strong emphasis on its human capital, recognising employees as a key contributor to its day-to- day operations. Guided by its core belief of Eliminate our Weakness, the Company focuses on talent retention to meet customer expectations and support growth. It promotes inclusive growth through extensive learning and development initiatives. The dedicated management team ensures that employees are provided with adequate space, guidance, and opportunities to realise their potential and pursue personal growth within the organisation. Ongoing monitoring, periodic reviews and a rewards framework maintain the effectiveness of the system.

The Management Discussion and Analysis Report containing your Companys objectives, projections, estimates and expectations may incorporate certain statements, which are forward-looking within the meaning of applicable laws and regulations. The statements in this Report could differ materially from those expressed or implied elsewhere. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in governmental regulations, tax regimes, forex markets, economic developments within India and the countries within which the Company conducts business besides other incidental factors.