Fiem Industries Ltd Management Discussions

GLOBAL ECONOMIC OUTLOOK

The global economy demonstrated resilience in 2024 with an estimated growth of 3.2%, despite persistent inflationary pressures, geopolitical tensions, and structural headwinds. However, in 2025, growth is projected to slow to 2.8%, and marginally improving to 3.0% in 2026, according to the IMFs April 2025 World Economic Outlook. These forecasts represent downward revisions of 0.5 and 0.3 percentage points, respectively, from the IMFs January 2025 estimates. The cumulative downgrade reflects the rising impact of trade tensions, geo-political conflicts, on-going wars, heightened policy uncertainty, and weakening consumer sentiment. The escalation of trade restrictions, including the growth-linked tariff regime introduced by the United States in April 2025, and retaliatory measures by major economies like China, have adversely affected global trade flows. Though a temporary 90-day pause in these tariffs is currently in effect to facilitate negotiations, the outlook remains clouded by volatility and uncertainty.

India, meanwhile, continues to stand out as a global growth leader. Despite global headwinds, the economy is projected to grow by 6.2% in FY26, slightly below earlier estimates, supported by strong rural consumption and resilient domestic demand. Growth is expected to improve to 6.3% in FY27, underpinned by structural reforms, a dynamic services sector, and a young workforce.

INDIAN ECONOMIC OUTLOOK

India continues to remain one of the fastest-growing major economies globally, exhibiting strong resilience amidst heightened global uncertainty and trade tensions. The National Statistics Office (NSO), in its Provisional Estimates released on May 30, 2025, has pegged real GDP growth at 6.5% in FY 2024–25, driven by robust performance in manufacturing, construction, and investment activity.

Looking ahead, the International Monetary Fund (IMF), in its April 2025 World Economic Outlook, has projected Indias growth at 6.2% in FY 2025–26 (FY26), followed by 6.3% in FY 2026–27 (FY27), and a medium-term projection of 6.5%, led largely by domestic growth drivers. While a global slowdown may impact Indias exports—goods and services exports accounted for around 22% of GDP on average during FY22–24—the adverse impact on net exports may be partly offset by a decline in imports and improving private investment momentum, supported by falling interest rates and the governments continued focus on infrastructure investment.

As part of its efforts to support economic growth, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 6.0% on April 9, 2025, marking the second consecutive rate cut and shifting its stance from neutral to accommodative. With CPI inflation falling to 3.3% in March 2025, a 67-month low, price stability appears well within reach.

The EY India – Economy Watch (April 2025) also underscores the economys structural strengths, citing robust government capital expenditure, strong banking and financial sector health, digital economy growth, and improving rural demand. Indias services sector and formal employment trends remain solid, supporting broad-based economic recovery.

From a medium- to long-term perspective, India is expected to sustain its growth momentum by accelerating land and labour reforms, promoting human capital development, and investing in emerging technologies such as Artificial Intelligence (AI) and Generative AI. Recent policy initiatives have laid the groundwork for this transformation.

The governments strategy also includes forging strategic Free Trade Agreements (FTAs) with key partners such as the UK, EU, and neighbouring countries, enhancing Indias global trade integration.

While escalating US-led tariff measures, geo-political conflicts, on-going wars and global trade frictions may pose risks, Indias strategic macroeconomic positioning—backed by proactive monetary and fiscal policies—positions it well to sustain real GDP growth of 6.5% in FY26 and beyond, while maintaining inflation within the target range and improving its global competitiveness.

INDUSTRY STRUCTURE AND DEVELOPMENT

Indian Automobile Industry

The Indian automobile industry continues to serve as a reliable barometer of the nations economic performance, playing a pivotal role in macroeconomic growth and technological advancement. In FY 2024–25, the sector demonstrated resilience and growth, driven by rising domestic demand, strong rural penetration, and increasing focus on sustainability and innovation.

Industry Landscape and Key Trends

India remains one of the largest automobile markets globally, supported by a robust ecosystem of OEMs, suppliers, and consumers. The two-wheeler segment leads in volume, buoyed by a growing middle class, youthful demographics, and expanding rural markets. The commercial vehicle segment is experiencing renewed demand, aided by growth in logistics, infrastructure development, and fleet modernization.

Policy Support and Investments

The Ministry of Heavy Industries (MHI) has extended the Production Linked Incentive (PLI) Scheme for Automobiles and Auto Components by one year. This scheme offers incentives for eligible sales over five consecutive years (2023–24 to 2027–28), with disbursements in the following financial year. The scheme has already attracted proposed investments of US$ 8.1 billion (Rs. 67,690 crore), exceeding the original target of US$ 5.1 billion (Rs. 42,500 crore).

These measures, coupled with Indias advantages in skilled labour, low-cost manufacturing, and expanding R&D capabilities, continue to make the sector attractive for both domestic and foreign investment.

Electric Vehicle Segment: Accelerating Momentum

The electrification of mobility in India continued to gain traction in FY 2024–25, supported by strong policy impetus, rising environmental awareness, and growing consumer acceptance. The Electric Two-Wheeler (E2W) segment led the transformation, accounting for the highest share of EV registrations. The extension of the FAME-II schemes and state-level subsidies helped maintain momentum in this segment. Additionally, increasing investments by OEMs in EV platforms, battery technologies, and charging infrastructure signalled long-term confidence in the sector. With a growing ecosystem of component suppliers and localized battery manufacturing initiatives under the Advanced Chemistry Cell (ACC) PLI scheme, India is poised to emerge as an EV hub in the coming years.

Auto Component Industry:

A Vital Growth Engine

Indias auto component industry plays a crucial role in supporting the broader automobile sector. It spans large enterprises to MSMEs, distributed across manufacturing clusters nationwide. The sector contributes significantly to GDP and provides employment to a large skilled population. Rising global demand for Indian components has attracted both domestic and international manufacturers, solidifying Indias reputation as a hub for quality and cost-effective automotive parts.

The Indian automobile industry remains a pivotal pillar of economic growth and technological progress. With strong domestic demand, export opportunities, government support, and rapid innovation, the sector is well positioned to navigate global headwinds and seize emerging opportunities. As electrification, sustainability, and digital transformation reshape the industry landscape, companies that proactively invest in capabilities, partnerships, and customer-centric strategies will be best placed to thrive in the evolving mobility ecosystem.

FY 2024–25 Performance of the Indian Automobile Industry

The Indian automobile industry posted a strong performance in FY 2024–25, supported by a gradually improving rural demand, moderating inflation, and continued government focus on infrastructure development and pro-consumption policies. These macroeconomic tailwinds enabled broad-based volume growth across most vehicle categories, with the exception of a muted performance in the commercial vehicle segment.

Passenger Vehicles (PVs)

The Passenger Vehicle segment reached at a high production volume of 50.61 lakh units, registering a 3.3% year-on-year growth. The growth was largely driven by the utility vehicle segment, which contributed approximately 62% to the total PV production. New product launches, higher rural penetration, and growing preference for SUVs remained key enablers.

Two-Wheelers (2Ws)

The Two-Wheeler segment recorded a strong 11% year-on-year growth, with production reaching approximately 2.39 crore units. Positive consumer sentiment, improved rural mobility, and recovery in entry-level models supported the segments performance. Exports saw a robust 21% increase, driven by a 23% rise in motorcycle exports and an impressive 209% surge in moped shipments.

Three-Wheelers (3Ws)

Production in the Three-Wheeler segment grew by 5%, primarily led by consistent demand for passenger carriers. Urban mobility solutions and the increasing adoption of electric variants contributed to steady volumes.

Electric Two-Wheelers (EV-2Ws)

FY 2024–25 ended with over 11.4 lakh electric two-wheelers sold, marking a 21% growth over FY 2023–24. However, the momentum slowed in the final quarter due to the reduction in government subsidies and continued challenges related to charging infrastructure. Despite near-term headwinds, the long-term outlook for EV two-wheelers remains robust.

5-Years Production Data across Vehicle Categories at a Glance (in ‘000)

[Source: SIAM data]

Category	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24	FY 2024-25
Passenger vehicles	3,062	3,651	4,579	4,902	5,061
Commercial vehicles	625	805	1,036	1,066	1,033
Three-Wheelers	611	758	856	993	1,050
Two-Wheelers	18,350	17,715	19,459	21,469	23,884
Total	22,648	22,929	25,930	28,430	31,028

FY 2024 25 : Automobile Industry Performance at a Glance

PASSENGER VEHICLES

Record production of 50.61 lakh units (3.3% up) driven by utility vehicles (62% share)

TWO WHEELERS

Strong recovery, production volume at 2.39 crore units (11% up)

THREE WHEELERS

10.50 lakh units produced (5% up)- backed by passenger carrier demand

EV TWO WHEELERS

11.4 lakh units sold (21% up), long-term outlook remains bullish

OUTLOOK, OPPORTUNITIES AND THREATS:

Outlook

The Indian automotive industry is expected for sustained growth in near to long term, supported by improving macroeconomic indicators, softening interest rates, growing consumer confidence, and continued government thrust on infrastructure, clean mobility, and Make-in-India initiatives. The auto component sector is expected to benefit from a strong domestic vehicle demand outlook, expanding export potential, and increasing localization efforts by OEMs. Electrification, digitization, and automation are rapidly transforming the industry. The Production Linked Incentive (PLI) schemes, targeted investment in EV ecosystems, and focus on R&D and indigenous technology development will play a critical role in shaping the industrys trajectory.

The Indian two-wheeler industry is crucial for the countrys automotive sector, playing a significant role in the mobility of millions of people. With the rising demand for personal transportation, economic growth, and urbanization, the two-wheeler market has been expanding rapidly. In recent years, the industry has seen a notable shift towards electric two-wheelers (E2Ws), driven by environmental concerns, technological advancements, and supportive government policies.

Opportunities and Key Growth Drivers

The Indian automobile and auto components industry is poised for sustained growth, driven by a confluence of structural, demographic, policy, and technological factors, on the back of following growth drivers:

Demographic Advantage

• A young, aspirational population with rising disposable incomes is fuelling personal mobility demand, especially in the two-wheeler and compact car segments.

• Rapid urbanization and improving road infrastructure are supporting broader automotive usage.

Government Policy Support

• Schemes like the Production Linked Incentive (PLI) for Automobiles and Auto Components and FAME-II for electric vehicles are incentivizing domestic manufacturing, innovation, and clean mobility.

• Extension of PLI timelines and higher-than-expected investment commitments (Rs. 67,690 crore vs. Rs. 42,500 crore targeted) underscore investor confidence.

Electrification & Green Mobility

• Expanding government support for electric mobility, including the PM e-DRIVE scheme and state EV policies.

Export Growth Potential

• Global OEMs are increasingly viewing India as a reliable export base for auto components. The industry is well-positioned to leverage this with its export-worthy capabilities, strong quality systems, and customer-centric approach.

Supply Chain Localization

• OEMs increasing preference for local suppliers to mitigate geopolitical risks and improve cost competitiveness aligns well with the growth objective of industry.

Resilient Domestic Ecosystem

• A robust network of OEMs, component manufacturers, and ancillary service providers forms a strong industrial backbone.

• Skill development initiatives and local sourcing are strengthening the sectors long-term capabilities.

Threats and Risks

• Global Uncertainties: Trade tensions, currency fluctuations, and recessionary trends in export markets could affect the automotive demand cycle and supply chain stability.

• Supply Chain Disruptions: The global supply chain remains vulnerable to disruptions due to geo-political tensions, on-going wars, trade barriers, and logistical constraints.

• Rare Earth Minerals Issue: Chinas rare earth minerals export restrictions have posed a new challenge on the automobile industry across the world.

The Company remains confident of its medium to long-term growth prospects, underpinned by a solid foundation of R&D, Innovation, Customer Relationships, Operational Excellence, and strategic approach with agility and resilience. By investing in future-ready capabilities and continuously enhancing value for stakeholders, the Company is well-equipped to navigate risks and capitalize on the evolving opportunities in the automotive lighting space.

FINANCIAL AND OPERATIONAL PERFORMANCE REVIEW

The Company delivered a robust performance in FY 2024–25, marked by record sales, strong operational execution, strategic capacity building, and accelerated new product development. This performance reinforces the Companys position as one of the preferred Tier-1 supplier in the automotive lighting industry.

Business Operations Overview

The Company is among Indias leading manufacturers of automotive lighting and signalling equipment manufacturers. With a diverse product portfolio and longstanding relationships with top OEMs, both domestic and international, the Company caters to markets across Japan, Europe, the USA, and other Asian regions.

The Company operates nine advanced manufacturing facilities located strategically across key automotive hubs in India: Haryana: Kundli (Unit 1) and Rai (Unit 7) Tamil Nadu: Hosur (Units 2, 3 & 5) Karnataka: Mysore (Unit 4) Himachal Pradesh: Nalagarh (Unit 6) Rajasthan: Tapukara (Unit 8) Gujarat: Karsanpura, Ahmedabad (Unit 9)

The Companys R&D and Design Centres in India, Italy, and Japan have significantly shortened product development timelines, facilitating faster rollouts of projects and enhanced customer satisfaction. Some of the highlights of new products are as under:

• Hondas Activa EV was launched, which is fitted with Companys Rear-Combination Lamp, Front Position Light, License Lamp and Rear-View Mirrors.

• Company already supplying to market leading models TVS iQube (headlamp, tail-lamp, and mirror) and TVS Apache 4G.

• Yamahas Tracer 700 and NovaFactor (for European and Brazilian markets) were launched with the Companys headlamps and position lamps.

• The Company commenced supply of all lighting solutions for Royal Enfield Classic 350.

• The Company also have started supply of headlamp for Hero MotoCorps Xtreme 250.

• In the four-wheeler segment, the Company commenced production for its first product with Mahindra & Mahindra, licence plate lamp, now approved across all models.

Technology and R&D Advancements

To enhance innovation and integrated development:

• In April, 2025, a state-of-the-art Innovation and R&D Centre was started in Gurugram, integrating mechanical, optical, electronics, and CAE teams.

• The Company is setting up an EMI/EMC validation lab, along with in-house SMT line, prototyping capabilities including assembly lines, to accelerate electronics product development.

• The Corporate Office is also housed in same office to facilitate direct oversight and agile decision-making.

Management believes this strategic step will enhance speed, integration, and customer responsiveness across 2W and 4W verticals.

Financial Highlights (Standalone – FY24-25 Vs FY23-24)

• Revenue from Operations up by 19.39% from Rs. 2,014.37 Crore to Rs. 2,404.96 Crore.

• EBITDA up by 19.69% from Rs. 267.97 Crore to Rs. 320.73 Crore.

• EBITDA Margin for FY25 remained 13.34% in comparison to 13.30% in FY23-24.

• Profit After Tax (PAT) up by 23.09% from Rs. 165.84 Crore to Rs. 204.14 Crore

KEY FINANCIAL RATIOS:

Please refer to Note No. 52 of Standalone Financial Statements forming part of this Annual Report.

COMPANYS PRODUCT PORTFOLIO REVIEW

The Company operates in the automotive components industry with a primary focus on Automotive Lighting, followed by significant presence in Rear View Mirrors and other ancillary products range in in Sheet Metal Parts, and Plastic Moulded Parts.

(i) Automotive Lighting and Signalling Equipments:

Contribution to revenues (Net) over the past years has remained as under

(Rs. Crore)

FY2020-21	FY2021-22	FY2022-23	FY2023-24	FY2024-25
798	1048	1313	1449	1756

This segment continues to be the core driver of the Companys revenues, contributing a significant portion of total sales. The company manufactures a large range of LED and conventional Head Lamps, Tail Lamps, Blinker Lamps, Fog Lamps, Warning Triangles, and Interior Lamps, among others, for two, three, and four-wheelers.

Lighting is one of the most important systems of a vehicle from the perspective of safety, functionality as well as aesthetics. It is critical to the safety of vehicle occupants and that of other road users. The innovation in Automotive Lighting is an ever-evolving process and is currently witnessing a fast adoption of LED and Electronics. In comparison to conventional bulbs, LED Lighting offers unlimited possibilities for designing and development from safety, functionality as well as aesthetic perspective. The shift toward LED lighting solutions with increasing electronics content remains a major growth area. During FY 2024–25, the share of LED lighting in total automotive lighting sales increased to 59%, compared to 52% in the previous year, reflecting growing customer preference and deeper penetration for LED Lighting across the vehicle segments.

(ii) Rear View Mirrors (RVM):

Contribution to revenues (Net) over the past years has remained as under

(Rs. Crore)

FY2020-21	FY2021-22	FY2022-23	FY2023-24	FY2024-25
146	176	210	240	267

The Companys second highest-selling product category is Rear View Mirror, which is being supplied to almost all OEM customers of the Company, majorly in 2-Wheeler segment, and for some of our valued OEM customers, we are the sole supplier for their Rear-View Mirror requirements. The Company has state-of-the-art mirror manufacturing plants across four units where plate making, profile cutting, washing, grinding, cleaning, coating (aluminium or chrome), and painting are carried out. The Company has installed injection moulding machines and rod-making facilities in-house. All the sub-components are accumulated in the assembly lines to complete the entire process of assembling and testing under one roof.

(iii) Plastic Moulded Parts:

Contribution to revenues (Net) over the past years has remained as under

(Rs. Crore)

FY2020-21	FY2021-22	FY2022-23	FY2023-24	FY2024-25
114	156	203	217	236

Apart from manufacturing moulded parts for Automotive Lighting and Signalling Equipments and Rear-View Mirrors, the Company also manufactures and supplies standalone plastic parts as finished parts for Two-wheelers, like Front Fenders, Floor Panels, Side Covers, Rear Fenders, Handlebars, Seat Bases, and many others. The Company has installed best-in class injection moulding machines across its 9 plants ranging from 50 tonnages to 1,400 tonnages, capable of making parts weighing 20 grams to 2.5 kilograms.

(iv) Others:

Contribution to revenues (Net) over the past years has remained as under

(Rs. Crore)

FY2020-21	FY2021-22	FY2022-23	FY2023-24	FY2024-25
137	170	101	100	141

These are all other items contributing individually less than 10% to the Companys revenue pie and mainly include fabricated items like sheet metal parts, canisters, bank angle sensors, moulds, etc. The company has full-fledged sheet metal fabrication facilities as well as mudguard rolling plants for manufacturing front and rear mudguards for motorcycles and mopeds.

RISKS AND CONCERNS

The automotive industry operates in a dynamic environment that is subject to a wide range of external and internal risks. To mitigate all foreseeable risks, Company continues to build resilience through diversification, operational efficiency, and innovation. Continuous focus on risk management across all functions and operations ensures that risk mitigation strategies are implemented promptly to minimize the adverse effects of emerging risks.

Periodic risk identification, analysis, mitigation, and monitoring are conducted by the Management and overseen by the Risk Management Committee (RMC). Post-assessment, detailed mitigation plans are developed and implemented, with regular reporting to the RMC of the Board. The RMC periodically monitors and refines the risk management framework, ensuring its robustness and relevance.

Several senior management team members are actively and continuously involved in the process, emphasizing a collaborative approach to risk management and quick remedial and proactive measures. The risk management framework encompasses a wide range of risks, including Cyber security Risks (protecting against data breaches and cyber-attacks, especially given the increasing digitalization across operations), Natural Calamities (preparedness for events like earthquakes, floods, and other disasters that could disrupt production facilities), Safety & Security of Assets (protecting company assets from fire, theft, damage, and accidents, ensuring a safe working environment for employees) etc.

The Company continues to proactively monitor these risks through its robust enterprise risk management framework and regularly updates mitigation strategies. Our focus remains on agility, innovation, and proactive risk mitigation measures with an optimised combination of machines, automation, technology and human interface. This approach ensures that the Company remains resilient and adaptable, safeguarding our interests and those of our stakeholders.

HUMAN RESOURCES

The Company believes that its people are its most valuable asset and key drivers of long-term success. A culture of continuous learning, empowerment, and performance excellence is deeply embedded in its human capital strategy. Our approach includes nurturing internal talent and bringing in key external talent for leadership roles.

Management is deeply focussed to support key talent and resources, enhancing their skills, and improving overall efficiency and productivity. Our performance management system effectively rewards high performers and encourages all employees to excel.

We are committed to nurturing, enhancing, and retaining talent through superior learning and organizational development initiatives. Training programs include ESG, Fire & Safety, 5S, 7QC Tools, TQM, Environment Awareness, Emergency Plan, PDCA, KAIZEN, CSR awareness, and various other topics, all designed to hone the skills of our employees. Special emphasis was placed on:

• Enhancing competencies in advanced lighting technologies, electronics, and design;

• Improving cross-functional collaboration across manufacturing, quality, and supply chain;

• Promoting leadership development at various levels through structured programs.

Employee engagement, safety, and well-being continued to remain top priorities. Initiatives related to health checkups, workplace safety protocols, and grievance redressal mechanisms were actively implemented across all plants. During the year under review, industrial relations remained cordial across our factories and offices.

At the close of the financial year under review, the strength of Companys employees was 2583 and throughout year on average basis 7466 contractual workers were employed across its manufacturing locations. Notably, close to 30% of the total workforce comprised women, highlighting the Companys commitment to diversity and inclusion.

In line with its vision to be a future-ready organization, the Company is committed to fostering an inclusive, innovative, and high-performance work culture that aligns with business growth and future ready organisation.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established comprehensive internal control framework that is commensurate with the size, scale, and complexity of its operations. The system is designed to provide reasonable assurance regarding the integrity of financial and operational information, compliance with applicable laws and regulations, safeguarding of assets, and effcient use of resources.

The Companys internal control system comprises the policies, procedures, and practices established to safeguard its assets, ensure accurate financial reporting, and promote operational efficiency. Adequate internal controls are essential for mitigating risks, preventing fraud, and maintaining transparency, which are crucial for the long-term success and growth of the Company and for safeguarding the interests of all stakeholders.

Our internal control measures include the segregation of duties, proper authorization and approval processes, and regular monitoring and review of financial transactions. These measures ensure that all transactions are authorized, recorded accurately, and compliant with laws and regulations.

The adequacy of our internal control system is periodically assessed by both statutory and internal auditors, with regular monitoring by the management and the Audit Committee. These assessments have consistently found the internal control systems of the Company to be adequate and effective, given the size and scale of operations, industry regulations, and the complexity of our manufacturing processes.

Management strongly believes that a robust and well-designed internal control system enhances the organizations ability to manage risks, protect its resources, and maintain the trust of stakeholders. Internal financial controls have been operating effectively throughout the year.