Frontier Springs Ltd Management Discussions

Economic overview

India remained among the fastest- growing major economies in FY26. Real gross domestic product is estimated to have grown about 7.4% for the year, up from 6.5% in FY25, supported by government capital expenditure, resilient services and a recovery in manufacturing. Gross fixed capital formation grew at a similar pace, and foreign exchange reserves crossed 700 billion US dollars during the year.

Source: Economic Survey 2025-26; Ministry of Statistics and Programme Implementation.

Domestic demand was supported by public capital expenditure and a recovery in private investment, while services continued to expand and manufacturing regained momentum through the year. Retail inflation moderated, which gave monetary policy room to remain supportive of growth. Looking ahead, the Economic Survey projects real GDP growth in the range of 6.8% to 7.2% for FY27. The principal risks to the outlook are external, including global trade and tariff uncertainty and the prices of energy and other commodities, which feed through to the cost of steel, the Companys main input.

Source: Economic Survey 2025-26.

Sustained public investment in infrastructure has been a feature of the Indian economy over recent years, and transport, and railways in particular, has been a large part of it. The government has held its capital expenditure at elevated levels, and railways has been among the largest recipients. This investment is the backdrop against which the Company operates, and it underpins the demand for its products. A durable, funded infrastructure cycle allows a supplier such as the Company to plan capacity and product development with greater confidence than a demand base that depends on the general business cycle.

Indian Railways: industry structure and review

Indian Railways is the fourth largest railway network in the world and the Companys primary customer. In FY26 it became the second largest freight carrier in the world, moving 1,670 million tonnes of freight, up from 1,617 million tonnes in FY25. Railway investment is the principal driver of demand for the Companys springs, air springs and forged components.

Source: Ministry of Railways.

The Union Budget for 2026-27 allocated a record capital outlay to Indian Railways of about Rs.2.78 lakh crore. Within this, rolling stock is the single largest head at ^52,108.73 crore, followed by new lines at ^36,721.55 crore, track doubling at Rs.37,750 crore and track renewal at Rs.22,853 crore. A large transfer to the railway safety fund continues to support

signalling, the Kavach train protection system and other safety works.

The Budget also announced seven high-speed rail corridors and a new dedicated freight corridor connecting Dankuni to Surat.

Source: Union Budget 2026-27;

Ministry of Railways.

The two existing dedicated freight corridors, the Eastern corridor of 1,337 kilometres and the Western corridor of 1,506 kilometres, are fully commissioned and carry several hundred trains a day. Three further corridors, the East Coast, East-West and North-South, are under detailed project report, at a combined estimated investment in the region of Rs.2 lakh crore. These corridors free capacity on the conventional network for passenger services, which supports continued coach and locomotive production.

Beyond new lines and corridors, the network is being modernised in ways that sustain rolling stock demand. New track has been commissioned at an average of about 8.32 kilometres a day over the period from 2014 to 2026. As at 1 April 2026, Indian Railways had 514 sanctioned infrastructure projects spanning about 40,000 kilometres at a total cost of approximately Rs.8.31 lakh crore, of which about Rs.3.05 lakh crore had been spent and 12,583 kilometres commissioned. Electrification, signalling and the Kavach train protection system continue to be extended, and 142 Gati Shakti cargo terminals have been commissioned to improve freight handling. Programmes for Vande Bharat, Amrit Bharat and metro rail extend the modern coach fleet, each unit of which carries the Companys products.

On rolling stock, management notes that around 6,000 coaches and 1,200 to 1,400 locomotives are planned for production in the year.

New coaches are built with air springs on the secondary suspension and coil springs on the primary suspension. Older coaches remain to be replaced over time, and programmes for Vande Bharat, Amrit Bharat, LHB, metro and suburban services add further demand. Management observes that demand for coaches and locomotives shows little sign of easing over the next several years, given the size of the population that depends on rail and the shortage of capacity at peak times. A large wagon tender is expected, which would support the Companys spring and forging supply to wagon manufacturers.

The opportunity

The railway investment cycle translates into demand for the Company in several ways. Every new coach carries both air springs and coil springs, so coach production converts directly into orders for two of the Companys divisions. Locomotive production supports coil spring and forging demand. Wagon procurement, expected to rise with a large tender, supports springs and forgings supplied through wagon manufacturers.

The economics are straightforward at the level of a single coach. A modern coach carries coil springs on its primary suspension and air springs on its secondary suspension, so the Companys content per coach has

risen as air springs have been added to coaches it already served with coil springs. As the installed base of air-spring-fitted coaches grows, an aftermarket for replacement builds behind it, because air springs are a safety-related component that is renewed over the life of a coach.

The Failure Indication and Brake Application system adds a further item of content per coach, at two devices and four indicators each.

New products widen the opportunity further. The Failure Indication and Brake Application system addresses a market that the Company sizes at around Rs.100 crore and that is presently served by imports, which gives the Company an import substitution opportunity. The forging division is developing components for road construction equipment and defence, and is studying exports, which would diversify demand beyond the Railways over time.

Taken together, these strands support the Companys stated target of Rs.500 crore in gross revenue in FY27, and its medium-term ambition, expressed by management, of reaching Rs.1,000 crore in gross revenue over a longer horizon, subject to demand and execution. The Company intends to reach these targets by deepening its share of existing products and by adding new products to its line, rather than by relying on any single large order, since Indian Railways places orders through many tenders across the year.

Company overview

Frontier Springs Limited was incorporated in 1981 and manufactures hot coiled compression springs, air springs and forged components for wagons, coaches and locomotives. The Company operates from Kanpur Dehat in Uttar Pradesh, across two manufacturing facilities and a testing laboratory, and has supplied Indian Railways for more than four decades. Its springs are fitted on the Vande Bharat Express.

The Company is organised into three divisions: coil springs, forging and air springs, supported by the new Failure Indication and Brake Application safety product. Its products are approved by the Research Designs and Standards Organisation, and it is certified to the International Railway Industry Standard and ISO 14001:2015. Management states that the Company holds a share of around 40% of Indian Railway demand in coil springs, a broadly similar share in air springs, and around 20% to 25% in forging.

The Companys manufacturing is supported by a testing laboratory that allows it to validate products against the specifications of Indian Railways before dispatch.

Its certifications, and its record of supply over four decades, position it as an approved source across coil springs, air springs and forging. The Company exports selectively, supported by its International Railway Industry Standard certification, and is developing forged components for customers beyond the Railways.

Summary profit and loss

(Rs. crore)

Performance discussion: financial review

Revenue from operations rose 39.22% to Rs.322.06 crore, from Rs.231.34 crore. EBITDA rose 73.80% to Rs.86.31 crore, and the EBITDA margin, measured on revenue from operations, widened by 533 basis points to 26.80%. Profit before tax was Rs.82.25 crore and profit after tax was Rs.61.31 crore, up 76.88%. Earnings per share were Rs.51.07, up from Rs.29.93. Growth was broad-based across the three divisions, and profitability improved alongside scale.

On the cost side, total operating expenses rose 29.69% to ^236.88 crore, more slowly than revenue, which is the source of the operating leverage in the year. Finance cost remained low at ^0.28 crore, reflecting minimal borrowing, and depreciation and amortisation was ^4.90 crore. The improvement in

return on capital employed to 43.56% reflects both the rise in profitability and the Companys low capital intensity relative to the revenue it now generates.

Balance sheet and returns

Shareholders funds rose to ^183.48 crore from ^123.96 crore. Total borrowings were ^10.80 crore against cash and bank balances of ^3.50 crore, a gross debt-to-equity of about

0.06:1.

Return on capital employed rose to 43.56% from 35.33%. Cash generated from operations was ^31.41 crore. Trade receivables rose to ^60.89 crore from ^38.44 crore, which management attributes to higher turnover and monthly sales, and states are good receivables with no bad debts. Capital expenditure during the year was directed across all three divisions to

remove bottlenecks and add capacity, and was funded from internal resources.

Segment performance

Coil springs remained the mainstay, with steady demand across freight, coaching and locomotive applications. Air springs contributed more meaningfully as production for LHB coaches scaled towards 180 to 200 coach sets a month against a capacity of about 300. Forging progressed with the commissioning of the new 6-tonne hammer, at building utilisation.

Human resources

The Companys workforce spans its manufacturing, engineering, quality and support functions across its facilities at Kanpur Dehat. The development of the Failure Indication and Brake Application system inhouse reflects the Companys investment in engineering and design capability, supported by experienced professionals and consultants. The Company continues to invest in machinery and automation, which raises productivity and reduces dependence on manual processes, and it maintains training and development for its people. Industrial relations during the year were cordial.

The Companys approach to people has centred on building engineering and manufacturing capability in-house, which allowed it to develop new products such as the Failure Indication and Brake Application system without relying on external design. As capacity

has expanded, the Company has added machinery that raises output per person, and has invested in the skills needed to operate and maintain it.

Internal control systems

The Company maintains internal control systems that are commensurate with the size and nature of its business. These systems are designed to provide reasonable assurance on the recording and reporting of financial and operational information, the safeguarding of assets, compliance with applicable laws and regulations, and adherence to Company policies. The controls are reviewed by management and are subject to internal and statutory audit, and the Audit Committee of the Board reviews their adequacy.

Management reviews the operation of these controls periodically and reports to the Audit Committee, which considers the adequacy of the

internal financial controls and the observations of the auditors. The Company updates its policies and procedures as the business grows and as regulation evolves.

Cautionary statement

This management discussion and analysis contains statements about the Companys objectives, expectations, estimates and plans that may be forward-looking within the meaning of applicable laws and regulations. These statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. Important factors that could affect the Companys operations include economic conditions affecting demand and supply, prices of raw materials and energy, changes in government policy, regulation and taxation, and other incidental factors. The Company undertakes no obligation to publicly amend, modify or revise any forward-looking statement on the basis of subsequent developments, information or events.