Gandhi Special Tubes Ltd Management Discussions

1. Economic OVERVIEW a. Global Economy

In Financial Year 2024–25, the global economy faced mixed trends. Growth slowed down in many developed countries due to high interest rates and inflation, while some emerging markets showed resilience. Supply chain issues eased compared to previous years, but geopolitical tensions and energy price fluctuations

These headwinds dampened consumer sentiment and disrupted trade flows, with global GDP growth estimated to slow to 2.3 percent from 2.7 percent in the previous year. The US economy remained resilient, supported by strong services growth and a robust labor market, while Europe grappled with energy cost pressures and the impact of the Ukraine conflict.

Chinas recovery lagged expectations due to a real estate downturn and weak industrial activity. In contrast, the Asia-

Pacific region remained a key growth driver, supported by steady consumption and a manufacturing rebound.

The global automotive industry faced a challenging environment, with high interest rates and tighter credit conditions curbing demand, particularly in the mass-market segments across the US and Europe. Furthermore, geopolitical tensions, elevated vehicle prices, and new tariffs, by the US on automotive imports, continue to pose risks to a full recovery. The industry remains focused on electrification and improving supply chain resilience to navigate volatility and drive long-term growth.

The current geopolitical and economic landscape is challenging, with persistent headwinds across continents. Yet, India stands uniquely poised to emerge as a global manufacturing powerhouse. With its growing infrastructure, young workforce, and favorable policies, Indias opportunity to lead the world in manufacturing has never been greater. This environment offers opportunities for Gandhi Special Tubes Limited (GSTL) to focus on operational efficiencies, exploring alternate markets and deliver high-quality products to meet the steady demand from automotive and engineering customers while carefully managing risks in a volatile global landscape. b. Indian Economy

The Indian economy continued its growth momentum in

Financial Year 2024-25. Inflation remained moderate and within the RBIs comfort range, while private consumption and government capital expenditure supported economic activity across sectors. The industrial sector, including manufacturing and construction, saw stable growth, while services remained resilient with strong demand. Agricultural output recovered due to favourable conditions, aiding rural sentiment. Export performance remained steady, and foreign exchange reserves stayed healthy, reflecting macroeconomic stability. While global uncertainties and high interest rates posed challenges, Indias domestic demand, infrastructure push, and ongoing policy reforms helped sustain growth, providing a supportive environment for manufacturing and engineering industries during the year.

Tractor Industry

The tractor industry is a vital part of Indias rural economy, supporting the transformation of agriculture and sustaining nearly half of the nations workforce. After a relatively subdued performance in Financial Year 2023–24, the industry saw a turnaround in Financial Year 2024–25. The Indian tractor industry recorded annual sales of 9.39 lakh units in Financial Year 2024–25, marking a growth of 7.3 percent over the previous year. This growth was supported by a timely monsoon, healthy reservoir levels, and improved crop procurement at higher minimum support prices. Government initiatives promoting farm mechanisation and rural infrastructure further strengthened demand. However, this growth was partly offset by a slowdown in international farm markets impacting exports. continued to affect trade flows.

CV Industry

Financial Year 2024–25 was a mixed year for the CV industry, with volumes marginally lower than Financial Year 2023–24. The industry faced headwinds from erratic monsoons, subdued fleet utilization, and slower infrastructure execution.

Nevertheless, the latter half of the year saw a gradual recovery, driven by resumed construction and mining activity and festive season demand. These green shoots indicate a more stable and positive trajectory in Financial Year 2025–26, especially with continued government push on infrastructure and logistics.

Commodity Prices

In Financialespecially Year 2024–25, commodity prices displayed a mixed trend amid global growth uncertainties, trade tensions, and weak manufacturing activity. Agricultural prices were shaped by strong rabi production and varied weather conditions across regions. Policy uncertainties, supply build-ups, and the potential for economic slowdowns may continue to influence commodity prices going forward. GSTL remains focused on cost optimization through value engineering, strategic supplier negotiations, prudent inventory management, and long-term price contracts.

Steel Industry

The Indian steel industry recorded stable growth in Financial Year 2024–25, supported by strong domestic demand from infrastructure, construction, and automotive sectors.

Government-led infrastructure projects, urbanization, and resilient housing demand continued to drive steel consumption during the year. However, the industry faced challenges from rising raw material costs and increased Chinese steel imports, which exerted pressure on domestic prices and producer margins. Chinas slower-than-expected economic recovery resulted in excess steel being diverted to export markets, including India, impacting domestic market dynamics. In response, the Indian government introduced safeguard duties on certain steel imports to protect local manufacturers and align with the broader goal of promoting self-reliance, enhancing local production, and improving the global competitiveness of the steel sector. While these measures aim to support domestic producers, it remains important to balance industry support with broader economic considerations, including managing inflation and ensuring affordability for end-

2. COMPANY OVERVIEW AND BUSINESS DESCRIPTION

Your Company delivers innovative and reliable tubular solutions to a diverse range of industries & niche markets in core sectors such as automotive and commercial vehicles, hydraulic systems and general engineering. Our team manufactures tailor-made seamless steel tubes, high-pressure tubes, welded tubes, and coupling nuts to meet the specific needs of our clients. We blend our advanced technical expertise with uncompromising standards to provide the highest quality with utmost accuracy.

These products are mainly supplied to the Original Equipment Manufacturers (OEMs) of the automotive sector, Farm Equipment manufacturers, Construction equipment manufacturers and other Engineering Industries.

3. STRENGTH, OPPORTUNTIES AND THREAT

Strengths

Integrated Manufacturing Setup - Only integrated facility in India for small diameter cold drawn seamless steel tubes, providing end-to-end quality control and operational efficiency.

Deep Market Understanding - Drawing upon a rich legacy of 40 years, the Company has developed an intimate understanding of diverse customer expectations across industries.

Established OEM Relationships - Over 30 years of strong partnerships with top customers and OEMs, ensuring consistent demand and trust.

Superior Delivery and Customization Capabilities -

Capability to fulfil orders of any quantity faster than local .peers, offering superior operational flexibility

Preferred Supplier to Leading OEMs - The only local player of scale and quality approved by a majority of the leading local and global OEMs.

Robust Financial Position - Strong financials reflect

GSTLs potential to generate long-term value for shareholders, customers, and stakeholders.

Operational - Focus on value engineering, cost optimization, and efficient supply chain management supports competitive pricing and healthy margins.

Experienced Management Team- A stable leadership team with low staff turnover ensures prudent strategic direction and operational execution.

Opportunities

Monsoon - The India Meteorological Department has forecast above-normal rainfall for the upcoming monsoon season. An early and well-distributed monsoon is expected to boost rural sentiment and aid agricultural productivity, supporting stable demand during the year.

Union Budget 2025 - Government investments and increased spending in roads, railways, logistics, and housing will drive steel tubes and commercial vehicle demand.

Export Market Diversification - Global supply chain particularly in diversification the US, Europe, and ASEAN.

Industry 4.0 - By investing in artificial intelligence, automation, and Robotics, GSTL can enhance its production processes, improve productivity, reduce costs, and increase operational flexibility.

Easing Inflation - A moderation in inflation can improve consumer purchasing power and enhance rural and urban sentiment. This supports higher demand across automotive, farm, and infrastructure sectors.

Favourable Interest Rates - Lower interest rates reduce borrowing costs for both businesses and consumers. This can drive capital investments in infrastructure and manufacturing while encouraging vehicle and equipment purchases, positively impacting demand for GSTLs precision steel tubes.

Recovery in International Markets - A gradual recovery in global markets, supported by stabilising supply chains and improved demand in key economies, presents export growth opportunities for GSTL.

Threats

Raw Material Price Volatility - Fluctuations in the prices of key raw materials such as steel, crude oil, and natural gas can significantly impact production costs and profitability.

Trade Policy and Geopolitical Risks - Tariffs, trade wars, and shifting global alliances can affect export viability, disrupt supply chains, and increase input costs, posing challenges for GSTLs global competitiveness.

Global Economic Slowdown - Fears of a global recession, coupled with persistent geopolitical tensions, may dampen demand across end-user industries, impacting production volumes and

Logistics Disruptions and Rising Freight Costs - Ongoing supply chain disruptions and high shipping costs can affect timely delivery and increase operational expenses.

Currency Fluctuations Cost Leadership - Volatile foreign exchange rates can impact the cost of imported inputs and the realization from exports, affecting margins.

4. PRODUCT WISE PERFORMANCE

More than 80% of the companys revenue comes from the production of seamless steel tubes, while the remaining revenue is generated from other products such as welded tubes and cold-formed coupling nuts.

5. BUSINESS OUTLOOK Farm Sector

The outlook for the Indian farm and tractor industry in Financial Year 2025–26 remains positive. Expectations of a normal monsoon, improving crop price realization, and positive rural sentiment are likely to drive demand for tractors and farm machinery. Government initiatives through the Union Budget continue to prioritize agriculture, rural development, and infrastructure investment, creating an enabling environment for growth in farm mechanization. Enabling trends such as farm diversification, higher cropping intensity, and institutional credit access further support long-term sectoral growth.

Monsoon

A normal and well-distributed monsoon is vital for sustaining rural demand, which directly impacts the tractor and automotive sectors. The India Meteorological Department has forecast above-normal rainfall for the upcoming monsoon season. Timely onset and distribution of rainfall will be critical factors, as disruptions caused by uneven rainfall could impact rural cash flows and consequently, demand for our products

An early and well-distributed monsoon is expected to boost rural sentiment and aid agricultural productivity, supporting stable demand during the year.

Protectionism and Geopolitics

As we step into Financial Year 2025-26, the outlook is cautiously optimistic. The global landscape for Financial Year 2025–26 remains volatile. Rising protectionism, trade wars, and shifting geopolitical dynamics are reshaping global commerce. A growing wave of economic nationalism is challenging established trade networks and disrupting supply chains. We are seeing a realignment of geopolitical alliances and the formation of new regional trade blocs. These changes bring challenges such as commodity price volatility, supply chain disruptions, and rising input costs. However, they also create opportunities for India to position itself as a reliable alternative in global supply chains. As globalization evolves into a multi-polar, regionally collaborative structure, Indias stable democracy and trusted partner status place it well to benefit from this transition.

Shifting Trade Dynamics

Amid shifting global trade dynamics, India has the opportunity to strengthen its position as a manufacturing and supply chain hub. Restrictions on Chinese exports and high tariffs on competing countries could open new markets for Indian goods, provided there is a focused push on manufacturing competitiveness and private sector investment. Speed and agility will be key to leveraging this opportunity, as other countries such as Vietnam and the Philippines also position themselves as alternative hubs. This environment calls for proactive adaptation, innovation, and investment in manufacturing and R&D to capture emerging opportunities in global trade realignment.

What to Expect from 2025?

Indias economic outlook for Financial Year 2025–26 remains cautiously optimistic, with strong domestic drivers balanced against global uncertainties. With stimulus provided by the Union Budget and RBI monetary policy measures to increase liquidity in the economy, the India consumption story is expected to remain strong to deliver on its growth target for Financial Year 2025-26. Consumer spending is expected to gain momentum, supported by an improved agricultural outlook, rising incomes, and positive rural sentiment. Government investments in infrastructure, including roads, housing, logistics, and railways, alongside growth in services sectors such as hospitality, healthcare, real estate, and education, are likely to drive capacity creation and employment. Inflation is expected to moderate closer to the RBIs target, allowing room for a gradual easing of interest rates, while financial stability remains strong with low bad loan ratios and healthy forex reserves. However, risks persist, with privatebusiness risk investment likely to remain cautious amid geopolitical tensions, uneven domestic demand, and oversupply from China. Rising global commodity prices and ongoing logistics disruptions may drive input cost inflation. Merchandise exports may face challenges due to weak global demand and trade tensions, while services exports are expected to remain resilient, despite evolving global financial market risks. Overall, India is positioned to remain the fastest-growing major economy, reflecting a stable outlook supported by domestic momentum . and ongoing structural reforms aimed at boosting investment, manufacturing, and job creation.

In a scenario with so many moving parts, it is difficult to predict outcomes. Hence, GSTL remains confident yet mindful as we step into Financial Year 2025–26. Your Company will continue to focus on cost leadership, value engineering, and efficient supply chain management. These priorities will help us mitigate inflationary pressures and manage input cost volatility. Our well-defined product strategy and customer-centric approach position us to capture demand while maintaining financial discipline. We aim to sustain profitable growth, strengthen our domestic leadership, and expand our presence in global markets. GSTL is well positioned to leverage Indias growth momentum and navigate evolving global dynamics.

6. RISK AND CONCERNS

The Companys business is constantly exposed to various internal and external risks. GSTL has implemented robust systems and review mechanisms to actively monitor, manage, and mitigate these risks to protect its business continuity and stakeholder value.

A. Industry and Macroeconomic Risks

Operating in a cyclical and volatile industry, GSTLs performance is closely linked to macroeconomic trends, government policies, and regulatory changes in India and globally. Adverse movements in these areas can impact demand, revenue, profitability, and liquidity.

B. Foreign Exchange Risks

GSTL imports steel and consumables while exporting finished tubes, exposing it to fluctuations in foreign exchange rates. Volatility in currency markets can directly affect raw material costs, export realization, and overall profitability.

C. Raw Material Price Volatility

Fluctuations in the price of key raw materials such as steel and natural gas can impact production costs and margins. Global supply chain disruptions, geopolitical tensions, and commodity market volatility can exacerbate these risks.

D. Energy Price Fluctuations

Volatility in gas and electricity prices can impact the Companys production costs, especially as the Companys processes are energy-intensive.

E. Monsoon Dependence

A normal monsoon is critical for the health of Indias agriculture and rural economy, directly influencing in the tractor and automotive sectors. Unpredictable or uneven monsoon patterns can reduce rural incomes and

. An dampen demand, posing a significant untimely or unevenly distributed monsoon could adversely impact sales and overall business performance.

F. Environmental and Regulatory Compliance

The Companys operations are subject to environmental laws and evolving compliance requirements. Non-compliance or changes in environmental regulations could lead to increased costs, operational restrictions, or reputational risks.

G. Legal and Taxation Risks

The Company operates within a dynamic legal and regulatory environment, subject to various direct and indirect tax laws, compliance requirements, and evolving policy frameworks. Frequent changes in tax structures, interpretations, and regulations require continuous monitoring and timely adaptation to ensure compliance, avoid penalties, and manage potential litigation risks. The Company has robust processes in place to address these changes proactively and to safeguard its operations and financial health

H. Cybersecurity and IT Risks

As GSTL continues its digital initiatives, it faces risks related to cyber threats and data breaches, which could disrupt operations, compromise sensitive data, and harm its reputation. Your Organization has undertaken

Cybersecurity assessments during the Financial Year 24-25 to identify gaps and mitigate the same. Your

Organization has also invested in various security tools and adopted best practices to ensure the confidentiality, integrity and availability of Information remains unscathed.

I. Trade Policy and Geopolitical Risks

Tariffs, trade wars, and geopolitical developments can impact GSTLs export competitiveness, input costs, and supply chain stability. Increasing protectionism globally could lead to higher duties on imports and exports, affecting operations.

J. Competition and Technological Disruption

GSTL faces competition from domestic and international players. Technological advancements, customer preferences for new materials, or substitutes can impact the demand for seamless tubes. GSTL continues to invest in technology and operational competitive.

K. Credit and Customer Concentration Risks

Dependency on key OEM customers can expose GSTL to credit risk and demand fluctuations if any major customer reduces orders, delays payments, or faces financial stress.

7. INTERNAL CONTROL SYSTEMS

Your Company has a well-established internal control system in place which is commensurate with the size and nature of its business. The internal control system ensures that all the assets of the Company are safeguarded from loss, damage or disposition. Checks and controls are in place to ensure that transactions are adequately authorized and recorded and that they are reported correctly. The internal control system is supplemented by an internal audit by a firm

Chartered Accountants and statutory audit which is periodically reviewed by the management and Audit Committee. No material issues in relation to the adequacy of Companys control systems were reported during the year.

? Debtors Turnover: The above ratio is used to quantify a Companys effectiveness in collecting its receivables or money owed by customers. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. It is calculated by dividing turnover by average trade receivables.

? Inventory Turnover: Inventory Turnover is the number of times a Company sells and replaces its inventory remain during a period. It is calculated by dividing turnover by average inventory.

? Current Ratio: The Current Ratio is a liquidity ratio that measures a Companys ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.

? Operating Profit Margin (%): Operating Profit Margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing the EBIT by turnover.

? Net Profit Margin (%): The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing the profit for the year by turnover. of

? Return on Net Worth: Return on Net Worth (RoNW) is a measure of profitability of a Company expressed in percentage. It is calculated by dividing total comprehensive income for the year by capital employed during the year.

Sr. No. Ratio Description	FY 2025	FY 2024	Change (%)
1 Debtors Turnover (in days)*	47	42	11%
2Inventory Turnover Ratio* (in days)	95	91	5%
3 Interest Coverage Ratio	Not Applicable in the absence of interest payment
4 Current Ratio	7.81	6.79	15%
5 Debt Equity Ratio	Not Applicable in the absence of any debt
6 Operating Profit Margin (%)	41.61	40.02	4%
7 Net Profit Margin (%)	31.81	30.33	5%
8 Return on Net Worth	22.11	24.80	-11%

The Audit Committee of the Board regularly reviews compliance with the Companys policies, procedures and statutory requirements in consultation with the Statutory Auditors and the Internal Auditors, who also attend the Audit Committee meetings.

8. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year, Net Sales escalated by approximately 1.32 % and Net Profit escalated by 5.57%.

Major Financial Ratios:

Capital Investment of Rs. 400 Lakhs was made during the year. The entire capital investment has been made out of the Companys internal cash accruals.

9. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company believes that nurturing and strengthening the human resource is vital in creating a uniqueorganizational reduction in unsafe structure consisting of harmonious relationships. The Company also considers its human capital a critical factor to its success. The Company also provides suitable environment for development of leadership skills which enables it to recruit and retain quality professionals in all the fields. The attrition rate is lower than the rate prevailing in the automotive sector. The Company has drawn up a comprehensive human resource strategy, which addresses key aspects of human resource development such as:

The code of conduct and fair business practices;

Evolution of performance based compensation packages to attract and retain talent.

Skill development of all Blue collared workforce to enable them to effectively meet the productivity and quality deliverables

There were total 385 number of employees (including contractual employees) under the payroll of the Company.

10. SAFETY, HEALTH AND ENVIRONMENT (SHE) MANAGEMENT

Your Company continues to adopt the best safety practices that have reduced the accident and severity rate. The initiation of new personnel in Safety, Health and Environment (SHE) Management practices, before their deployment to the shop floor, contributed to a significant.

Constant upgradations in technology, safety equipment provisions and regular safety inspections of the plant and machinery are also carried out to mitigate any hazards. This is progressively taking the Company towards achieving the target of Zero Accidents.

11. CAUTIONARY STATEMENT

Statements made in this Management Discussion and

Analysis describing your Companys objectives, projections, estimates and expectations are "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

The Management is confident that your Company with its . quality products, enduring relations with OEM and commitment of staff will continue to sustain its growth and pay out by way of dividend to the shareholders in the year 2025-2026

For GANDHI SPECIAL TUBES LTD.

Manhar G. Gandhi

Chairman and Managing Director

DIN: 00041190

 

Place: Mumbai

Date: 28 May 2025