Garg Furnace Ltd Management Discussions

Part-A

For FY 2024-25

Presented by Toshak Garg, Promoter cum Managing Director Garg Furnace Limited

Leading the Future - Next-Gen Vision at Garg Furnace Namaste Shareholders,

It gives me great pride to present the Management Discussion and Analysis for FY 2024-25 on behalf of the Board of Garg Furnace Limited. As the next generation entrusted with this legacy, I see our role not just as steel manufacturers—but as engineering partners, building stronger foundations for Indias growth through quality, innovation, and responsibility.

This year marked a turning point. We have begun shifting from a commodity mindset to a value-first, margin-driven model. The steel industry is evolving, and so are we. Every decision we made this year was rooted in one core belief: Steel should perform, not just weigh.

? Our Three Core Focus Areas in FY 2024-25

1. Chemistry-Led Product Innovation

Tailoring our steel compositions to meet specific strength, machinability, and consistency requirements for industrial applications.

2. Entry into Value-Added Segments

Launching high-strength steel and self-drilling screws aimed at auto, engineering, and infrastructure sectors.

3.Strategic Acquisition (Initiated)

We have taken a decisive step toward acquiring a 51% stake in Vaneera Industries Ltd., which brings advanced alloy steel capabilities to our ecosystem.

^ Industry Context - The Steel Landscape in FY 2024-25

This year brought challenges across the global steel value chain. Benchmark per-ton steel prices declined by 10-15%, driven by:

• Global oversupply

• Softened demand from China •Volatile input prices and freight

Despite strong infrastructure-led demand in India, margin pressure persisted industry-wide. Many players saw squeezed profitability and stagnating growth.

0 Our Response: Innovation, Efficiency, and Margin-Focus

Amid this backdrop, Garg Furnace chose not to compete on price—but on performance. We redesigned our internal chemistry, processes, and customer base with one goal: Improve bottomline profitability regardless of commodity cycles.

Chemistry-Led Value Creation

• Introduced custom steel compositions—carbon, manganese, and chromium balanced for specific performance needs

• Supplied to auto component suppliers, agricultural equipment makers, and industrial fastener producers

• Gained traction as a preferred vendor to Tier-2 OEM suppliers

• Enabled performance-linked pricing, reducing dependence on general market prices

This strategic transformation allowed us to:

• Carve out a niche based on quality

• Maintain 100% capacity utilization

• Grow margins and customer loyalty, even as prices fell

y Financial Performance Snapshot

Despite falling steel prices, our innovation-led strategy helped us increase net profit by 60%, proving that quality and value addition are the future of this business.

And we continued to remain 100% debt free.

Delivered What We Promised (from FY 2023-24)

Commitment (Last Year)

Status FY 2024-25

Improve margins through better quality & direct scrap sourcing Q 50% direct sourcing achieved, cost savings realized Enter alloy steel market

Q Strategic step taken via proposed Vaneera stake Diversify into auto/defense-grade steels Q Value-added grades accepted by OEM-tier suppliers

^ Strategic Expansion - Vaneera Industries Ltd.

This year, we initiated the acquisition process for a 51% stake in Vaneera Industries Ltd., Ludhiana— a critical step in our journey toward becoming a premium alloy steel player.

Why VaneeraRs.

•Advanced metallurgy: LRF, EMS, VD

•Total planned capacity: 204,000 MT

• Serves auto, engineering, and defense sectors

•Allows mid-premium pricing at 5-10% discount to arc furnace steel

• Perfect for import substitution

The acquisition is expected to:

• Expand product range

• Improve realizations

• Provide entry into high-margin, performance-focused industries S3 Fasteners: Scaling a New Growth Vertical

We also commissioned a new self-drilling screw plant this year:

•400 MT/year capacity, expandable to 1200 MT •Technology sourced from Taiwan

•Targets Indias ^5,000 Cr+ fastener market (20%+ imports)

• Strong policy tailwinds with anti-dumping protections

Our positioning here is clear: Local quality at global standards.

^ Sustainability & Compliance

We continue our journey as a responsible manufacturer:

• 100% recycled scrap used as raw material

Q Outlook for FY 2025-26

As we look ahead, were optimistic and laser-focused. Key initiatives:

• Complete the Vaneera acquisition and begin alloy steel production Scale up value-added steel and fastener volumes

• Expand customer base in auto and engineering segments

• Sustain bottom-line-led growth, not just top-line expansion

Our internal goal is clear: Build a differentiated, defensible steel business that thrives in every cycle.

A Note of Gratitude

To all our shareholders, thank you for believing in us. This year we didnt grow by chance—we grew by choice, by discipline, and by design.

As I take forward the legacy of Garg Furnace, I assure you that the best is yet to come. We are not just forging steel anymore—we are forging value, resilience, and leadership.

Warm regards,

Toshak Garg

Promoter cum Managing Director Garg Furnace Limited Ludhiana, Punjab

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Part-B

NAMASTE SHAREHOLDERS

It gives me great pride to present the Management Discussion and Analysis for FY 2024-25 on behalf of the Board of Garg Furnace Limited. As the next generation entrusted with this legacy, I see our role not just as steel manufacturers—but as engineering partners, building stronger foundations for Indias growth through quality, innovation, and responsibility.

This year marked a turning point. We have begun shifting from a commodity mindset to a value-first, margin-driven model. The steel industry is evolving, and so are we. Every decision we made this year was rooted in one core belief: Steel should perform, not just weigh.

INDUSTRY OVERVIEW

The global steel industry in FY 2024-25 witnessed significant headwinds. Benchmark steel prices declined by 10-15% due to global oversupply, softened demand in China, and fluctuating input and freight costs. While Indias infrastructure-driven demand remained robust, industry-wide profitability was challenged.

In this evolving landscape, Garg Furnace Limited (GFL) made a strategic shift from volume-based growth to a value-first, margin-led business model. Our focus remains on engineering high- performance steel solutions, especially in specialized and fast-growing end-use segments such as automotive, infrastructure, and precision manufacturing.

OUR COMPANY

We operate in the steel industry, primarily supplying to the agricultural, auto, nut and bolt and cycle parts market in India.

Our Three Core Focus Areas in FY 2024-25

1. Chemistry-Led Product Innovation

Tailoring our steel compositions to meet specific strength, machinability, and consistency requirements for industrial applications.

2. Entry into Value-Added Segments

Launching high-strength steel and self-drilling screws aimed at auto, engineering, and infrastructure sectors.

3. Strategic Acquisition (Initiated)

We have taken a decisive step toward acquiring a 51% stake in Vaneera Industries Ltd., which brings advanced alloy steel capabilities to our ecosystem.

OPPORTUNITIES AND THREATS OPPORTUNITIES Chemistry-Led Value Creation

Introduced custom steel compositions—carbon, manganese, and chromium balanced for specific performance needs

Supplied to auto component suppliers, agricultural equipment makers, and industrial fastener producers

Gained traction as a preferred vendor to Tier-2 OEM suppliers

Enabled performance-linked pricing, reducing dependence on general market prices

This strategic transformation allowed us to:

• Carve out a niche based on quality

• Maintain 100% capacity utilization

• Grow margins and customer loyalty, even as prices fell

THREATS

• Volatility in raw material (scrap) and energy costs

• Pricing pressure from imports and commoditized steel players

• Delays in infrastructure spending or auto sector slowdowns

• Risk of integration and execution in new acquisitions and business verticals

FINANCIAL/OPERATIONAL PERFORMANCE

Despite falling steel prices, our innovation-led strategy helped us increase net profit by 60%, proving that quality and value addition are the future of this business and we continued to remain 100% debt free. The detailed performance has already been discussed in the Directors Report under the column Financial Performance.

INTERNAL CONTROL & SYSTEMS

The company has adequate internal control procedures commensurate with its size and nature of its business. These internal policies ensure efficient use and Protection of assets and resources. Compliance with policies, ensure reliability of financial and operational reports. The detailed point has already been discussed in the Directors Report under the point Internal Financial Control.

RISK AND CONCERNS

This year brought challenges across the global steel value chain. Benchmark per-ton steel prices declined by 10-15%, driven by:

• Global oversupply

• Softened demand from China

• Volatile input prices and freight

Despite strong infrastructure-led demand in India, margin pressure persisted industry-wide. Many players saw squeezed profitability and stagnating growth.

STATUS FY 2024-25

Improve margins through better quality & direct scrap sourcing 50% direct sourcing achieved, cost savings realized Enter alloy steel market

Strategic step taken via proposed Vaneera stake Diversify into auto/defense-grade steels Value-added grades accepted by OEM-tier suppliers

Strategic Expansion - Vaneera Industries Ltd.

This year, we initiated the acquisition process for a 51% stake in Vaneera Industries Ltd., Ludhiana— a critical step in our journey toward becoming a premium alloy steel player.

Why VaneeraRs.

• Advanced metallurgy: LRF, EMS, VD

• Total planned capacity: 204,000 MT

• Serves auto, engineering, and defense sectors

• Allows mid-premium pricing at 5-10% discount to arc furnace steel

• Perfect for import substitution

The acquisition is expected to:

• Expand product range

• Improve realizations

• Provide entry into high-margin, performance-focused industries Fasteners: Scaling a New Growth Vertical

We also commissioned a new self-drilling screw plant this year:

• 400 MT/year capacity, expandable to 1200 MT

• Technology sourced from Taiwan

• Targets Indias ^5,000 Cr+ fastener market (20%+ imports)

• Strong policy tailwinds with anti-dumping protections

Our positioning here is clear: Local quality at global standards.

Sustainability & Compliance

We continue our journey as a responsible manufacturer:

• 100% recycled scrap used as raw material FUTURE OUTLOOK

As we look ahead, were optimistic and laser-focused. Key initiatives:

• Complete the Vaneera acquisition and begin alloy steel production

• Scale up value-added steel and fastener volumes

• Expand customer base in auto and engineering segments

• Sustain bottom-line-led growth, not just top-line expansion

Our internal goal is clear: Build a differentiated, defensible steel business that thrives in every cycle. HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATION

During the year, the company has employed 69 persons. The Industrial Relations remain cordial during the year. The company is continuing its efforts for improvement in the work culture wherein employees can contribute to their fullest potential.The management acknowledges the contribution of all employees in achieving better performance.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

As per SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to provide details of significant changes (change of 25% or more as compared to immediately previous financial year) in key financial ratios. Accordingly, the Company has identified the following ratios as key financial ratios:-

Ratio	F.Y. 2024-2025	F.Y. 2023-2024	% Change
Current Ratio	3.91	3.98	-1.83%
Debt equity Ratio	0.02	0.03	-24.96%
Debt Services coverage Ratio	70.36%	42.10%	67.13%
Return on equity ratio (ROE)	13.76%	16.02%	-14.11%
Inventory Turnover Ratio (in days)	21.99	22.34	-1.56%
Trade receivable turnover ratio (in days)	11.02	12.23	-9.93%
Trade payable turnover ratio (in days)	22.51	29.02	-22.42%
Net capital turnover ratio	6.34	8.13	-22.04%
Net profit ratio	2.92%	2.14%	36.39%
Return on capital employed (ROCE)	12.45%	11.42%	8.98%

EXPLANATION FOR CHANGE OF 25% OR MORE IN KEY FINANCIAL RATIOS:

Change in Debt services coverage ratio due to increase in earnings during the year. Change in net profit ratio due to increase in net profit after tax during the year

ACCOUNTING TREATMENT:

The financial statements of the Company for financial year 2024-2025 have been prepared in accordance with the applicable accounting principles in India and the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013 read with the rules made thereunder. The Company has followed accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Companies Act, 2013 (the Act) and other relevant provisions of the Act. The significant accounting policies which are consistently applied are set out in the notes to the financial statements.

Place: Ludhiana	For and on behalf of the Board
Date: 14.08.2025	For Garg Furnace Limited
	Devinder Garg
	Chairman and Managing Director
	DIN:01665456