GNA Axles Ltd Management Discussions

INDIAN ECONOMY

The Indian economy posted a growth of around 7.4% in the financial challenging due to geo political conditions globally and uncertainty in trade due to impositions of the tariffs. India was able to put up a great show by good domestic demand and Government capex. The private sector investment, while improving, remained measured, reflecting differentiated risks amidst a volatile trade and tariff environment. Geopolitical complexity intensified with the escalation of long-standing tensions in West Asia. Inflation in the Country also slowed down in the financial year 2025-26. The exports from the country were under pressure due to a weak demand and the disruptions caused due to the tariffs imposed by the US Government. Despite global uncertainties and downward revisions in growth forecasts for other large economies, India is set to maintain its leadership in global economic growth. Supported by strong fundamentals and strategic government initiatives, the country is well-positioned to navigate the challenges ahead. The global economy entered CY 2026 in a fragile state, with key downside risks arising from higher policy uncertainty and escalating tensions arising from the conflict in West. The Asian Development Bank and Reserve Bank of India project a growth rate of around 6.9 percent for the country in the Financial Year 2026-27.

INDUSTRY OVERVIEW AND OUR PERFORMANCE

As you all know that GNA Axles Limited is preferred OEM supplier for manufacture year2025-26inspiteofanenvironmentthatwas and supply of Rear Axle Shafts, Spindles and Drive Shafts for Tractors and Commercial Vehicles. Our Business is heavily dependent on the demand from the OEM customers both in India and Abroad. During the year under review the demand from the domestic Tractor as well as Commercial vehicle manufacturers for the components produced by the Company was very good and robust which helped the Company limiting the downside in its top line as the Exports of the Companys products were highly impacted due to the tariffs imposed by the US Government of the products exported by the Company to US. The lowering of GST rate on tractors coupled with above-normal monsoon also helped the Industry. Another shift is the increase in the non farm use of the tractors like their deployment in haulage, construction, sand mining and rural infrastructure work etc have also helped the tractor Industry to perform their best and which in turn has increased the demand of the Companys products. The Domestic demand from the Commercial Vehicle segment was also good as the Company was able to penetrate into more segments within the CV space. The Exports of the Company suffered due to imposition of the tariffs and were lower than the last years sale and which resulted in the overall drop of around 4 percent in the total sales of the Company.

The Brief Summary of the operational and financial performance of the Company is given below:-

Product-wise Volume Distribution No. of Pcs. in Lacs

Product Types	2025-26		2024-25
	Domestic	Exports	Domestic	Exports
Rear Axle Shafts	26.25	14.58	21.37	17.45
Spindles	3.22	6.21	3.30	7.75
Drive Shafts	2.02	2.67	1.81	1.46
Total	31.49	23.46	26.48	26.66

Segment-wise distribution No. of Pcs. in Lacs

Segments	2025-26		2024-25
	Domestic	Exports	Domestic	Exports
Off Highway	20.18	2.64	17.73	3.42
CV	11.31	20.82	8.75	23.25
Total	31.49	23.46	26.48	26.67

Geography-wise Revenue from operations Amount ( in Cr)

	2025-26	2024-25
Exports	678.69	840.36
Domestic	765.76	672.05
Total	1,444.45	1,512.41

Amount ( in Cr)

Financial Highlights	2025-26	2024-25
Total Operating Revenue	1,478.42	1,539.74
Profit Before Depreciation, Interest and Tax	240.98	213.22
Financial Costs	13.25	11.86
Depreciation	70.04	57.10
Profit before Tax	157.69	144.27
Tax Expense	40.70	37.15
Profit After	116.99	107.12
Earnings Per Share
- Basic	27.25	24.95
- Diluted	27.25	24.95

Key Financial Ratios

The Company has identified the following ratios as keyfinancialratios:

Sr. No Particulars	2025-26	2024-25	Explanation for Significant Change
1 Debtors Turnover Ratio (Times)	2.31	2.50	-
2 Inventory Turnover Ratio (Times)	6.54	7.73	-
3 Debt Service Coverage Ratio	4.22:1	6.55:1	-
4 Current Ratio (Times)	2.37	2.50	-
5 Debt Equity Ratio (Times)	0.22	0.29	-
6 Return on Capital Employed (%)	14.18	13.62	-
7 Net Profit Margin (%)	8.10	7.08	-
8 Return on Equity (%)	11.65	11.90	-

Market and Business Outlook

With promising GDP growth outlook, incentives from government to improve productivity in both manufacturing and agriculture sectors, and continuing focus on infra, demand for CVs and Tractors is expected to improve from here and we remain optimistic about domestic demand while keeping a close watch on geopolitical developments, interest rates, fuel prices and inflation. There has been an improvement in the Export sales of the Company also in the last quarter of the Fiscal 2025-26 as the demand from the US has increased due to lowering of the tariffs and their rationalisation. India has been proactively engaging with the US on tariffs and is likely to be the first country to sign a bilateral trade deal to avoid reciprocal tariffs. India will continue to be the fastest-growing among all major global economies, though the trade related disruptions have exacerbated uncertainties clouding the economic outlook. We hope that the Company will be also to post improved numbers in the current Financial Year both on the Sales and Margin fronts due to effective steps being taken in the direction of New product development, improving efficiency and revival of the Export markets.

Opportunities and Threats

It is expected that India will grow faster and ahead of the other economies of the World in the current financial year and there will be healthy demand for the Companys products both from the Off Highway and Commercial Vehicle sectors. The Company is penetrating into SUV segments also and this penetration has already started yielding results and the Company has identified this segment as the next Growth Engine for itself. The Company is focussing on this segment both in the domestic and overseas markets. As global automakers reduce reliance on traditional sourcing hubs, India has a prime opportunity to increase its direct exports. Any increase in the Tariffs or imposition of new tariffs by the US can impact the export revenues. The situation is evolving as tariff actions have been fluid and trade negotiations are ongoing. Any adverse development on the tariff front in the USA can have an adverse impact on the demand of Commercial Vehicles in USA and that in turn can impact the demand for the Companys products.

Human Resources & Industrial Relations

The Company believes that human resources is the strong foundation for creating endless possibilities for its business. Employee development is a priority, with a focus on building essential competencies to deliver measurable outcomes. Our employees are our prime assets and are instrumental and vital to our success. We nurture our people by investing in their empowerment through learning and development, wellness and safety besides providing contemporary workplace facilities. The Companys Succession Planning policy identifies and nurtures potential leaders, creating a robust pipeline of talent to ensure continuity in key roles, reinforcing the role of human resources as a critical driver of success. We are committed to create a professional culture which enables our employees to grow in their career alongwith the growth of the organisation. We continue to step up efforts to accelerate our value-based growth strategy and the overall development of our employees and continue to engage them in various initiatives of development and learning opportunities, reward and recognition and their career growth. Richer collaborations and stronger teamwork have accelerated our pursuit of excellence. The Company employed 1,702 employees on its rolls as at the end of the financial year 2025-26. The Companys resilient culture, rooted in core values, is reflected in the low attrition rates and high employee satisfaction. By investing in the people, GNA continues to build a motivated, capable, and engaged workforce, driving sustainable success and stakeholder value.

Quality, Efficiency & Delivery

During the year under review, we undertook various measures to reflect our strong endeavour towards quality commitment, efficiency and deliveries.

- In-house execution of manufacturing processes to monitor product quality, control production costs and maintain delivery schedules

- Improving forging efficiency to increase capacity utilization

- Better relations with vendors for achieving quality, costs and delivery objectives with the help of regular vendor Audits

- Centralised approach towards sourcing and vendor management ensuring economies of scale in raw material procurement, especially steel

- Special focus on products packaging to meet customers requirements. Due consideration given to the mode of transportation and destination, ensuring timely deliveries

Technology and Automation

Technology define ones competitive edge in the market. The Company realizes that and has been investing in systemstechnological upgradation and also fine-tuning and processes to ensure that those are in sync with the technology platforms. Thus, helping us provide a variety of customer specifications. The forging facilities are supported by robots. We intend to invest in automation for most stages of production process. This will help ensure optimal use of resources, reduction of industrial risk to human workers, economies of scale and significantly higher accuracy in the overall manufacturing and design of products.

Internal Control System

The Company has a well devised and comprehensive mechanism and controls to maintain internal controls, ensuring efficiency and reliability in its operations. These controls have been designed in such a way so as to provide assurances regarding the maintenance of proper financial records, protection of the assets of the Company, and also ensures monitoring of the operations of the Company. The Company has set up standard operating procedures, standardisation of its processes to achieve a smooth work flow across the organisation. Additionally, the Company employs continuous monitoring systems, maker-checker concepts, and implements Delegation of Authority matrices to enhance internal controls. The Company utilises state-of-the-art technology to enhance operational efficiency and employs a robust risk management system to identify and mitigate risks associated with business activities. The Financial Records of the Company are maintained in SAP and the transactons are entered in the SAP systems to ensure precision, accuracy, and integrity in reporting. The Internal Audit function of the Company reviews the Compliance of the established designs of Internal Control and the shortfalls and discrepancies, if any, are looked upon into and tracked for closure. The summary of the Internal Audit findings and status of implementation of action plans for risk mitigation, are submitted to the Audit Committee every quarter for review, and concerns around residual risks if any, are presented to the Board.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied. Important factors that could make a difference to the Companys operations include global economy, political stability, stock performance on stock markets, changes in Government regulations, tax regimes, economic developments and other incidental factors. Except as required by law, the Company does not undertake to update any forward looking statements to reflect future events or circumstances. Investors are advised to exercise due care and caution while interpreting these statements.