Grindwell Norton Ltd Management Discussions

General Review:

Grindwell Norton Limited ("GNO") is one of the subsidiaries of Compagnie de Saint-Gobain (Saint-Gobain), a transnational group with its headquarters in Paris and with sales of Euro 46.60 billion in 2024. Saint-Gobain has organised its businesses into two broad areas: Construction or Building related businesses focused on serving regional markets and High-Performance Solutions ("HPS") catering to the global market. GNOs businesses are part of the HPS Sector. Within GNO, the businesses are divided into two major segments.

1. Abrasives

2. Ceramics & Plastics

Business environment:

Despite global uncertainty, India has demonstrated steady economic growth. The overall growth for the full year is estimated to be between 6.4% and 6.5%. The industrial sector performed strongly in the first quarter of the financial year, recording an 8.3% growth; however, this momentum moderated in the later part of the year due to weak demand and aggressive trade policies by major trading nations.

Despite various challenges, India continues to register the fastest growth in manufacturing PMI, according to the Survey. The latest Manufacturing PMI for December 2024 remained well within the expansionary zone, driven by new business gains and robust demand.

Continued focus on higher capacity utilization across all sectors, government investment in infrastructure, strong balance sheets, and easing financial conditions have all contributed to this growth.

Abrasives Segment Review

GNO is the market leader in India and offers the widest range of cutting-edge Abrasive products to the Indian market. We cater to multiple market segments through our diverse and varied channels. While most of these products are made by GNO in India, some are sourced from other affiliate plants of Saint-Gobain or from third parties.

Abrasives business comprises of following sub-groups, also called as Sector of Activities (SOAs)

i) Bonded Abrasives

ii) Thin Wheels

iii) Coated Abrasives (including Non-woven abrasives)

iv) Superabrasives and

v) Construction products. Saint-Gobain has good backward integration for certain Abrasives as the Ceramic Materials Division of Saint-Gobain manufactures high-end Abrasive grains. Besides, Saint-Gobain has strong Research and Development capabilities and is uniquely positioned in the Abrasives industry.

Abrasives business in India has four manufacturing sites: Mora (near Mumbai), Bengaluru, Nagpur and Baddi (Himachal Pradesh). All the sites are certified under ISO 9001: 2015, ISO 14001:2015 and ISO 45001:2018. Besides, to augment its manufacturing capacity, GNO also has contract manufacturing and extensive sourcing arrangements both at domestic and international level.

In recent years, we have begun offering a range of Sealants & Adhesives under the Tekbond brand, following the successful acquisition of several businesses by Saint-Gobain in other parts of the world.

Products & Plants:

Bonded abrasives, generally available in the form of wheels and other shapes such as Segments, Sticks & Cones, etc. are used for various precision applications such as OD grinding, ID grinding, Surface grinding, Face grinding, Lapping, Honing, Super-finishing, Thread grinding, Fluting etc. They are also used in rough applications such as Snagging, Burr removal and Off-hand grinding. Bonded Abrasives are used by a variety of Industries like Steel, Bearings, Auto Ancillaries, Auto Original Equipment Manufacturers ("OEMs"), Foundries, Cutting Tools, Needle, Razor, Food Processing, Aerospace and General Engineering. The variety of products is large and consists of both Made-to-Order and Made-to-stock products. GNO makes over 15,000 different products in a year.

Thin Wheels are predominantly Cutting and Grinding Wheels used for Cutting, Deburring and Weld-removal. These are generally used in Fabrication, Construction, Foundry and General Engineering. With the increasing affordability of Power Tools, usage of TWs is growing significantly.

Coated Abrasives products are engineered composites comprising of a backing, a bond system and abrasive grains and are designed for material removal and surface preparation and finishing. Coated Abrasive products are available in various shapes like Discs, Belts, Wheels, Sheets & Rolls to suit a wide gamut of surface preparation and polishing applications. Non-Woven Abrasives, which are a part of Coated, are used for getting the desired high-quality surface finish for metals, woods and other composites. Non-woven products are also used for consumer applications like utensil cleaning, floor cleaning etc. as well.

Superabrasives are made of Diamond (synthetic or natural) or Cubic Boron Nitride and are used in precision applications in Auto, Bearing, Steel, Solar, Electronics and many similar industries.

Industry:

The Abrasives industry in India currently has two major players offering a full range of Abrasives products, one of which is GNO. GNO is the market leader in several products-market segments of Abrasives and has a strong presence across geographies and channels. Over the years, and due to the growth of the Indian market, many global players have established their presence in India. We are also seeing power tool companies and local traders importing products under their own brands from China.

Imports from China are predominantly in the power-tools accessory range and cater to the low and mid-tier market segments. In the last few years, we have also seen Paint, Adhesives and players from other allied industries also starting to participate in select Abrasives range.

While the overall abrasive Industry is becoming competitive due to the Chinese influx, this is also helping to grow the overall market as many manual applications are moving to power tools. Also, major players like GNO can differentiate due to deep customer connect, ability to customize solutions and also due to strong brand equity, built over decades.

The key success factors for the Abrasives industry in India include a comprehensive product range, a loyal distribution network, extensive market reach, a high level of technical competence to develop specific solutions for diverse customers, a strong cost position, agility in introducing new products and solutions, reliable service, consistent quality, and a focus on innovation.

Development & Outlook:

Saint-Gobain is a major player worldwide in Abrasives. It has a strong product portfolio with Centers of Excellence, footprint in several countries for manufacturing and R&D centers located in different parts of the world to cater to both the local and global needs in terms of products, manufacturing process etc. Besides, the Ceramic Materials Division of Saint-Gobain develops high end Abrasive Grains.

GNO benefits from being a part of such an organization, in terms of access to all developments in products and process technology. In 2024-25, we witnessed some slowdown in the market. Core Industries, as well as the retail markets, slowed down due to lower demand, cash crunch in the market as well as impact from the global markets. From mid and long term, we remain optimistic as we see many new segments emerging, core industries increasing their capex outlay and also some production shift from West to India. Also, we see many new and emerging segments.

From GNOs point of view, we have grown volumes faster than the market and major competitors. This growth is the result of deep customer engagement across channels and a strong focus on growth opportunities within both core and emerging segments. We have also prioritized innovation, the development of new products, and maintained a stringent focus on reducing manufacturing costs.

Risks & Concerns:

Overall, there are no major risks and concerns. There can be some volatility in the market due to increase in the US tariffs and uncertainty in the global trade. There can be some minor fluctuations in growth for certain segments, however, with the new avenues adding, we feel the market will remain positive in near future.

With India being one of the fastest growing economies in the world, we see a lot of global players taking aggressive position in India. We will have to work on many cost-cutting initiatives to not lose any space to competition.

(i) Industry & Market:

The Abrasives business caters to several industries such as Steel, Automobiles, Auto Components, General Metal Fabrication, Construction and Woodworking. The dependence on any single industry segment is less than 15% even as Automotive coupled with ancillaries and Automotive after, has a significant impact. This broad-based nature of Abrasives business in a way protects it from the volatility of any segment.

GNO, over the last few years has focused on growing the non-engineering channels and also diversifying into adjacency products. We have also increased efforts to grow exports. This in a way, should partially insulate us from the ups and downs of specific market segments in India.

(ii) Technology:

Abrasives have been used over a very long period and technological changes in terms of applications are gradual. GNO Abrasives is well positioned to anticipate and take advantage of these technological changes as Saint-Gobain is one of the Worlds leading manufacturers of Abrasives with a very strong R&D Centre in the USA with regional R&D centers located elsewhere (including a Centre in India). Both basic and applied research takes place at these R&D centers. GNO has full access to all the research and technology developments.

(iii) Competition:

The Abrasives Market in India has two major players and many other small, mid-size players. In the last few years, we have seen many Paint, Adhesives and similar companies entering the Abrasives market. With their deep distribution and aggressive prices, they have been able to penetrate the market in a short period of time. On the other hand, imports from China have grown over the period. We see organized players in power-tools segment and local traders importing from China in their own brands. High-end European and Japanese players continue to work in specific niches. They operate through their subsidiaries, distributors or agents. To meet the growing challenges in the market, the business will have to continue to invest in technology, capacities and capabilities and provide superior solutions.

Performance Polymer Solutions ("PPS")

Product, Plant & Industry:

The Performance Polymer Solutions business produces and markets more than 800 standard and custom-made polymer products through multiple business segments: EQUO MT (Motion Tech) previously known as Bearings and EQUO SPT (Sealing Precision Technologies) Omni Seals Solutions, Life Sciences ("LS") and Tape Solutions (TS ) and performance Film Solutions ( PFS) . Each of the segments demonstrates innovation, responsiveness to customer needs and polymer expertise. The major product lines in PPS are Bearings, Automotive Polymer Solutions, Seals, Tubing & Hoses, Single Use Bags and Assemblies, Tape Solutions and Performance Films. The major markets addressed are Life Sciences, Automotive, Construction, Energy, Oil and Gas and General Industrial. GNO has a plant for ENC and LS products situated at Bengaluru. This plant is certified under ISO 9001: 2015, ISO 14001:2015 and ISO 45001:2018.

Development & Outlook:

The major growth drivers are:

(a) New product development and new customer /market conversions

(b) Success in new applications development

(c) Broad basing of existing applications and markets

(d) Specification driven approvals at customers in Life Sciences and Automotive market segments. 2024-25 was a challenging year due to a drop in the market potential of Life Sciences business in domestic and export markets. EQUO MT (Bearings segment) of Engineered Components had disappointing growth in the year due to low sales in the automotive market. Tape Solutions business gained volumes in all segments of the business, i.e., Automotive, Electric Vehicle ("EV") and Construction markets in both exports and domestic segments. Strong business conversion in battery pack manufacturers supported by demand pick up in EV automotive customers has led to a very good year for Tape Solutions business. Seals business had a great year on account of a strong conversion of opportunities in exports segments coupled with good growth in domestic energy segments.

Looking ahead, the outlook for most of the businesses is positive with a favorable demand scenario in most of the markets. The Life Sciences business shows good signs of demand revival on the domestic front and export markets. With local production of Bags there is a huge new business opportunity available for conversion in both domestic and export segments. With Automotive demand expected to remain muted the outlook is cautious however there are enough opportunities for share gain and new application development in all applications of EQUO. Tape Solutions business too have a good outlook in the automotive market segments however outlook on Electric Vehicle Battery packs specifically in exports is looking challenging. The main aim of the PPS business in 2025-26 would be to strengthen its position in existing markets, while accelerating growth in new markets in the industrial, Life Sciences and construction segments. Presence of well-trained technical sales and application engineers with good market coverage is a key requirement to identify and develop new applications and deliver high growth. Building such teams and local expertise will continue to be a high priority for the business.

Risks & Concerns:

Demand disruption in key markets like Automotive, Life Sciences, Industrial and Oil & Gas is a major risk due to the macro environment uncertainty in the short term. EV adoption pace in the coming year with withdrawal of subsidies could lead to lower growth rates in this customer segments. Inflationary environment and concerns over availability of Key Raw materials along with logistical uncertainties will be critical challenges to overcome for the business in the current year. Depreciation of the Rupee is also a risk as the business is import-intensive.

PERFORMANCE CERAMICS AND REFRACTORIES ("PCR")

Products & Plants:

GNOs PCR Business Unit makes Ceramic and Refractory products for a wide range of industrial applications. The products manufactured mainly include Silicon Carbide based "shaped" refractory and ceramic products. The range of "unshaped (monolithic)" products primarily includes "dry ramming masses", "Special Castables" & "Tap Hole Clay". PCR Business offers comprehensive solutions based on deep expertise acquired over the years, in the design, engineering, and manufacturing of ceramic and refractory systems for addressable applications. In many cases, our offering includes installation support and training as part of the overall product-service package. PCR business unit has two manufacturing sites: one is located at Bengaluru, in Karnataka, and the other at Halol, near Vadodara, in Gujarat. The plants in Halol & Bengaluru are certified under ISO 9001: 2015, ISO 14001:2015 and ISO 45001:2018. The plant at Halol recently received the ECOVADIS Silver Label for Sustainability.

Industry:

PCR Refractory products find use in applications across industry segments like Primary Iron & Steel, Primary Non-Ferrous Metals (Aluminium, Copper, Zinc, etc.), Secondary Steel, Secondary Iron, Secondary Non-Ferrous (Aluminium, Copper), Petrochemicals, Carbon Black , Waste to Energy Systems, etc. PCR Ceramic products are used in applications in industry segments like Sanitaryware, Tableware, Ballistic Armor Protection, Wear Resistance Systems, etc.

Development & Outlook:

The Business did well in the Domestic Markets, especially in segments like Iron & Steel, Ceramic Systems and Carbon Black. However, exports declined on account of economic and geo-political issues. The outlook for 2025-26 remains positive as far as the domestic market is concerned but the visibility for exports (Europe / North America) is quite low. The focus will, therefore, be primarily on the domestic market and several new opportunities have been identified in segments like Iron & Steel, Secondary Metals. Good opportunities of cost optimization (Purchasing / Manufacturing) have also been identified.

Risks & Concerns: Visibility of Export Demand is expected to remain low and that is a major concern. There is a need to need to explore new geographies in exports to offset potential sales drops in traditional export markets.

SILICON CARBIDE ("SiC")

Products & Plants:

Silicon Carbide grains are used primarily as raw material in the manufacture of Abrasives, Refractories, Iron Foundries and for tone polishing. SiC is manufactured at the plant located at Tirupati in Andhra Pradesh. SiC is also manufactured by the Companys subsidiary, Saint-Gobain Ceramic Materials Bhutan Private Limited, at its plant near Phuentsholing in Bhutan. Both the plants are certified under ISO 9001: 2015, ISO 14001:2015 and ISO 45001:2018. GNO is pioneered in providing consistent quality, reliable service with shorter lead time, which becomes the strength of the Company to compete with imports.

Industry:

In the domestic market, there are three main players (including GNO) in the SiC business. This market is also catered to by imports, mainly from China, Vietnam and Russia. The key requirements for success in the industry are quality and cost competitiveness. Entry barriers are high by way of capital investment and technology. SiC is experiencing annual growth in the domestic market, driven by the increasing steel production in India. The demand from the steel industry will continue to fuel the growth of SiC in the country.

Development & Outlook:

Price of SiC products saw a further decline during the year. The drop in sales prices was at a slightly higher than the cost drop leading to drop in Operating Margins.

On the supply side, both the sites increased their output compared to the previous year. After the slowdown of Bhutan operation last year for major maintenance, Bhutan Plant moved to highest operation level this year. With the overall increase in output from both sites, we were able to grow volumes in this financial year thereby improving our supply in the marketplace.

Looking ahead, the focus in 2025-26 will be on maximizing supply from both manufacturing locations and to continue focus on the price and cost management.

Risks & Concerns

Product and input costs continue to be under pressure, largely due to increase in the US tariffs and uncertainty in the global trade. Raw material and finished goods prices are expected to remain volatile given the current geopolitical situation. Close monitoring of the market will be essential to guide future business decisions.

Digital Services

Development & Outlook and Risk & Concerns:

GNO has captive IT services unit which provides various IT services (e.g., Application development, infrastructure management, and cybersecurity) to the Saint-Gobain group globally. The IT services unit has around 650 employees. The captive center follows the cost-plus model. The growth in this segment is limited and future growth can happen only on account of cost inflation. The financial performance of this segment may be impacted due to the foreign exchange fluctuation and hedging strategy.

Risks & Concerns:

1. Financial:

GNOs financial management has always been governed by prudent policies, based on conservative principles. Currently, GNO has minimal borrowing. All the commercial transactions entered into by GNO in foreign currencies are managed by hedging them appropriately to minimize the exchange risk. GNO has a well-defined and structured treasury operation, with the emphasis being on security.

2. Legal & Statutory

• Contingent Liabilities: Details of Contingent Liabilities are in the Notes forming part of the financial statements.

• Statutory Compliance: GNO ensures statutory compliance of all applicable laws and is committed to the timely payment of statutory dues. The Company monitors compliance under various statutes periodically.

Human Resources:

The Companys primary focus is to provide a fair and inclusive work environment that fosters innovation for building a more sustainable world, inspires high performance, and empowers employees to develop and grow. The Company strives to sustain its leadership position in the market and places a strong emphasis on developing careers through shared trust. The well-founded hiring and onboarding practices enables the Company to attract, grow and retain talent and enable them to unlock their infinite potential through exposure to diverse assignments and opportunities. An objective and transparent performance management process serves to encourage superior performance. To improve organizational efficiency, employee engagement, and skill development, the Company encourages participation in various training programs, e-learning courses, external events participation, benchmarking and best practices visits. At the end of the financial year, there were 2,429 permanent employees on the Companys rolls. The Company will continue to invest in training its people in Environment, Health and Safety, and World Class Manufacturing, while also providing opportunities for employees to perform at their best and realize their full potential.

The Company firmly believes in enhancing the culture of creating values by taking initiatives in proactively designing and presenting innovative solutions that generate value for customers and end-users. The top priority is to maintain a smooth execution process, while emphasizing on high standards of quality and efficiency, as well as prioritizing environment, health and safety. This approach is rooted in the companys ethos of promoting togetherness, leveraging diversity, and nurturing personal and professional development.

Overall Performance:

GNO demonstrated remarkable resilience with its financial and operating performance during the year being quite satisfactory in the context of challenges posed by evolving geopolitical dynamics and difficult market conditions. While your Companys standalone

revenue from operations increased by 3.2 % and standalone operating profit decreased by 5.4%, the consolidated revenue from operations increased by 4.6% and operating profit decreased by 3.2% respectively. The consolidated operating profit margin (17.8% vs 19.2%) and net profit margin (13.2% vs 14.3%) witnessed a slight fall. Return on Net Worth (standalone) for the financial year ended March 31, 2025 stood at 16.1% compared to that of the previous financial year (18.6%) and Return on Net Worth (consolidated) for the financial year ended March 31, 2025 was at 16.4% compared to that of the previous financial year (18.6%).

Internal Control Systems:

The Company has established an effective system of internal controls, with documented policies and procedures that encompass all financial and operational aspects. These controls are designed to reasonably ensure the reliability of financial reporting, monitor operations, and protect assets from unauthorized use or losses while ensuring compliance with regulations. The efficacy of the internal control systems is validated by Internal as well as the Statutory Auditors.

A well-established, independent and multi-disciplinary Internal Audit team operates in accordance with governance best practices. It reviews the compliances, internal controls, the efficiency and effectiveness of operations, and key process risks. Every quarter the significant audit finding, the corrective steps recommended, and their implementation status are presented to the Audit Committee.

The Risk Management Committee reviews business risk areas, encompassing operational, financial, strategic, regulatory, and other risks.

Segment Financials:

For the current year, in line with the Accounting Standards on Segment reporting, GNO has identified three segments. These segments are Abrasives, Ceramics & Plastics and Digital Services.

Cautionary Statement:

The Management Discussion and Analysis Report contains a few forward looking statements based on the information and data available with the Company and assumptions with regard to the economic environment, the government policies etc. The Company cannot guarantee the validity of assumptions and performance of the Company in the future. Hence, it is cautioned that the actual results may differ from those indicated, expressed, or implied in this report.