Harsha Engineers International Ltd Management Discussions

Global Economy

The International Monetary Fund (IMF) has trimmed its global economic growth forecast, capturing a world balancing endurance with emerging headwinds. Global GDP growth is now expected to slow to 2.8% in 2025, down from an estimated 3.3% in 2024. A mild recovery may follow in 2026, with growth projected at 3.0%. Though these figures trail the 2000-2019 average of 3.7%, they signal a measure of steadiness despite persistent volatility.

Several structural and policy- driven trends are shaping the contours of the global economy. One of the most consequential developments is the introduction of sweeping tariffs by the US. These include a 10% tariff on nearly all imports and punitive duties of at least 145% on Chinese goods. Additional reciprocal tariffs on major trading partners such as the EU, Japan, South Korea, and Taiwan have been announced. But their implementation remains on hold pending further trade negotiations.

At the same time, heightened policy uncertainty and ongoing geopolitical tensions are exerting their influence on the global economic environment. These aspects continue to weigh on business sentiment and long- term investment planning. However, steady consumer spending and accelerating growth in some emerging markets offer a modest counterweight to this cautious sentiment.

Against this backdrop, there is one positive sign, the projected decline in global inflation. Headline inflation is expected to decline at a pace reaching 4.2% in 2025 and 3.6% in 2026, with notable upward revisions for advanced economies and slight downward revisions for emerging markets and developing economies (EMDEs) in 2025.

Looking ahead, the impact of tariffs on global growth will largely hinge on how trade talks unfold. If current tariff regimes stay, they could continue dampening export-oriented sectors and increase costs for both consumers and producers. Conversely, successful trade negotiations could ease tensions and partially reverse the negative effects, reinstating greater confidence and stability in international markets.

(Source: https://www.imf.org/en/Publications/WEO/lssues/2025/07/29/world-economic-outlook-update-july-2025)

Indian Economy

While many leading global economies face slowing growth, India has maintained steady progress. Solid macroeconomic fundamentals, pro-business government reforms and a focus on fostering an investment- friendly environment drive this momentum. Such efforts have strengthened Indias position as an attractive destination for global investment.

Indias economy continues to expand, projecting real GDP growth at 6.5% for 2024- 25, keeping its position as the worlds fastest-growing major economy. This growth is driven by strong private and government expenditure, along with a positive contribution from net exports, even as economic uncertainties persist.

(Source: https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULT19032025F9CCA0ABlF7294130A950E2FD5448B5FC.PDF)

Inflation dynamics have also seen shifts in recent months. Core inflation remained subdued across goods and services.

The fuel segment, meanwhile, continued to experience deflation. This decline was driven by a combination of lower global crude oil prices, government- led tax reductions on petroleum products, and increased renewable energy adoption, which reduced demand for conventional fuels.

Complementing this positive macroeconomic backdrop, the Union Budget 2025-26 focusses on sustaining economic growth through strategic initiatives.

Key areas include promoting agricultural development, supporting the manufacturing sector under the Make in India initiative, and rolling out skill development programmes to generate employment.

Outlook

India continues to progress along a strong economic path, propelled by domestic demand and infrastructure growth. Industrial revival, a stable agricultural base, and a growing manufacturing ecosystem support this momentum. Export- led services further strengthen the countrys position in global value chains. Rapid urbanisation, a young workforce, and rising incomes provide additional thrust. Furthermore, automation, green tech, fiscal discipline, and investments continue to reinforce the nations economic strength.

US tariffs present hurdles, but India stands ready to capitalise on global shifts. The countrys strategic alliances and a more favourable tariff structure than competitors like China set the stage for stronger foreign inflows. These factors will also boost domestic manufacturing.

Moreover, ongoing structural reforms and modernisation are shaping a path to long- term high growth. Alongside this, a sharper focus on ease of business and strategic policymaking keeps India aligned with global challenges and on track for global economic leadership.

(Source: https://www.thebusinessresearchcompany.com/report/bearings-global-market-report)

Industry Overview

Global Bearings Market

Bearings are critical mechanical components used to reduce friction and support motion between rotating parts in machinery. They are integral to a wide range of applications across automotive, railways, aerospace, industrial equipment, renewable energy, and healthcare sectors.

The global bearing market, valued at over USD 120.51 billion in 2024, is projected to expand at a compound annual growth rate (CAGR) of 6.90%. By 2030, the market is anticipated to exceed USD 179 billion, driven by growing industrial activity and technological advancements.

The Asia-Pacific region accounted for the largest share of the market in 2024, powered by robust manufacturing and infrastructure development in China and India. Western Europe is expected to be the fastest-growing region during the forecast period, driven by advancements in engineering, sustainability initiatives, and clean energy investments.

The industry is undergoing significant transformation, with increasing adoption of bearings in renewable energy systems, medical equipment, and automation technologies. Innovation in materials, precision design, and additive manufacturing further add to the momentum. All these factors, along with the rising emphasis on high-performance and eco- friendly solutions is expected to shape the markets evolution in the coming years.

Indian Bearings Market

The bearings market size in India is forecast to increase by USD 853.9 million, at a CAGR of 3.2% between 2024 and 2029. The market is witnessing significant developments, driven by the increasing focus on automation across various industries.

(Source: https://www.technavio.com/report/india-bearings-market-analysis)

While the overall market growth is moderate, it remains consistent, offering a stable outlook for industry participants. In this scenario, companies will need to focus on gaining market share and improving operational efficiency to seize available opportunities. With growing demand across key sectors and a solid domestic economy, the bearings market remains a promising avenue for long-term growth.

The automotive segment remains the largest contributor to the Indian bearings market, holding a 31.2% share in 2024.

This segment is expected to maintain its leadership with a share of 31.5% in 2029. Growth in passenger and commercial vehicle production, supported by rising disposable incomes and improving living standards, remains a key demand driver. Additionally, the automotive sector is projected to experience the highest growth during the forecast period.

Other sectors, including general industrial applications, are also contributing to market expansion. Ball bearings hold a prominent share of the Indian market, owing to their widespread usage and technological improvements that have enhanced performance and durability. As industries continue to modernise and demand reliable motion solutions, the Indian bearings market is well-positioned for sustained growth.

Global Stamping Market

The global metal stamping market is poised for steady growth, fuelled by rising demand in automotive, aerospace, electronics, construction, and consumer goods. In 2024, the market was estimated to be valued at USD 245.4 billion and is projected to clock in a CAGR of 3.7% through 2031.

The increasing focus on lightweight and high-strength components, particularly in the automotive and aerospace sectors, is a major growth driver. These industries are prioritising fuel efficiency, emission and India play a pivotal role due to their strong production capabilities and growing domestic demand.

In addition, increased construction activity, particularly in emerging economies, is boosting the use of stamped metal sheets in roofing and interior structures. As metal stamping finds wider use across industrial and commercial construction, the region is expected to sustain strong momentum throughout the forecast period from 2024 to 2031.

Indian Stamping Market

The Indian metal stamping market is projected to reach USD 6.74 billion by 2030, registering a CAGR of 5.7% from 2024 to 2030. This growth is supported by rising demand across diverse sectors such as automotive, telecommunications, electronics, industrial machinery, and energy. In parallel, widespread applications of metal stamping processes such as blanking, embossing, flanging, and bending in precision manufacturing continue to drive market expansion across end- use industries.

In 2023, the automotive and transportation sector led Indias metal stamping market, fuelled by higher vehicle output and a growing shift to electric mobility. Lightweight stamped components, especially those under 2.5 mm in thickness, are gaining prominence in both automotive and aerospace applications.

In high-speed, high-volume manufacturing settings, mechanical presses continue to be the preferred choice, given their efficiency. As advanced technologies gain ground and demand rises across industries, Indias metal stamping market stands poised for sustained, wide-ranging growth in the years ahead.

Global Solar Industry

The global solar electricity market has seen strong momentum in recent years. Estimated at USD 103.58 billion in 2024, it is set to reach USD 123.37 billion by 2025, reflecting a solid 19.1% CAGR. This growth has been supported by increasing global focus on clean energy transition, favourable policy support, and investments in research and development (r&d) and solar panel technologies.

Governments across key markets are stepping up with incentives and regulations to promote solar adoption. In 2023, global investments in energy transition technologies reached a record USD 1.3 trillion, highlighting the growing commitment to renewables.

Solar electricity is rapidly emerging as a reliable, cost- effective, and sustainable solution to meet growing energy demands while prioritising environmental sustainability. The market is on track to reach USD 219.29 billion by 2029, recording a CAGR of 15.5%. This growth is being driven by the increasing integration of solar energy with storage solutions, alongside the widespread adoption of digital technologies and artificial intelligence (ai).

AI and machine learning are playing pivotal roles in enhancing system efficiency and scalability. Their application in microgrid controllers and system optimisation are transforming how solar power is managed and deployed. Additionally, the global share of renewables in the power generation mix is expected to rise from 29% to 35% by 2025, reflecting continued expansion in solar installations. With supportive policy environments, technological innovation, and strong environmental imperatives, the global solar electricity market remains well-positioned for sustained growth in the coming years.

Indian Solar Industry

The Indian solar energy market continues to witness significant growth, with revenues estimated at USD 10.4 billion in 2023. Projections indicate this will rise to USD 24.9 billion by 2030, reflecting a CAGR of 13.4% from 2024 to 2030.

The expansion is driven by proactive government policies, a structured regulatory framework, and various financial and implementation incentives under initiatives such as the National Solar Mission (NSM). The CPSU Scheme, Solar Park Scheme, Grid Connected Rooftop Scheme, and Canal Top Solar Projects have also played a key role in accelerating capacity addition and promoting solar energy adoption across sectors.

The Ministry of New and Renewable Energy (MNRE) has set clear targets for increasing the share of renewables in the national energy mix. This measure further makes the policy environment supportive of solar development.

India has a significant geographic advantage, receiving 4-7 kWh of solar radiation per square metre per day across most regions. This abundant resource, coupled with rising energy demands and decreasing solar technology costs, continues to strengthen the sectors fundamentals. Additionally, cross-border collaborations and foreign direct investments are contributing to faster deployment, technology upgrades, and ecosystem development.

As solar adoption expands across residential, commercial, and industrial sectors, the industry is expected to play a pivotal role in enhancing Indias energy security. Furthermore, it will be vital in meeting the countrys long-term sustainability objectives.

The government has undertaken several initiatives to promote solar energy in the country, including:

PM Surya Ghar: Muft Bijli Yojana Launched in February 2024 with a Rs 75,021 crores budget, this scheme aims to solarise 10 million households. It offers subsidies of up to Rs 78,000 per 3kW system and provides 300 free units of electricity per month.	Record Solar Capacity Addition In 2024-25, India added 21 GW of solar capacity, surpassing a total of 100 GW in installed capacity. Solar module manufacturing also doubled to reach 74 GW.
PLI Scheme Expansion An allocation of Rs 24,000 crores has been made to boost domestic solar module manufacturing, attracting Rs 410 billion in investments and creating over 11,650 jobs.	Rooftop Solar Surge By March 2025, 1.1 million households had been solarised under the PM Surya Ghar initiative, with Rs 54.3 billion in subsidies disbursed to promote the adoption of rooftop solar systems.

Domestic Manufacturing Growth

Solar PV cell capacity tripled to 25 GW, and the first 2 GW ingot-wafer plant became operational.

(Source: https://www.energymonitor.ai/news/india-adds-25gw-renewable-energy-capacity-in-
zation-2024-25/ https://pib.gov.in/PressReleaselframePage.aspxRsPRID=2089056, https://static.pib.gov.in/ WriteReadData/specificdocs/documents/2025/feb/doc20252149370t.pdf)

Company Overview

Harsha Engineers International Limited (also referred to as HEIL or The Company or Harsha Engineers) stands as a leading global provider of precision engineering solutions. It is also Indias largest manufacturer of bearing cages. The Company caters to all six of the worlds leading bearing manufacturers.

HEILs product portfolio spans more than 7,500 types of bearing cages, with diameters ranging from 20 mm to 2,000 mm. The Companys extensive customer base is served through six manufacturing facilities, including leased facilities in India, Romania and China and a global distribution network spread across more than 20 warehouse locations and 25+ countries.

In addition to bearing cages, the Company has strategically diversified into precision stamped components and solar EPC solutions. The stamping division produces complex components for applications across automotive, electrical and industrial sectors. We are also expanding into the bushing business, where we have emerged as a standout performer with year-end revenues over 100 crores. This growth underscores our ability to anticipate industry trends and respond with precise engineering expertise. Moreover the bushing business focusses on specialised, high precision components for demanding use cases in the wind market.

The Company also operates in the renewable energy segment through its solar EPC arm, offering turnkey solutions for rooftop and ground-mounted solar PV systems. Backed by in-house tooling, automation, and product development capabilities, HEIL continues to expand its role as a trusted precision engineering partner to global OEMs and Tier-1 suppliers.

Operational

Overview

HEIL navigated a year of contrasts in 2024-25, marked by both hurdles and key achievements. While revenue remained stable compared to the previous year, profitability improved due to enhanced operational efficiencies and strategic initiatives. The Companys focus on automation, cost management, and market expansion allowed it to navigate external pressures successfully.

Financial Overview

(in Rs lakhs)

Particulars	Standalone			Consolidated
	For the Year Ended March 31, 2025	For the Year Ended March 31, 2024	For the Year Ended March 31, 2023	For the Year Ended March 31, 2025	For the Year Ended March 31, 2024	For the Year Ended March 31, 2023
Revenue from Operations	108,930	108,094	102,472	140,765	139,230	136,402
Profit before Depreciation and Tax	20,345	19,450	19,561	20,390	19,007	20,324
Less: Depreciation	2,867	2,685	2,331	4,054	3,932	3,612
Profit for the Year before Exceptional Items and Taxation	17,478	16,765	17,230	16,336	15,075	16,712
Exceptional Items	9,501	-	-	2,768	-	-
Profit for the Year before Taxation	7,977	16,765	17,230	13,568	15,075	16,712
Less: Current Year Tax	4,079	3,771	3,863	4,120	3,797	3,846
Less: Deferred Tax	362	303	528	517	135	538
Profit after Taxation	3,536	12,691	12,839	8,931	11,143	12,328
Add: Other Comprehensive Income for the Year	(228)	400	(748)	(229)	400	(748)
Total Comprehensive Income for the Year	3,308	13,091	12,091	8,702	11,543	11,580

Revenue from Operations

HEIL recorded a growth of 0.77% in standalone revenue for 2024-25, rising from Rs 1,08,094 lakhs in the previous year to Rs 1,08,930 lakhs. The Company also saw a 1.10% increase in its consolidated revenue, moving from Rs 1,39,230 lakhs in 2023-24 to Rs 1,40,765 lakhs in 2024-25.

Profit after Tax

In 2024-25, the Company reported a 72.14% decline in standalone profit after tax, which stood at Rs 3,536 lakhs compared to Rs 12,691 lakhs in the previous year. Consolidated profit after tax also fell by 19.85%, from Rs 11,143 lakhs in 2023-24 to Rs 8,931 lakhs in 2024-25. The decline in both standalone and consolidated profitability was primarily due to the recognition of an impairment loss on the carrying value of the investment in Harsha Engineers Europe SRL, the Companys wholly owned subsidiary, based on an independent fair valuation report. Additionally, the impact of a one-off item related to bad debts written off of Rs 2,060 lakhs in Solar EPC division further affected the bottom line during the year.

Total Comprehensive Income

Standalone total comprehensive income was Rs 3,308 lakhs compared to Rs 13,091 lakhs in 2023-24 this year. The Companys standalone total comprehensive income decreased by 74.73% in 2024-25, compared to the previous year. Also, its consolidated total comprehensive income decreased by 24.61%, reaching Rs 8,702 lakhs in 2024-25 from Rs 11,543 lakhs in 2023-24.

Financial Ratios (consolidated)

Key Financial Ratios	2024-25	2023-24	2022-23
Current Ratio (Times)	3.21	2.91	2.90
Debt-to-Equity Ratio (Times)	0.16	0.15	0.17
Debt Service Coverage Ratio (Times)	10.55	7.69	6.94
Return on Equity Ratio (%)	7.351	9.92	15.47
Inventory Turnover Ratio (Times)	4.07	3.78	3.59
Return on Capital Employed (%)	10.221	12.33	16.85
Net Profit Ratio (%)	6.34	8.00	9.04

nclusive exceptional items and bad debt

Risk Management

The Company has a comprehensive risk management framework to systematically identify, evaluate, and address key business risks across its operations. Reviewed periodically with input from the Risk Management Committee and the Board of Directors, the framework is aligned with the Companys strategic goals and evolving market dynamics.

The framework covers all major business segments, including bearing cages, precision stampings, bushings, and solar EPC. It is supported by structured processes for documentation, monitoring, and escalation. This enables HEIL to manage risks proactively, while ensuring business continuity and long-term value creation.

Risk	Impact on the Company	Mitigation Strategies
Market Concentration	A significant portion of HEILs revenue is generated from a few large bearing manufacturers. Any reduction in demand or changes in sourcing strategies by these clients could impact revenues.	O Expanding into adjacent segments like precision stamping, bushings, and solar EPC to diversify revenue mix O Investing in new product development and exploring opportunities in emerging markets to reduce reliance on key clients
Raw Material Price Volatility	Volatile prices of brass, steel, and other metals could impact margins, especially in a cost-sensitive global market.	o Adopting a multi-supplier sourcing model and short-term contracts to stay agile O Using pass-through pricing with customers to offset fluctuations in material costs
Sectoral Transition (EV Shift)	The shift from internal combustion engines to electric vehicles may impact demand for conventional automotive components.	o Using the growing stamping business to supply components for EV applications and benefit from the EV shift O Continuing to invest in product innovation tailored for EV platforms
Foreign Exchange Fluctuations	As a significant exporter, the Company is exposed to currency fluctuations, which could affect profitability.	o Using forward contracts and hedging instruments to manage foreign currency exposure O Ensuring a geographically diversified revenue base to mitigate concentration risk
Execution Challenges in EPC Business	Delays or cost overruns in solar EPC projects may impact margins and strain customer relationships.	O Following a robust project management framework O Coordinating closely with vendors and clients to ensure timely and budget- compliant execution
Supply Chain Disruptions	HEIL may face penalties as stipulated by relevant provisions and regulations owing to the failure to fulfil obligations.	O Ensuring strict adherence to regulatory mandates with a proactive approach to compliance management o Monitoring and assessing regulatory changes, alongside regular compliance monitoring and reporting procedures
Cybersecurity and Data Protection	The Company faces ongoing competitive risks, as increased competition may impact factors such as profit margins and market share.	O Enhancing brand reputation through focus on design, quality, cost-effectiveness, and timely delivery O Expanding market share and delivering superior customer service to stay ahead of competitors
Climate and Environment	Regulatory changes or physical risks related to climate change could impact operations, particularly in manufacturing and EPC businesses.	o Focussing on sustainable practices, energy efficiency, and complying with environmental regulations O Supporting the transition to clean energy through its solar business

Human Resources

HEIL recognises its employees as the foundation of its success and culture. Therefore, the Company aligns its HR strategies with its broader objective, ensuring policies, engagement practices, and skill development initiatives foster a positive and productive work environment.

The Company offers competitive compensation and growth opportunities, supported by a robust reward and recognition framework, designed to enhance employee retention and motivation. HEIL also encourages active employee participation in organisational development and continually invests in leadership, training, and communication to strengthen its human capital. As of March 31, 2025, the Company employed 1,664 individuals including 265 qualified engineers.

Sustainability

Sustainability continues to be a core focus for Harsha Engineers, with environmental, social, and governance (ESG) principles integrated across its operations. In 2024-25, the Company implemented several initiatives promoting responsible practices such as water conservation, afforestation, shared mobility to reduce emissions, and improvements in workplace safety.

HEIL also took steps to conserve natural resources and maintain clean, green environments across supported initiatives. On the social front, the Company is dedicated to empowering person with disabilities (PwD) by providing meaningful career employment opportunities. Its social outreach further extend to education, healthcare, and support for vulnerable communities. These activities reflect HEILs commitment to reducing its environmental footprint, supporting inclusive growth, and maintaining high standards of governance and transparency.

CSR Initiatives

Corporate Social Responsibility (CSR) at Harsha Engineers reflects the Companys commitment to inclusive growth and social development. The Companys CSR initiatives are governed by a formal policy and implemented under the supervision of a dedicated Board-level committee. During 2024-25, HEIL focussed on key areas such as the welfare of individuals with intellectual and developmental disabilities, healthcare, education, animal welfare, environmental sustainability, and disaster response. A flagship initiative was the ongoing development of Anand Dham, a self-contained residential facility for mentally challenged individuals with ageing or deceased parents, undertaken through the Aastha Charitable Trust.

In the financial year 2024-25, HEIL spent Rs 171 lakhs on CSR initiatives and transferred Rs 135 lakhs to the Unspent CSR Account towards an ongoing project. These activities were implemented through credible non-governmental organisations and aligned with Schedule VII of the Companies Act. Through these focussed efforts, HEIL continues to contribute meaningfully to the communities it serves and reinforce its position as a responsible corporate entity.

Internal Control Systems and Their Adequacy

HEIL has aligned its internal control systems with the growing scale and complexity of its operations. To meet evolving business demands, the Company has strengthened the role of its internal audit function and broadened its scope to include corporate governance, risk management, IT controls, policy compliance, and statutory requirements. These systems ensure the safeguarding of assets, accurate transaction recording, and timely financial reporting.

The Company conducts periodic evaluations to ensure its internal controls remain robust, transparent, and aligned with regulatory expectations. The Audit Committee oversees the control environment and regularly reviews audit outcomes. It also drives implementation of key recommendations to enhance operational integrity and risk oversight.

Cautionary Statement

The Management Discussion and Analysis may contain Rsforward-looking statements based on current expectations, assumptions, and projections about future events. These statements involve inherent risks and uncertainties both identified and unforeseen that could cause actual results to differ materially. Factors such as shifts in macroeconomic conditions, regulatory changes, geopolitical events, and potential global disruptions, including pandemics, may significantly impact business outcomes. The Company bases its statements on information available at the time of reporting and assumes no obligation to revise or update any forward-looking statements arising from subsequent developments or events.