HMT Ltd Management Discussions

GLOBAL ECONOMIC ENVIRONMENT

During FY 2025-26, the global economy continued to witness moderate but uneven growth, influenced by geopolitical tensions, tight financial conditions, and evolving trade dynamics. As per the International Monetary Fund World Economic Outlook (2025), global GDP growth is projected at around 3.2%- 3.3%, with advanced economies growing at a slower pace compared to emerging markets. Global trade growth remained subdued at around 2%, reflecting cautious investment sentiment and supply chain realignments. Inflation has shown signs of moderation across major economies, although uncertainties in energy prices and geopolitical developments continue to pose risks. Despite nearterm challenges, the long-term outlook remains supportive for sectors driven by automation, food processing, and efficiency-enhancing technologies, including dairy machinery.

INDUSTRY STRUCTURE AND DEVELOPMENT

The dairy machinery industry in India is closely linked to the countrys position as the largest milk producer globally, accounting for approximately 25% of global milk production. As per the Ministry of Fisheries, Animal Husbandry and Dairying, Indias milk production increased from 239.30 million metric tonnes during 2023-24 to 247.87 million tonnes in 2024-25 registering a growth of 3.58%, registering a CAGR of around 6%-7%.

The industry structure comprises a mix of large global players offering turnkey and high-end automated solutions, and domestic manufacturers focusing on cost-effective and customized equipment. The sector has evolved significantly

from basic processing units to technologically advanced systems incorporating automation, digital monitoring, and quality control. Growth has been driven by increasing penetration of the organized dairy sector, expansion of cooperative networks, and rising demand for hygienic and packaged dairy products. The industry is also witnessing increasing investments in cold-chain infrastructure, processing capacity, and value-added product lines.

OUTLOOK OF DAIRY MACHINERY INDUSTRY IN INDIA

Indias continued investment in dairy processing infrastructure is expected to generate sustained demand for dairy processing machinery. Under the National Programme for Dairy Development (NPDD), as on 24 November 2024, 35 projects have been sanctioned under Component-B, creating an additional 5.5 lakh litres per day of milk processing capacity and 294 metric tonnes per day of value-added dairy product capacity. These investments are expected to increase the demand for equipment such as pasteurisers, homogenisers, cream separators, storage tanks, evaporators and packaging systems.

The increasing consumer preference for value-added dairy products such as cheese, paneer, yoghurt, butter and flavoured milk is driving investments in modern processing plants equipped with automated processing, packaging and quality control systems. Expansion of organised dairy processing is expected to create opportunities for manufacturers of advanced dairy processing machinery.

The Government has continued the Animal Husbandry Infrastructure Development Fund

(AHIDF) with an revised outlay of 29,110.25 crore up to FY 2025-26, supporting investments in dairy processing, value addition, cold chain and related infrastructure. The scheme is expected to encourage installation of modern dairy processing plants and associated equipment.

NEW OPPORTUNITIES

The dairy machinery sector in India presents significant growth opportunities driven by expanding dairy consumption, modernization of infrastructure, and technological advancements. Increasing demand for processed and value-added dairy products, which is growing at approximately 8%-10% annually, is creating demand for advanced equipment such as pasteurizers, homogenizers, separators, and automated packaging systems.

There is strong potential in turnkey dairy projects, integrated processing plants, and modular equipment solutions catering to both large cooperatives and emerging private dairy players. Expansion of cold-chain infrastructure, supported by government funding and private investments, is further driving demand for chilling and storage equipment.

Additionally, the increasing focus on exports of dairy products, growth of organized retail, and emergence of new dairy clusters across states such as Gujarat, Maharashtra, Uttar Pradesh, and Karnataka are opening new avenues for business. Technological advancements such as loT-enabled monitoring, automation, and energy-efficient systems also present opportunities for domestic manufacturers to enhance competitiveness and expand market share.

CHALLENGES

Despite strong growth prospects, the dairy machinery industry faces several challenges. The

sector is characterized by intense competition from both domestic and international players, leading to pricing pressures. Volatility in raw material prices, particularly stainless steel and alloy components, directly impacts manufacturing costs.The industry also faces constraints related to skilled manpower, especially in the operation and maintenance of advanced automated systems. Further, dependence on imports for certain high-precision components and control systems exposes manufacturers to supply chain disruptions and foreign exchange fluctuations.

In addition, the need for continuous investment in research and development to meet evolving technological standards and customer expectations adds to operational challenges. Delays in project execution and financial constraints faced by smaller dairy operators also impact demand for machinery.

RISKS & CONCERNS

The dairy machinery industry is exposed to multiple risks that could impact its growth trajectory. One of the key concerns is the fluctuation in milk procurement prices, which affects the profitability of dairy processors and may lead to postponement of capital investments in machinery.

Financial constraints among small and medium dairy operators, who form a significant portion of the market, can limit demand for advanced equipment. Project delays and working capital challenges may further impact order execution and revenue realization.

Supply chain disruptions, particularly for imported components and specialized equipment, remain a risk factor. Technological obsolescence is another concern, as rapid advancements require continuous upgradation of products and capabilities.

Additionally, increasing regulatory requirements related to food safety, quality standards, and environmental compliance may result in higher costs for manufacturers. The industry must therefore focus on innovation, cost competitiveness, and strengthening after-sales support to mitigate these risks and sustain long-term growth.

SEGMENT WISE / PRODUCT WISE PERFORMANCE

Food Processing Equipment

i) SS Centrifugal Pumps: Well-accepted in the market. Upgraded die tool set to achieve enhanced quality and performance. Expecting more sale in F.Y. 2026-27 than previous years.

ii) Cream Separators: Very good market for cream separators with capacity 1 KLPH & 2 KLPH. But it could not sustain in the market for higher capacity separator i.e. 5 kl, 10 kl & 20 kl due to its performance problem.

iii) Homogenizer: Homogenizer of capacity 500 LPH, 1000 LPH and 2000 LPH machines are well accepted in the market. Homogenizers of 3000 & 5000 LPH capacity have performance issue and need technological upgradation to compete with market players.

iv) Milk Pasteurizer/Chiller: Due to old and obsolete design of HMT Plate Heat exchangers, pasteurizers are not acceptable in the market. Even after purchasing PHE plates with CLIP ON type gasket, prices of machine are very high due to our overheads. Hence, business for Milk Pasteurizers/chillers is very low.

v) Continuous Butter Making Machine: Strong market demand has been identified for Continuous Butter Making Machine, particularly for the production of white butter used in ghee manufacturing. HMT CBM machines are efficient, reliable and perform well in 400, 800 and 1000 kg/h capacity range. Our existing CBM machines are not equipped with salt dozing device and hence not suitable for table butter. Imported variants of CBM machine offer the flexibility to produce both white and table butter.

Watches

i) Automatic Day Date models: Well-accepted in the market because of design aesthetics, but due to the cost factor sales is low.

ii) Quartz: Very good market for quartz watches as the price range starts from Rs.650/- to Rs.3500/-.

ii) Hand wound Mechanical watches: Well-

accepted in the market, but due to unavailability of components, production of hand wound mechanical watches are limited.

FINANCIAL PERFORMANCE

The turnover of the Company for the year 2025-26 was Rs.25.96 crore with net profit of Rs.16.69 Crore.

The total borrowing (loan) of the Company from Government of India were Rs.641.72 crore as on 31.3.2026.

	2025-26	2024-25
Trade Receivables Turnover Ratio	2.77	1.87
Inventory Turnover Ratio	2.35	2.16
Interest Coverage Ratio	230.75	24.97
Current Ratio	0.80	0.78
Debt Equity Ratio	1.38	1.43
Operating Profit Margin (%)	71.11%	75.39%
Net Profit Margin (%)	64.29%	61.53%
Return on Net Worth	0.04	0.03

Trade Receivables Turnover has increased due to reduction in debtors in the current year.

Inventory Turnover has increased due to reduction in average inventory in the current year.

Interest coverage ratio has increased due to Interest on borrowings dropped drastically during the year.

Current ratio has increased due to increase in Current Assets on account of loan provided to HMT Machine Tools Ltd. during the year.

Debt equity ratio decreased due to increase in Total Equity on account profit earned during the year.

Operating profit margin decreased due to reduction in EBIT.

The increase in Net Profit Margin is mainly due to increase in Net profit during the year.

Increase in return on Net worth is due to increase in PAT during the current year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate systems of Internal control commensurate with its size and nature of its operations. The salient features of internal control systems are

i) Clear delegation of power with authority limits for incurring capital and revenue expenditure.

ii) Well laid down corporate policies for accounting, reporting and Corporate Governance.

iii) Safeguarding assets against unauthorized use or losses or disposition, and ensuring that the transactions are authorized, recorded and reported correctly.

iv) Process for formulating and reviewing annual and long term business plans have been laid down.

v) Detailed Annual budget giving further break up of monthly targets under various heads.

vi) Continuous review of the performance by the Core Committee with reference to the budgets on an ongoing basis.

vii) Compliance with laws and regulations.

The Internal Audit Department of the Company along with the external firms appointed for carrying out internal audits of Units / Divisions reviews, evaluates and appraises the various systems and procedures / policies laid down by the Company and suggests meaningful and useful improvements.

Internal Audit Department coordinates with the Units / Divisions of the company to ensure coverage of all areas of operations in order to bring a transparency in the whole spectrum of the Company.

The Audit Committee reviews the Audit Report submitted by the Internal Auditors. Suggestions for improvement are considered and the Audit Committee follows up on the implementation of corrective actions.

The Audit Committee also discusses with the Companys statutory Auditors to ascertain, inter- alia, their views on the adequacy of internal control system in the Company and keeps the Board of Directors informed of its major observations from time to time.

HUMAN RESOURCES

As on 31.03.2026, the Company and its Subsidiaries had a total workforce of 552 employees, comprising various categories of employees in manufacturing plants and other offices in technical and other professional areas as detailed below.

Sl Company and Subsidiary No	IP as on 31.03. 2026	Engineering Graduates	Diploma Holders	Professionals		ITI/ NAC	General Graduates/ Post Graduates	Others
				HR	Finance
1 HMT Limited	39	11	3	5	2	2	15	1
2 HMT Machine Tools Ltd	501	93	85	3	5	242	30	43
3 HMT (International) Ltd	12	9	0	1	1	0	1	0
Total	552	113	88	9	8	244	46	44

The Company has taken suitable measures to bring down the Personnel Costs by implementing several austerity measures, rationalization of surplus manpower in the Company.

Statistics on the number of employees separated on availing the VR Scheme in HMT and its Subsidiary Companies during the last four years is NIL.

Surplus manpower in certain areas has been deployed under re-deployment scheme by

providing training and re-training to the employees and posting them at thrust areas to meet the goals of the organization. The Company is trying its best to retain the skilled and professionally qualified personnel to arrest attrition.

PERSONNEL AND INDUSTRIAL RELATIONS

The Personnel and Industrial Relations situation in the Company during the year, remained cordial.

For and on behalf of the Board of Directors

Sd/-
(N. Ramesh Kumar)
Chairman & Managing Director
(Addl. Charge)
DIN:11630127

Place: Bengaluru
Date: 07-09-2026