Indag Rubber Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian tyre and tyre retreading industry continues to play a pivotal role in the countrys transportation and logistics ecosystem. Replacement demand — the foundation of the retreading market — remains structurally resilient, supported by an expanding commercial vehicle parc, longer freight movement, and steady fleet utilisation. As per ICRA, domestic tyre demand is projected to grow at 5–7% in FY 2026-27, with replacement demand contributing the larger share of incremental growth.

Several structural shifts continued to shape the industry during the year:

1. Shift from Unorganised to Organised Retreading: The Indian retreading market remains highly fragmented, with a large number of small, regional retreaders. However, the organised segment continues to gain share — currently estimated at 50–55% — supported by a combination of structural factors — tighter regulatory compliance (GST), the rising technical complexity of radial-tyre retreading, and growing quality and sustainability expectations from large fleet customers — all of which favour organised players over the long fragmented tail.

2. Circular Economy Becomes Mainstream: Retreading is increasingly recognised as a core enabler of Indias circular economy commitments. With Extended Producer Responsibility (EPR) regulations on waste tyres maturing, and growing awareness in corporates and State entities to embed sustainability into procurement, retreading is no longer viewed only as a cost lever but as a strategic ESG choice. Retreaded tyres deliver material savings of approximately 70% in natural resources versus a new tyre, with a correspondingly lower carbon footprint.

3. Cost-Benefit of Retreading vs New Tyres Continues to Widen: Persistent volatility in crude-linked inputs and natural rubber, combined with elevated fleet operating costs (fuel, toll, driver, finance), is reinforcing the cost-per-kilometre (CPKM) advantage of retreading. For a typical commercial fleet, retreading remains a multiple-times more economical solution over a tyres life cycle.

4. Radialisation Deepens: The continued penetration of radial tyres in the M&HCV segment is structurally positive for organised retreaders with the technical capability to retread radial casings safely and consistently. Radialisation in the M&HCV segment has now risen to over 60% as per CRISIL estimates, and the trajectory is expected to continue towards 68%-70% by FY30. However, casing rejection rates for radial tyres are materially higher than for bias tyres, reflecting the lower repair-tolerance of steel-belted radial construction — a near-term headwind for the retreading industry that organised players, with their technical service depth and casing-management capability, are best placed to address.

5. Infrastructure-Led Freight Growth: With over 21,700 km of Bharatmala highway network already constructed (ICRA Roads & Highways) and the Vision 2047 programme targeting 75,000 km of national highways (including 50,000 km of access-controlled corridors) now under execution, freight kilometres are rising steadily. According to BMI (a Fitch Solutions company), Indias transport infrastructure construction sector is forecast to grow at an average of 5.5% per annum over 2026–2035, with the road sector itself growing at 6.3% per annum — a clear multi-year tailwind for replacement-tyre and retread demand. Toll collection growth of 6–8% is projected for FY 2026-27 (ICRA) and NHAIs monetisation programme — at approximately Rs. 28,078 crore in FY 2025-26 — is recycling capital back into highway expansion, further strengthening the freight ecosystem.

6. Commercial Vehicle Cycle Stabilising: After a strong FY 2025-26, ICRA expects CV wholesale volumes to grow 4–6% in FY 2026-27, normalising on a high base, with M&HCVs at 5–7%, LCVs at 3–5%, and buses at 7–9% supported by replacement demand from STUs. CRISIL also expects CV volumes to grow 5–6% in FY27, with LCVs leading at 5–6% and M&HCVs at 4–5%, aided by domestic demand, e-commerce last-mile delivery, freight movement and infrastructure spending. STU fleet replacement demand and electrification programmes continue to support bus procurement, though the broader CV cycle remains mainly driven by freight, infrastructure, and replacement demand.

OPPORTUNITIES AND THREATS Opportunities

Fleet Operator Expansion: The continued expansion of organised private fleet operators — supported by infrastructure-led freight growth, e-commerce, FMCG, retail, and project logistics — is broadening the addressable market for branded retreading. Organised logistics revenues are projected to grow 8–10% in FY 2026-27 (ICRA), and BMI expects Indias total trade to rise 5.2% in real terms in 2026 — both translating into a steady stream of casings entering the retread cycle.

Electrification of STU Fleets: State Transport Undertakings are expanding their bus fleets and standardising procurement processes. Electrification is being actively promoted by State Governments, and STUs are increasingly moving to a Vehicle-as-a-Service model under which fleet ownership rests with the commercial vehicle manufacturers while STUs procure the service. This evolving structure is reshaping the retreading opportunity within the public transport segment, and your Company is engaging proactively with both STUs and OEM partners to position itself within the new operating model.

Digital Engagement with Channel Partners: Indag is progressively deepening digital engagement with its Indag Certified Retreaders and our franchisee partners— through structured technical training, on-ground audits, and faster information flow on raw material trends and pricing. This is improving partner economics and stickiness.

Product Leadership: Your Companys R&D function is focused on addressing the evolving needs of customers — developing high-performance products for performance-seeking customers as well as differentiated o_erings for value-seeking customers across the retreading market.

Sustainability-Led Procurement: EPR-driven and ESG-driven procurement preferences — particularly among State entities and large corporate fleets — favour organised retreaders with documented quality systems and traceability.

Threats

Raw Material Volatility: Natural rubber, synthetic rubbers (PBR / SBR), and carbon black are subject to global supply and crude-linked price cycles. The escalation in West Asia in early 2026 has further tightened global synthetic rubber and carbon black supply, with BMI flagging continued upside risk to crude through FY 2026-27 and the rupee is expected to depreciate to an average of around INR 94.5/USD over FY 2026-27 — both of which can pressure landed input costs. ICRA expects the Indian tyre industrys operating margin to moderate to 12–14% in FY 2026-27 from 13–15% in FY 2025-26, reflecting these pressures. Your Company nonetheless has well-tested levers — calibrated price pass-through, supplier diversification, and close engagement with our franchisee partners — to manage these pressures.

Trade Tari_s and Geopolitics: Evolving global trade frameworks, anti-dumping actions, and shifting tari_ regimes can alter the economics of the broader tyre and rubber industry. The direct impact on the retreading segment is limited, but indirect effects through raw material availability, freight costs and logistics flows are monitored continuously. Approximately 40% of Indias natural rubber consumption, and close to half of the tyre industrys synthetic rubber requirement, are met through imports — making global trade dynamics directly relevant to industry input-cost trends. Your Companys 48-year heritage as an established Indian brand, together with deep, long-standing supplier relationships, supports the effective management of these risks.

Competitive Intensity: The organised retreading market continues to see competitive activity from established and new entrants. Your Companys response is centred on product quality, technical service depth, deep channel relationships, and a multi-tier portfolio that addresses customers across price segments.

STU Business Volatility: The STU business is subject to the variable cadence of government procurement, where the concentration of revenue is tied to highly competitive, L1-driven public tender awards. Your Companys long-standing relationships with STUs, technical service capability and disciplined tender approach position it well to participate in this segment through the cycle.

Casing Quality: Radial casing rejection rates remain elevated industry-wide. Your Companys training and audit programmes for retreaders are aimed at progressively improving casing recovery.

OUTLOOK

FY 2025-26 marked a clear inflection point in your Companys Turnaround journey. Operating profitability recovered sharply over the prior year, supported by tighter raw material discipline, an improved product and channel mix, and the foundational launch of the value-tier portfolio. The improvements are operational in nature — built on cost, mix and execution — and therefore more durable than a cyclical tailwind.

Looking into FY 2026-27, the outlook is constructive on multiple fronts:

PVT Business Continues to Anchor Performance: The Private segment, the largest contributor to your Companys revenue, continues to demonstrate resilience. Relationships with franchisee partners have been deepened, with more frequent communication on raw material trends, technical support and product programmes. Your Company continues to serve performance-seeking and value-seeking customers through the Indag-branded product portfolio, and to engage closely with its network of retreading franchisee partners as a key route to market.

Focus on a Complete Retreading Solution: Your Company is positioned as an end-to-end products and solutions provider in the retreading segment, with a clear focus on national accounts and large fleet owners. Our PAN-India presence enables us to serve national fleet accounts/ large fleet customers operating across geographies. Allied products such as cushion gum, solvent cement and envelopes complement the core tread rubber business and strengthen your Companys value-added o_erings to the retreader ecosystem. Infrastructure-Driven Demand: With Bharatmala nearing completion and Vision 2047 corridors progressing, freight density on national highways is rising. BMIs forecast of 5.5% per annum growth in Indias transport infrastructure construction over 2026–2035 — and 6.3% in the road sector specifically — underwrites a multi-year tailwind for the replacement tyre and retreading market.

Beyond FY 2026-27, the structural drivers — radialisation, organised-sector consolidation, EPR-led formalisation, and infrastructure-led freight growth — remain firmly intact. Your Company will continue to invest in product, channel and operational capability to participate meaningfully in these multi-year tailwinds.

SUBSIDIARY UPDATE — MILLENIUM MANUFACTURING SYSTEMS PVT. LTD.

Millenium Manufacturing Systems Pvt. Ltd. (Millenium), a subsidiary of your Company, is engaged in the manufacture of power electronics for the renewable energy and Battery Energy Storage System (BESS) industries. The subsidiary is positioned as one of Indias emerging power-electronics manufacturers, with an ambition to support the global energy transition and to help de-risk renewable energy supply chains.

FY 2025-26 was a foundational year for Millenium:

During the year, Millenium progressed from factory homologation and product certification to securing its first commercial order — marking the subsidiarys transition from product development and validation to commercial revenue generation.

Your Company also supported Milleniums growth through a calibrated equity infusion to fund its green-energy and operational requirements during the year.

Going forward, Millenium plans to scale volumes meaningfully as additional orders are converted, leveraging its India-based manufacturing footprint and the structural tailwinds of the energy transition.

Industry context — a powerful structural tailwind:

Indias BESS industry is at a strategic inflection point, with policy, tendering and end-customer demand now aligning simultaneously: The Central Electricity Authoritys National Electricity Plan projects that India will require 74 GW / 411 GWh of energy storage by 2031-32, of which approximately 47 GW / 236 GWh is to be Battery Energy Storage — implying an estimated capex requirement of ~Rs. 56,647 crore for BESS alone (Source: CEA, National Electricity Plan; PIB).

The Governments Viability Gap Funding (VGF) scheme for BESS, originally approved in 2023, was further expanded by 30 GWh (Rs. 5,400 crore) in June 2025 — providing direct capex support and long-term o_take visibility for the sector (Source: Ministry of Power; industry press).

Tendering momentum has been exceptional. Over 130 GWh of BESS tenders were issued in calendar year 2025, led by NTPC and SECI, and the project pipeline at the end of 2025 stood at approximately 92 GWh — up from around 19 GWh a year earlier (Source: industry press; Energy Storage News).

A mandatory 20% domestic-content requirement introduced in December 2025 for VGF-supported BESS projects directly favours India-based power-electronics manufacturers — a meaningful structural advantage for Millenium (Source: Ministry of Power; pv magazine).

ICRA estimates that India will need investment of approximately Rs. 1.4 lakh crore to build the targeted BESS capacity by 2030, signalling the scale of the multi-year opportunity (Source: ICRA).

BMI projects Indias energy and utilities infrastructure sector to grow at an annual average of 6.7% over 2026–2035, with renewable-energy capacity additions a leading contributor — providing a broad and durable demand backdrop for power-electronics manufacturers like Millenium.

Strategic significance for your Company:

The BESS opportunity provides Indag with exposure to one of Indias most attractive long-term growth themes, and complements the core retreading business with a clean-energy, manufacturing-led adjacency. Milleniums first commercial order in FY 2025-26 is a meaningful proof-point. Volume ramp-up, customer development, and product portfolio extension will be the key priorities for FY 2026-27 and beyond.

RISKS AND CONCERNS

Indag maintains a well-defined risk management framework covering risk identification, assessment, mitigation and monitoring, overseen by the Audit Committee and the Board. The principal risks tracked during the year were:

1. Commodity / Raw Material Price Risk: Natural rubber, synthetic rubbers and carbon black remain the dominant input cost variables. The Company manages this risk through weekly price monitoring, calibrated pass-through to the market, and supplier diversification across geographies.

2. Logistics and Supply Chain Risk: Geopolitical events in early 2026 a_ected synthetic rubber and carbon black availability and freight economics. The Companys vendor diversification programme, inventory discipline, and active production-vs-indent planning have helped maintain continuity of supply to customers.

3. Demand and Competitive Risk: Volume risk is managed through the multi-tier portfolio (premium and value), deep channel relationships, and the technical service o_ering. Competitive activity is met with quality, consistency and partner economics — not with tactical discounting.

4. Interest Rate and Investment Risk: Treasury investments are managed with a laddered maturity profile, conservative credit selection, and avoidance of concentration in long-duration instruments — limiting mark-to-market sensitivity in a moving rate environment.

5. Regulatory and Compliance Risk: EPR, GST, and environmental regulations continue to evolve. The Company maintains active monitoring and a structured compliance framework to ensure full alignment.

6. Subsidiary Execution Risk: As Millenium scales from first commercial order to volume production, execution risks around supply chain, working capital and customer development are actively monitored. The subsidiarys progress is reviewed regularly at the Board level.

During the year, no major risks were identified that, in the opinion of the Board, threaten the existence of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Indag maintains an internal control framework that is commensurate with the size, scale, and complexity of its operations. The framework covers operational, financial reporting, regulatory and compliance controls, and is supported by Standard Operating Procedures across functions, periodic reviews by independent internal auditors, and oversight by the Audit Committee.

During the year, Indag continued to invest in digital transformation to strengthen the control environment: HRMS Implementation: A new Human Resource Management System was operationalised, digitising the employee life-cycle from onboarding to exit, and improving data integrity, payroll controls, and people-data analytics.

In-house Automation Development: The Company continued to develop in-house automation tools across reporting, reconciliations, and operational MIS — reducing manual intervention, improving cycle times, and tightening preventive controls.

Process Reviews: Periodic reviews of finance, procurement, sales, and plant operations were carried out by the internal audit function. Recommendations have been substantially implemented, with progress reported to the Audit Committee. Based on the deliberations with Statutory Auditors regarding the financial statements, the Financial Reporting System, and compliance with Accounting Policies and Procedures, the Audit Committee was satisfied with the adequacy and effectiveness of the Internal Controls and Systems followed by the Company.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and applicable Accounting Standards.

(Rs. in Lakhs)

Sl. No. Particulars	Year ended		Year ended
	March 31, 2026	March 31, 2025	March 31, 2026	March 31, 2025
	Standalone		Consolidated
1 Revenue from operations	21,424.39	22,481.65	21,450.87	22,841.94
Other income	1,056.24	1,208.05	1,033.93	1,181.44
2 Total income	22,480.63	23,689.70	22,484.80	24,023.38
3 Expenses
(i) Cost of materials consumed	13,490.34	15,739.86	13,677.60	15,938.07
(ii) Purchases of stock in trade and services	802.48	696.30	802.48	696.30
(iii) Changes in inventories of finished goods, stock-in- trade and work in progress	424.82	(280.97)	244.52	(193.65)
(iv) Employee benefit expenses	2,508.86	2,662.10	2,701.95	2,838.98
(v) Depreciation and amortisation expense	562.58	552.31	676.77	661.82
(vi) Finance costs	47.30	54.64	118.94	98.72
(vii) Other expenses	3,010.67	3,223.98	3,149.94	3,387.48
4 Total expenses	20,847.05	22,648.22	21,372.20	23,427.72
5 Profit/(loss) before tax	1,633.58	1,041.48	1,112.60	595.66
6 Tax expense
(i) Current tax	398.26	164.55	398.26	164.55
(ii) Deferred tax	(3.43)	31.95	(92.70)	(43.81)
(iii) Income tax adjustment for earlier years	0.81	3.05	0.81	3.05
7 Total tax expense	395.64	199.55	306.37	123.79
8 Profit after tax	1,237.94	841.93	806.23	471.87
9 Profit/(loss) for the year	1,237.94	841.93	806.23	471.87
10 Attributable to:
- Shareholders of the Company	-	-	1,018.27	653.20
- Non-Controlling Interest			(212.04)	(181.33)
11 Other Comprehensive Income (net of tax)	(53.49)	270.88	(54.93)	270.87
12 Total Comprehensive Income	1,184.45	1,112.81	751.30	742.74
13 Attributable to:
- Shareholders of the Company	-	-	963.34	924.07
- Non-Controlling Interest			(212.04)	(181.33)

During FY 20252-26, the Operating profitability recovered sharply, supported by:

A more favourable raw material cost environment for the major part of the year, partially compressed in the closing months by global supply disruptions; Disciplined product and channel mix, with focused engagement of franchisee partners; Tight overhead and working capital management.

The Companys balance sheet remains conservative, with comfortable liquidity, prudent treasury management and no significant external borrowings. This financial flexibility positions your Company to invest behind the FY 2026-27 strategic priorities — franchisee network deepening, operational digitalisation, and the volume ramp-up at Millenium.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

During the year, the Company had cordial relations with workers, sta_ and officers. The shop floor management is done through personal touch, using various motivational tools and meeting their training needs. The Company has taken steps for safety of employees and implemented regular safety audit, imparted machine safety training, wearing protective equipment etc. The Company has also implemented ISO 45001:2018 standard.

The Company believes in empowering its employees through greater knowledge, team spirit and developing greater sense of responsibility. On the job training and management development programme series on skill upgradation has been attended by functions like Sales, Finance & Accounts, Purchase, Exports, Secretarial, IT and HR. The leadership team is also playing the role of mentors in order to support knowledge transfer, skill-building and career growth for their respective teams, fostering a supportive work culture across the organization. There were 275 regular employees as at March 31, 2026.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The significant changes in the key financial ratios of the Company, which are more than 25% as compared to the previous year are given below:

Sl. No. Particulars	FY 2025-26	FY 2024-25	Change (%)	Explanations
(i) Interest Coverage Ratio (times)	47.43	30.17	57.22	Due to higher profit before tax, finance cost and depreciation
(ii) Operating Profit Margin (%)	3.74	0.11	3300.00	Due to higher margin
(iii) Net Profit Margin (%)	5.78	3.74	54.29	because of lower raw
(iv) Return on Net Worth (%)	5.25	4.56	15.13	material cost and lower expenses

Annexure-VI FORM NO. AOC-1

Statement containing salient features of the financial statement of Subsidiaries/Associate Companies/ Joint Ventures (Pursuant to first proviso to sub-section (3) of section 129 read with Rule 5 of Companies (Accounts) Rules, 2014) Part A: Subsidiaries

Sl. No.	Particulars	Details
1	Name of the Subsidiary	Millenium Manufacturing Systems Private
		Limited
2	Reporting period for the subsidiary concerned, if	Reporting period of the Company and its
	different from the holding Companys reporting period	Subsidiary is same i.e. April 1 to March 31
3	Reporting currency and Exchange rate as on the	NA
	last date of the relevant financial year in the case of
	foreign subsidiaries
4	Equity Share Capital	1,49,22,469 Paid Up Equity Shares @ Rs 10 each
5	Reserves & Surplus	9,18,39,000
6	Total Assets	35,52,99,000
7	Total Liabilities	35,52,99,000
8	Investments	-
9	Turnover	26,48,000 *
10	Profit before Taxation	(5,20,98,000)
11	Provision for Taxation/Deferred Tax	(89,27,000)
12	Profit after Taxation	(4,31,71,000)
13	Proposed Dividend	Nil
14	% of shareholding	51%

*Includes export incentives.

Part B: Associates & Joint Ventures

Associates and Joint Ventures Statement pursuant to Section 129(3) of the Companies Act, 2013 related to Associate Companies and Joint Ventures

This is not applicable as there were no Associates and Joint Ventures of the Company during the year ended March 31, 2026.

Annexure-VII FORM NO. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto

1. Details of contracts or arrangements or transactions not at arms length basis- Not Applicable

Sl.	Particulars	Details and Terms
No.		of Transaction
(a)	Name(s) of the related party and nature of relationship	-
(b)	Nature of contracts/arrangements/transactions	-
(c)	Duration of the contracts/arrangements/transactions	-
(d)	Salient terms of the contracts or arrangements or transactions including the value, if any	-
(e)	Justification for entering into such contracts or arrangements or transactions	-
(f)	Date of approval by the Board	-
(g)	Amount paid as advances, if any	-
(h)	Date on which the special resolution was passed in general meeting as required	-

2. Details of contracts or arrangements or transactions at arms length basis which are not in the ordinary course of business:-(i) Name of the related party and nature of relationship- Millenium Manufacturing Systems Private Limited, Subsidiary Company:

Sl. No.	Particulars	Details and Terms of Transaction
(a)	Nature of contracts/	Corporate Guarantee for an amount of Rs. 20 Crores given
	arrangements/transactions	to Kotak Mahindra Bank Limited on behalf of Millenium
		Manufacturing Systems Private Limited
(b)	Duration of the contracts/	Recurring
	arrangements/transactions
(c)	Salient terms of the contracts	Corporate Guarantee for an amount of Rs. 20 Crores given
	or arrangements or transactions	to Kotak Mahindra Bank Limited on behalf of Millenium
	including the value, if any	Manufacturing Systems Private Limited
(d)	Date of approval by the Board	July 14, 2023
(e)	Amount paid as advances, if any	NA

(ii) Name of the related party and nature of relationship - Elcom Systems Private Limited (Entity in which KMPs have Significant influence/ Control):

Sl. No.	Particulars	Details and Terms of Transaction
(a)	Nature of contracts/	Leasing out of MRO Facility at Bhiwadi, Rajasthan
	arrangements/transactions
(b)	Duration of the contracts/	9 Years and 6 Months
	arrangements/transactions
(c)	Salient terms of the contracts	MRO facility given on rent of INR 36,95,000 p.m. at arm\u2019s length
	or arrangements or transactions	basis for the period of 9 years and 6 Months, effective from
	including the value, if any	September 1, 2021.
		The above rent is subject to increase of 12% p.a. after every 3 (three)
		years.
(d)	Date of approval by the Board	January 15, 2019
(e)	Amount paid as advances, if any	NA