Indo Tech Transformers Ltd Management Discussions

Economic Overview

The global economy was projected to grow at 3.2% in FY 2025-26, as per the IMF estimates, maintaining its pace despite persistent inflation, tight monetary policy, and geopolitical tensions. Advanced economies grew modestly at 1.5%, while emerging markets, such as India and China, posted stronger growth rates of 7.0% and 5.0%, respectively.

The global economy, including India, is going through heightened uncertainties as the global trade war continues. While the US has put higher reciprocal tariffs on hold for India for three months, the uncertainty on the trade policy front persists. The reciprocal tariffs announced are much larger than anticipated, not just for India but also for other countries.

Indias robust economic fundamentals, including projected GDP growth of 6.5% in FY25-26, strong domestic demand, and ongoing structural reforms, continue to position the country as an attractive destination for global capital. The continued focus on infrastructure development, digital transformation and manufacturing (through initiatives like Make in India and PLI schemes) further enhances the longterm investment potential. Nevertheless, while global economic conditions present challenges, Indias relative growth advantage and improving microeconomic stability provide a strong buffer that could position it for sustained medium-term gains.

Indian transformer industry structure and development

Sector transition: Indias transformer market is consolidating - Sector transition rewarding players with scale, regulatory adaptability, and innovative design. Agile manufacturers with broad portfolios and integrated capabilities are positioned for long-term leadership.

Renewable energy and product evolution: Indias renewable ambitions (500 GW by 2030) are fuelling demand for medium and large power transformers to evacuate bulk power in addition to specialised transformers for variable and bidirectional loads. Products such as inverter-duty, dry-type, and modular transformers are gaining traction. Players that offer fast customisation and modular manufacturing are set to acquire.

Standards and specifications: The adoption of CEA standardisation norms is increasing. Indo Tech is actively aligning its offerings to these standards, ensuring technical compliance and long-term market relevance.

Demand trends: Energy-efficient distribution and inverter-duty transformers are proliferating due to the integration of renewable energy sources and policy incentives. Conventional transformers remain relevant for cash flow but face tighter margins and rising quality expectations. Meanwhile, fragmented rural markets remain constrained by low margins and high price sensitivity.

Infrastructure momentum: Urban and rural electrification, transmission upgrades, and large-scale infrastructure projects, such as metros and data centres, are spurring transformer demand. Customisation and modular design are key drivers in these projects.

Indo Tech has ramped up capabilities in these areas via inhouse engineering, NABL-accredited testing, successful short-circuit testing, and capacity enhancements.

Raw material and logistics risks: The industrys high dependency on imported CRGO steel, copper, and transformer oil exposes it to global price and logistics volatility. Indo Tech tackles this through supplier diversification, partial backward integration, and standard rate contracts with vendors and price escalation arrangement with the customers.

Lifecycle orientation and digitalisation: The shift to lifecycle-focused procurement is driving demand for predictive maintenance and digital monitoring. Manufacturers with in-house component capabilities and regional adaptability are gaining prominence.

Opportunities and Threats

A sector-wide shift toward Total Cost of Ownership based procurement aligns with Indo Techs focus on lifecycle solutions, including low-loss transformers and operational and maintenance (O&M) services. Its broad customer base across EPC, renewable, and utilities reflects its competitive stature. However, systemic risks persist—aggressive bidding by utilities, weak DISCOM finances, and delayed payments strain margins and working capital. Indo Tech mitigates this by adopting a strategic focus on EPC, industrial, and renewable contracts, which feature stronger payment structures.

Compliance, costs, and consolidation

The dual BIS-BEE certification has increased the compliance threshold, prompting exit or consolidation among smaller, cost-driven players. Indo Tech is well- positioned to gain market share with its integrated design-to-delivery operations and robust governance. SSEL group synergies support cost efficiency, even as 60% of raw material costs remain vulnerable to fluctuations in commodity prices.

Risk and Concerns

Risk	Risk Definition	Mitigation Strategy
Raw Material Price Volatility	Volatility in copper and CRGO prices due to global demand-supply and FOREX fluctuations, affecting margin stability.	Engage in long-term contracts with suppliers; explore strategic hedging; diversify supplier base; build inventory during low-price periods.
Overcapacity in Industry	Excess supply from numerous players in the transformer sector is leading to aggressive pricing and lower margins.	Focus on product quality, reliability, and custom engineering; target niche segments; invest in brand positioning.
Delayed Payments from Electricity Boards	Late payments to Independent Power Producers (IPPs) and consequently OEMs, disrupting cash flows and order intake.	Strengthen client screening; renegotiate payment terms; build buffer liquidity; prioritize contracts with assured payment security mechanisms.
Utility Order Pricing and Payment Terms	Utilities favour low-price (L1) bids with long credit terms, pressuring margins and working capital.	Limited exposure to direct utility orders. Target non-L1 or quality-based tenders; advocate for quality-linked procurement norms; maintain stringent cost controls.
High Working Capital Intensity	High receivables, inventory holding, and delay in project certifications strain liquidity.	Improve internal processes; negotiate better credit terms; adopt digital tools for faster testing & certification; increase service- based revenue.
Climate Risk	Rising climate variability and extreme weather events can disrupt supply chains and increase demand unpredictability; a regulatory push may shift demand to greener technologies.	Invest in resilient supply chains; diversify product offerings into greener technologies (e.g., dry-type transformers); monitor climate-related regulatory developments.

Internal control systems and their adequacy

The Company follows a systematic approach to operations and has implemented appropriate checks and balances. It maintains a proper and adequate system of internal controls, commensurate with its size and the nature of its operations. These systems are designed to provide reasonable assurance that assets are safeguarded and that all transactions are properly authorised, recorded, and reported.

The internal control framework ensures the availability of reliable financial and operational information, compliance with applicable laws and regulations, protection of assets against unauthorised use, execution of transactions with due authorisation, and adherence to corporate policies. The Company has a clearly defined delegation of powers, with authority limits for approving contracts and expenditures. It has also established processes for formulating and periodically reviewing annual and long-term business plans.

An Internal Financial Control (IFC) framework is in place to ensure the reliability of financial reporting, compliance with regulations, and operational efficiency. This involves documenting and evaluating departmental and entity-level controls through existing policies and procedures to identify significant gaps and outline improvement measures. Based on managements assessment, the companys internal financial controls were effective as of March 31, 2025.

The Audit Committee and the Board of Directors periodically review the internal control systems and monitor the implementation of internal audit recommendations. The CEO and CFO certification included in this report affirms the adequacy of the internal control systems and procedures.

M/s. G Balu Associates LLP, the Internal Auditors, independently evaluate the adequacy and effectiveness of internal controls, checks, and balances. In addition, M/s. ASA & Associates LLP, the statutory auditors, have audited the financial statements included in this Annual Report and have issued an attestation report on the Companys internal control over financial reporting, in accordance with Section 143 of the Companies Act, 2013.

Discussion on financial performance with respect to operational performance

Indo Tech recorded operating income of Rs. 611.78 crore, a 22% growth YoY, and improved EBITDA margins due to better capacity utilisation and process efficiency. An order book worth Rs. 830 crore (~1.5 times annual revenue) provides revenue visibility for FY25-26.

The detailed financial performance of the Company has been discussed in Directors Report under the heading

Financial Results and Performance Review.

Despite operating in a fragmented and price-sensitive market, Indo Tech maintains an edge through high-quality and customer-centric delivery. It serves marquee clients across the EPC, renewables, utilities, and industrial sectors.

Financial strength and outlook:

> Strong Growth & Profitability

• Revenue increased by ~ 22%, from Rs.503 Cr to Rs.611.8 Cr.

• Net profits went up ~36%, from Rs.46.86 Cr to Rs.63.88 Cr.

• EBITDA increased by ~41% from Rs.65.90 Cr to Rs.92.57 Cr.

• EPS rose from Rs.44.12 to Rs.60.15.

• Net worth increased by ~29% from Rs. 217.16 Cr to Rs. 280.75 Cr.

• Debt exposure is minimal (debt-to-revenue ratio ~0.01).

> Enhanced Credit Profile

India Ratings has improved our credit rating recently (June 2025) to BBB+/A2 from BBB-/A3, commending our improved scale, demand visibility.

The Board authorised CAPEX spendings of rupees 75 crores to increase the production capacity from 9,500 MVA to 16,000 MVA in phased manner in next 2 financial years and will be funded through internal sources.

Material developments in Human resources / Industrial relations front, including number of people employed

The Company firmly believes that its employees are its most valuable asset. In line with this belief, it remains committed to equipping employees with relevant skills and enabling them to keep pace with technological advancements. The focus during the year remained on enhancing processes to attract, develop, engage, and retain talent.

With robust systems and a responsive approach, the Company continued its efforts in digitalisation, process improvement, employee engagement, and promoting work-life balance. These efforts made a meaningful contribution to the business objectives for FY 2024-25.

Operational safety is of paramount importance. The Company takes pride in its workforces technical and functional excellence and strongly emphasises employee learning and development. The HR department continuously works towards maintaining harmony and coordination across all levels of the organisation, from workers and staff to senior management.

The company had employed 331 employees on its rolls as on March 31, 2025.

Details of significant changes in key financial ratios:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios and any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Key financial ratios:

Ratio	s	Denominator	As at March 31, 2025	As at March 31, 2024	Variance (%)
(a) Current ratio	Current assets	Current liabilities	2.5	2.0	23%
(b) Debt-Equity ratio (1)*	Debt	Shareholders Equity	0.03	0.02	45%
(c) Debt service coverage ratio#	Earnings available for debt service	Debt Service	56.72	37.31	52%
(d) Return on Equity ratio (2)	Net Profit after taxes	Shareholders Equity	22.8%	21.6%	5%
(e) Inventory turnover ratio (3)	Cost of goods sold	Average Inventory	3.5	3.7	-7%
(f) Trade receivables turnover ratio (4)	Revenue	Average Trade Receivable	4.7	3.8	24%
(g) Trade payables turnover ratio (5) @	Purchases	Average Trade Payable	6.2	4.6	34%
(h) Net capital turnover ratio	Revenue	Average Working capital	3.3	3.5	-8%
(i) Net profit ratio (6)	Net Profit	Total income	13.7%	11.2%	22%
(j) Return on Capital employed (7) &	Earnings before interest and taxes	Capital Employed	30.4%	27.3%	11%
(k) Return on investment	NA	NA	-	-	-

* - Increase in bank borrowings (Secured loan) to finance CAPEX

# - Increase in earnings resulting in higher coverage of debt

@ - Better payables management lead to increase in the ratio & - Better profitability on account of quality orders and reduction in cost

Cautionary statement

This report is based on the Companys experience in the transformer business, domestic and global economic conditions, assumptions, and government and regulatory policies. The Companys performance is subject to these variables and may be materially impacted by any changes beyond its control. Such changes may influence the perspectives and expectations presented in this report.

	2024-25	:2023-24	2022-23	2021-22	2020-21	2019-20	2018-19	2017-18	2016-17	2015-16	2014-15
Gross Sales & Other Income	62,822	50,992	37,357	28,175	20,892	21,075	21,463	23,016	16,591	22,318	18,671
Net Sales & Other Income	62,822	50,992	37,357	28,175	20,892	21,075	21,463	22,472	15,059	20,263	17,363
Earnings before Depreciation, Interest and Tax (EBDIT)	9,257	6,590	3,324	1,858	1,155	507	-268	151	-308	937	632
Depreciation	447	491	482	452	482	479	519	474	482	535	518
Profit After Tax	6,388	4,686	2,570	1,219	629	192	-839	-369	-1,127	402	-374
Equity Dividend %	--	--	--	--	--	--	--	--	--	--	--
Dividend Payout	--	--	--	--	--	--	--	--	--	--	--
Equity Share Capital	1,062	1,062	1,062	1,062	1,062	1,062	1,062	1,062	1,062	1,062	1,062
Reserves and Surplus	27,013	20,654	16,028	13,450	12,261	11,591	11,455	12,348	12,757	14,425	14,023
Net Worth	28,075	21,716	17,090	14,512	13,323	12,653	12,517	13,410	13,819	15,487	15,085
Gross Fixed Assets	9,133	8,610	7,646	6,887	6,731	6,671	6,563	5,987	5,909	10,106	10,003
Net Fixed Assets	4,966	4,889	4,416	4,139	4,374	4,797	5,159	5,034	5,429	6,215	6,635
Total Assets	43,589	38,209	30,066	23,837	18,660	20,193	19,346	20,868	20,868	21,269	20,659
KEY INDICATORS	2024-25	2023-24	2022-23	2021-22	2020-21	2019-20	2018-19	2017-18	2016-17	2015-16	2014-15
Earnings per Share (in Rs.)	60.15	44.12	24.20	11.48	5.92	1.81	-7.90	-3.48	-10.62	3.79	-3.52
Turnover per share (in Rs.)	591.54	480.15	351.76	265.30	196.72	198.45	202.10	216.72	156.22	210.16	175.82
Book value per share (in Rs.)	264.36	204.48	160.93	136.65	125.45	119.14	117.86	126.27	130.12	145.83	142.04
Debt : Equity Ratio	0.02:1	0.02:1	0.07:1	--	--	--	--	--	--	--	--
EBDIT / Gross Turnover %	15%	13%	9%	7%	5%	2%	-1%	1%	-2%	4%	3%
Net Profit Margin %	10%	9%	7%	4%	3%	1%	-4%	-2%	-7%	2%	-2%
RONW %	23%	22%	15%	8%	5%	2%	-7%	-3%	-8%	3%	-2%
ROCE %	30.4%	27.3%	16.4%	9.6%	5.0%	0.2%	-6.2%	-2.4%	-5.7%	2.7%	0.7%