Indo Tech Transformers Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy remained resilient during FY 2025-26 despite geopolitical uncertainties, inflationary pressures, commodity price volatility and tighter monetary conditions. While global GDP growth is estimated at approximately 3.4%, the power sector continues to witness stronger growth of around 8% CAGR, led by significant investments in the United States and other major economies.

Growth in renewable energy, replacement of ageing power infrastructure, grid strengthening, and increasing electricity demand from data centres are creating sustained demand for transformers globally. However, uncertainties arising from geopolitical developments, foreign exchange movements, copper prices, CRGO steel, transformer oil and other raw material costs continue to remain key industry considerations.

The Indian transformer industry is entering a strong growth phase driven by increasing electricity consumption, rising peak power demand, renewable energy expansion and investments in transmission and distribution infrastructure.

Indias peak power demand has already crossed 250 GW and is expected to move towards 500 GW and beyond by 2036. This growth requires significant investments in power generation, transmission networks, substations, grid modernisation and renewable energy evacuation infrastructure, creating sustained demand for transformers.

The industry is witnessing increasing focus on reliability, energy efficiency, quality and advanced engineering capabilities. Manufacturing scale, product quality, testing infrastructure, execution capability and regulatory compliance are becoming key differentiators.

Transformer demand continues to be supported by:

Transmission and distribution utilities
Renewable energy projects
Railways and metro systems
Industrial manufacturing
Urban infrastructure
Commercial developments
Data centres
Smart grid infrastructure

The rapid expansion of solar, wind, battery storage and green energy corridors requires extensive transformer deployment for power evacuation and grid integration. In addition, ageing power infrastructure across developed markets and increasing investments in grid strengthening are creating further opportunities for transformer manufacturers.

Indian manufacturers are increasingly gaining acceptance in domestic and international markets due to their engineering capabilities, manufacturing capacity, quality standards and ability to deliver reliable solutions.

Indias target of achieving 500 GW of renewable energy capacity by 2030 continues to provide significant opportunities for the transformer industry.

Renewable energy integration requires specialised transformer solutions capable of handling variable loads, higher efficiency requirements and grid connectivity challenges.

Demand is increasing for:

Inverter-duty transformers
Dry-type transformers
Energy-efficient transformers
Modular and compact transformer solutions
Large power transformers for evacuation infrastructure

Manufacturers with strong design capabilities, testing infrastructure, customised solutions and execution capability are expected to benefit from this transition.

Government investments in transmission expansion, rural electrification, smart grids, metro rail, industrial corridors and infrastructure development continue to support transformer demand.

Growth in data centres, industrial automation, manufacturing facilities and commercial infrastructure is further increasing demand for reliable and high-efficiency transformer solutions.

Custom-engineered products, faster delivery capability and lifecycle-based solutions are becoming increasingly important in securing large projects.

The industry continues to witness increasing adoption of technical standards and efficiency norms issued by regulatory authorities including BIS, BEE and CEA.

These requirements have increased the importance of quality systems, testing capabilities, product reliability and process discipline. The Company continues to align its products and processes with evolving regulatory standards to maintain long-term competitiveness.

The Company has adopted digitalisation as a business improvement and operational transformation tool rather than merely as a financial or reporting tool.

Digital initiatives have been implemented across production planning, manufacturing processes, procurement, inventory management, quality systems and operational monitoring. These initiatives have enabled better visibility, improved process control and faster decision-making.

The adoption of digital tools has helped the Company achieve higher production volumes, improved productivity, enhanced operational efficiency and better utilisation of manufacturing capacity. Digitalisation continues to support improved execution capability, resource optimisation and scalable growth as the Company expands its operations.

The transformer industry remains exposed to volatility in key raw materials such as CRGO steel, copper, transformer oil and insulation materials. Geopolitical uncertainties, foreign exchange fluctuations and freight cost variations may impact procurement costs and delivery schedules.

The Company continues to mitigate these risks through:

Supplier diversification
Long-term vendor relationships
Strategic sourcing initiatives
Rate contracts
Inventory optimisation
Operational efficiencies

The Indian transformer industry continues to offer strong medium- and long-term growth opportunities supported by:

Renewable energy expansion
Transmission and distribution investments
Infrastructure development
Industrial growth
Electrification initiatives
Smart grid modernisation
Rising demand for energy-efficient equipment

The Companys diversified presence across utilities, EPC contractors, industrial customers, renewable energy developers, infrastructure projects and commercial applications provides resilience and broad-based growth opportunities.

The Company delivered strong operational and financial performance during FY 2024-25 supported by healthy order inflows, improved execution efficiency, better capacity utilisation and favourable product mix.

Operating income increased to INR 78,207.91 Lakhs, registering growth of approximately 27.84% over the previous year. EBITDA improved to INR 13,073.71 Lakhs, reflecting growth of approximately 41.22%. Net profit increased to INR 9,277.11 Lakhs, recording growth of approximately 45.22%. Earnings Per Share (EPS) improved from INR 60.15 to INR 87.36. Net worth increased from INR 28,075.00 Lakhs to INR 37,370.00 Lakhs. The Company maintained a strong balance sheet with minimal debt exposure.

The Companys order book stood at approximately INR 1339.1 Crores as on March 31, 2026, providing strong revenue visibility for FY 2026-27 and beyond.

The Company continues to strengthen its competitive position through:

High-quality engineering capabilities
Strong customer relationships
Timely execution
Product reliability
Advanced testing infrastructure
Customer-centric solutions

The Board has approved a capital expenditure plan of approximately INR 495 crore to expand manufacturing capacity from 9,500 MVA to 50,000 MVA in a phased manner over the next two years.

The expansion will be funded through internal accruals and will strengthen the Companys ability to address growing domestic and export opportunities.

The Company continues to invest in:

Process automation
Product development
Testing infrastructure
Operational efficiency
Digitalisation initiatives
Engineering excellence

During the year, India Ratings upgraded the Companys credit rating from BBB- /A3 to BBB+/ A2, recognising improved operational scale, strong demand visibility, healthy financial profile and prudent capital management.

The Company continues to maintain:

Strong liquidity position
Low leverage
Healthy working capital management
Strong operational cash flows
Disciplined capital allocation

The Company operates in a dynamic business environment and remains exposed to industry and macroeconomic risks.

Volatility in copper, CRGO steel, transformer oil and other commodities may impact profitability.

Strategic sourcing
Supplier diversification
Long-term supply arrangements
Price escalation clauses
Inventory optimisation

The transformer industry remains competitive, particularly in utility tenders.

Focus on value-added products
Quality and reliability focus
Selective bidding
Operational efficiency improvement

Delayed payments from utilities and project customers may impact working capital cycles.

Diversified customer mix
Focus on EPC, industrial and renewable customers
Improved receivables management
Liquidity discipline

Supply disruptions, freight volatility and evolving environmental regulations may impact operations.

The Company addresses these risks through multiple sourcing strategies, vendor development, sustainable manufacturing practices and continuous monitoring of regulatory developments.

The Company maintains a robust internal control framework covering asset protection, financial reporting, regulatory compliance, operational efficiency and fraud prevention.

The Internal Financial Control (IFC) framework is periodically evaluated to ensure effectiveness. The Audit Committee and Board review internal controls, risk management systems and audit findings.

M/s. G Balu Associates LLP, Internal Auditors, independently evaluate internal controls and operational processes.

M/s. ASA & Associates LLP, Statutory Auditors, have audited the financial statements and internal financial controls in accordance with the Companies Act, 2013.

The Companys internal financial controls were found to be adequate and operating effectively as of March 31, 2026.

The Company continues to invest in employee development, technical training, leadership development, digitalisation, workplace safety and operational excellence.

Industrial relations remained cordial across the organisation.

As on March 31, 2026, the Company had 353 employees on its rolls.

The Company remains committed to sustainable development through initiatives in education, healthcare, environmental conservation and renewable energy.

During the year, the Company:

Improved educational infrastructure through construction of toilets, RO water systems, renovation works and kitchen facilities across government schools.
Supported healthcare initiatives through administration of approximately 2,150 doses of Cervical Cancer (HPV) vaccines.
Supported ecological restoration initiatives including the Sandapallam Stream Rejuvenation Project and water conservation activities.
Sourced approximately additional 20 lakh units (2 million units) of green wind energy, supporting carbon reduction initiatives.
The Company continues to integrate ESG principles into its operations and stakeholder initiatives.

The Company continues to integrate ESG principles into its operations and stakeholder initiatives.

The outlook for the Indian transformer industry remains positive, supported by renewable energy expansion, transmission investments, grid strengthening, industrial growth, urbanisation and increasing electrification requirements.

With expanded manufacturing capacity, strong engineering capabilities, digitalisation-driven productivity improvements, diversified customers, healthy order visibility and a strong balance sheet, the Company remains well positioned to deliver sustainable growth and create long-term value for stakeholders.