Jainex Aamcol Ltd Management Discussions

COMPANY REVIEW

Operational Overview

Jainex Aamcol Limited is a leading manufacturer of gear hobs and special cutting tools, inspection tools & precision accessories under the brand "Aamcol".

The Company caters to a wide range of customers including automobile industries, industrial and special gearbox manufacturers, machine tool manufacturers, and many others. The Companys product range includes Various Hobs for different applications such as Spur / Helical Gears, Chain Sprocket & Timer Pulleys, Worm Gears, Cutters, and other Inspection Tools & Precision Accessories. By producing international quality products, the company not only saves countrys foreign exchange but also generates the same by exporting its products.

The objective of this report is to convey the Managements perspective on the external environment and market, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities, and internal control systems and their adequacy in the Company during the Financial Year 2024-25. This should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Annual Report. The Company continued its strategic focus on enhancing process efficiency, product quality and customer connect. With an emphasis on manpower training, automation and product innovation, the Company strengthened its positioning in the marketplace.

The company is in the process of increasing the existing production capacity and adding New Products for which it has availed Working Capital and Term Loan facility amounting to Rs. 160.00 million from ICICI Bank Limited ("Bank") on the terms and conditions as set out in the indicative Credit Arrangement Letter ("CAL") No. CAL435278023243 dated August 27, 2024 issued by ICICI Bank and any amendments, renewals or modification made thereto by ICICI Bank from time to time.

The Company implemented a range of productivity enhancement initiatives, including retrofitting, reconditioning, automation, improved utilization of high-speed cutting tools, and cycle time optimization.

Being a safety conscious organization, the Company imbibes safety across various functions of the entire plant operation. In order to protect the health of workforce at the shop floor level, it curtails the use of hazardous material inside the plant premises.

The global gear market is witnessing steady growth, driven by rising demand from the automotive, aerospace, and industrial machinery sectors. Increasing focus on precision manufacturing and the shift toward electric vehicles are key growth drivers. The market is projected to grow at a moderate CAGR through 2030, with Asia-Pacific leading due to rapid industrialization and strong manufacturing infrastructure.

Technological advancements such as CNC automation, IoT integration, and smart manufacturing are enhancing productivity and efficiency. However, high initial costs and maintenance challenges may limit adoption among small and medium enterprises. North America and Europe continue to play a significant role, supported by mature industrial sectors and innovation in gear-cutting technologies.

In 2023 2024, global market size estimates vary-from approximately USD 912 M (Zion Market Research) growing at ~2.3% CAGR through 2034 Fortune Business Insights, to USD1.2 B (DataIntelo) with a stronger ~6.1% CAGR through 2032. Emerging analyses likewise point to a more modest ~2.09% CAGR from 2024 2028, adding USD 83 M of value during that span. This growth continues to be fueled by demand from automotive (especially EVs), aerospace, industrial machinery, and renewable energy sectors-thanks to the need for precision-grade gears and volume output.

Technological advancements like CNC automation, IoT-enabled maintenance, and real-time monitoring are driving efficiency in gear hobbing machines. Vertical models are gaining popularity for compact applications, while horizontal machines remain dominant for mass production. Asia-Pacific continues to lead the market, followed by steady growth in North America and Europe driven by smart manufacturing adoption.

Indias gear market is growing steadily, supported by rising demand from automotive, aerospace, and defense sectors. Increased adoption of CNC technology and government initiatives like "Make in India" are boosting domestic manufacturing and exports.

Technological upgrades, skilled labor availability, and cost-effective production give Indian manufacturers a competitive edge. Companies are modernizing their offerings to meet both domestic and global precision gear requirements.

Indias auto-components industry is a critical pillar of the countrys manufacturing sector, contributing around 2.3% to GDP and employing over 5 million people. The sector is well-diversified, producing a wide range of components for both domestic consumption and exports. With strong backward integration, the industry supports OEMs in passenger vehicles, commercial vehicles, two-wheelers, and electric vehicles. The Indian auto-component market reached approximately USD 70 billion in FY24, and is projected to surpass USD 200 billion by 2030, driven by increased vehicle production, exports, and localization trends.

Growth is fueled by rising domestic vehicle demand, policy support under initiatives like PLI (Production-Linked Incentive) and Auto Component Manufacturing Scheme, and a growing focus on EVs and advanced technologies. Exports have also seen a strong push, with Indian components reaching over 160 countries, including major markets like the US, Germany, and Japan. Investments in R&D, quality improvements, and the shift toward green and smart mobility are reshaping the industry for global competitiveness.

In FY 2024-25, Indias auto-components industry achieved a turnover of USD 80.2 billion ( 6.73 lakh crore), marking a robust 9.6% year-on-year

growth, and nearly doubling in five years with a CAGR of ~14% from FY20 to FY25. Supplies to domestic OEMs grew by 10%, driven by rising vehicle production and higher value-content per vehicle. The sector accounted for ~2.3% of Indias GDP and directly employed over 1.5 million people, with projections to contribute 5 - 7% of GDP by 2026 and add 3.2 million more jobs under the Automotive Mission Plan.

Exports rose to USD 22.9 billion in FY 25 - up 8% year-on-year, while imports grew by 7.3%, leading to a trade surplus of USD 453 million (up from USD 300 million in FY24). Exports from India now reach over 160 countries, with major contribution from engine components, transmission & steering parts, and body/chassis systems. Looking ahead, NITI Aayog projects the sector to reach USD 145 billion in output by 2030, with exports tripling to USD 60 billion, supported by technology-led capex, localization and government incentives like PLI schemes.

In mid-2025, India initiated the formulation of the Automotive Mission Plan 2047 (AMP 2047) to succeed the ongoing AMP 2016 26 framework (also referred to as AMP 2026). While the formal roadmap through FY 2024 25 is still part of the concluding AMP 2016 26 mandate, AMP 2047 planning is already underway via seven expert-led sub-committees targeting milestones for 2030, 2037, and 2047. This shift represents a strategic pivot aligned with the national vision of "Viksit Bharat @2047", aiming to elevate India to a global automotive power through innovation, sustainability, and export-led growth.

Under AMP, NITI Aayogs April 2025 report titled "Powering Indias Participation in Global Value Chains" advocated several policy interventions to boost Indias automotive component sector. Key recommendations include providing fiscal and operational expenditure (opex) support for tooling, infrastructure and brownfield auto clusters; R&D and international branding incentives; MSME support including IP transfers; and facilitating joint ventures and FTAs for market access. Through AMP 2047, stakeholders aim to strengthen the ecosystem for multiple powertrains -ICE, EVs, flex-fuel, and green hydrogen - all while enhancing digital manufacturing capabilities and export competitiveness.

Being a manufacturer of components for end-user industries, the Company is prone to market vagaries with rapid technological development and unique economic cycles. In addition, the regulatory and macroeconomic environments have a direct impact on the business. The Company has been quick to respond to any market challenges, thus making smart come backs. The Company has in place a robust mechanism to preempt merging risks and take meaningful corrective actions in a timely manner. Some of the key risks that may emerge are enlisted below, with the corresponding mitigation measures that can be adopted by the Company.

Indias strong manufacturing base, cost competitiveness, skilled workforce, and rising domestic vehicle demand particularly in EVs and hybrid segments-present vast opportunities for auto-component growth. Government initiatives like PLI schemes, Make in India, and global OEMs diversifying supply chains (China+1 strategy) further enhance export potential and attract foreign direct investment (FDI) into component manufacturing hubs.

The industry faces threats from global economic volatility, raw material price fluctuations, high import dependence for advanced electronics and semiconductors, and slow EV ecosystem readiness. Additionally, rising competition from Southeast Asian manufacturers and tightening global emission and safety regulations may challenge Indian suppliers in maintaining quality and compliance at scale.

To counter these threats, the industry must invest in R&D, localization of critical components, and build capabilities in EV-specific parts like battery packs, motors, and controllers. Encouraging technology partnerships, upskilling the workforce, developing Tier 2/3 suppliers, and leveraging FTAs for market access will also help mitigate external risks and strengthen global positioning.

The Companys segment-wise performance for the financial year 2024-25 is as under:

(Amt. in Lakhs)

The Company, being a listed entity, has established a sound internal control framework in compliance with the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. These controls are designed to provide reasonable assurance regarding the accuracy and reliability of financial reporting, timely compliance with applicable laws and regulations, and the effective management of operations. The internal control environment includes well-documented policies, clearly defined authority levels, segregation of duties, and automated systems that support key processes.

The internal audit function is conducted independently and periodically across all departments and business locations. The internal auditors submit their reports directly to the Audit Committee of the Board, which actively monitors the implementation of audit recommendations. Based on the reviews conducted and feedback from the internal auditors, the Audit Committee and the Board are of the opinion that the Companys internal control systems are adequate and effective, and provide a strong foundation for risk mitigation, operational efficiency, and sound corporate governance.

The Audit Committee of the Board oversees the Audit function through regular reviews of audit findings and monitoring corrective actions taken on the same.

Discussion on Financial Performance with Respect to Operational Performance

During the financial year 2024-25 under review, there was increase in the turnover of the Company as compared with the previous year i.e. from Rs. 2094.40 Lakhs to Rs. 2378.73 Lakhs. The Company has reported Net Profit of Rs. 34.49 Lakhs against Net Profit of Rs. 51.94 Lakhs in the previous year.

The Company has established well-integrated support systems across key operational areas to ensure seamless business functioning and strategic execution. These include robust IT infrastructure, efficient ERP systems, and dedicated teams for finance, human resources, legal, procurement, and compliance. Each function operates with clearly defined processes and performance metrics, enabling timely decision-making, enhanced productivity, and regulatory adherence. Regular training and upskilling initiatives further strengthen internal capabilities, ensuring that the support functions effectively align with the Companys overall business goals.

Statements in this Management Discussion and Analysis and Directors Report describing the Companys objectives, projections, estimates, expectations, or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results may differ materially from those expressed or implied due to various risks and uncertainties, including but not limited to changes in government policies, economic conditions, market demand, competitive pressures, and other external factors beyond the Companys control. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.