Kalyani Forge Ltd Management Discussions

ECONOMIC REVIEW Global Economy

The global economy in FY2025 continued its gradual recovery amidst ongoing geopolitical tensions, inflationary pressures, and changing monetary policies in key regions. While growth in advanced economies remained moderate due to tight financial conditions and geopolitical uncertainty, emerging markets and developing economies showed resilience. This resilience was supported by rising consumption, increased infrastructure investments, and a focus on digital and industrial transformation.

The forging industry, which plays a crucial role in the global manufacturing value chain, is well-positioned to benefit from renewed momentum in sectors such as automotive, defense, aerospace, and industrial machinery. There is a noticeable global trend toward investing in sustainable infrastructure, green technologies, and automation, which is driving demand for precision-forged components.

Manufacturing output has consistently improved, as companies adopt innovative manufacturing practices that focus on efficiency, innovation, and localized supply chains. This shift presents new opportunities for forming partnerships between companies with strong technical capabilities and global connections.

Outlook

According to the International Monetary Fund (IMF), the April 2025 World Economic Outlook (WEO) projects a global growth rate of 2.8% for 2025, with an increase to 3.0% anticipated in 20261. This forecast has been revised downward due to several factors, including heightened trade tensions, policy uncertainty, and declining demand. Advanced economies are experiencing subdued growth, primarily due to high interest rates and geopolitical uncertainties. In contrast, emerging markets and developing economies (EMDEs) are demonstrating resilience through strong domestic consumption, infrastructure development, and a focus on digitalization and industrial transformation.

The forging and precision engineering industry is experiencing significant growth in sectors such as automotive, aerospace, and industrial machinery. This growth is driven by government incentives and increased capital spending. Additionally, the shift toward sustainable infrastructure and localized supply chains is creating long-term demand for high-quality components.

Indian Economy

Indias economy has maintained its growth trajectory in FY2025, solidifying its position as one of the worlds fastest-growing major economies. Supported by strong domestic consumption, strategic government initiatives, and increased infrastructure spending, the overall economic environment remains favorable for industrial and manufacturing growth. According to estimates from the

National Statistical Office (NSO), Indias GDP has indicated a real GDP growth of 6.5%2 in FY2025, demonstrating resilience despite global challenges.

The forging industry is experiencing increased demand, driven by sectors such as automotive and defense.

Government initiatives such as "Make in India" and Production Linked Incentives (PLIs) are promoting domestic manufacturing, creating opportunities in precision engineering. Indias appeal as a manufacturing hub is bolstered by global supply chain diversification and rising foreign direct investment (FDI). By adopting Industry

4.0 practices, companies like Kalyani Forge Limited are set to meet the demand for high-quality forged components, improving productivity and efficiency.

Sources:

1 World Economic Outlook, April 2025: A Critical Juncture—International Monetary Fund

2 Indias Trade and Economic Outlook PIB

Outlook

The economic outlook for India in FY2026 remains positive, with projections indicating that it will be the worlds fastest-growing major economy, projected to expand by 6.3%3 to 6.8% in FY2026. This transformation is the result of a decade of decisive governance, visionary reforms, and increased global engagement. The growth is driven by strong domestic demand, significant investments in infrastructure, and expansion across various industries. The favorable macroeconomic environment, along with the governments ongoing initiatives in manufacturing and digitization, provides a solid foundation for Kalyani Forge Limited to strengthen its market position.

Key growth drivers include the PM Gati Shakti Master Plan, rapid infrastructure development, and strategic programs such as PLI and "Make in India," which aim to increase domestic industrial output.

This encouraging economic climate benefits the forging and engineering sectors, as demand for forged components is rising, particularly with the recovery of the automotive industry and growth in defense, agriculture, and construction. Additionally, foreign direct investment (FDI) is estimated to have reached $80 Billion, further solidifying Indias reputation as a reliable manufacturing hub as global companies look to diversify their supply chains.

Source:

3 India Becoming An Economic Powerhouse PIB

BUSINESS ENVIRONMENT Automotive Business

The automotive sector is a crucial part of Kalyani Forge

Limiteds business, significantly contributing to its revenue.

The commercial vehicle (CV) segment has established the Company as a trusted partner, and Kalyani Forge is now gaining strong traction in the passenger vehicle (PV) space by maintaining the same high standards of quality, precision, and reliability.

The Companys engineering expertise, advanced processes, and agile supply chain have enabled it to adapt to the evolving needs of both internal combustion engine (ICE) and emerging electric vehicle (x-EV) platforms. The Companys focus on high-strength, lightweight, and precision-forged components aligns with the industrys shift toward electric vehicles (EVs) and advanced driver-assistance systems (ADAS). Notably, the commissioning of a new 4,000T press has expanded its forging capabilities from 10 kg to 25 kg, allowing for the production of larger components, such as stub axles for commercial vehicles and crankshafts for passenger cars, thereby strengthening its market position in the mobility sector.

Industrial Business

The industrial segment remains a crucial area of growth for Kalyani Forge Limited, covering a diverse range of applications, including power generation, construction, mining, infrastructure, marine, railways, and other off-highway vehicles. With the Indian economy continuing on a strong growth trajectory, these sub-sectors are experiencing consistent capital inflows and expansion.

The global demand for reliable power generation is increasing, driven by the growth of data centers due to advances in AI, IoT, and cloud computing. Kalyani Forge has leveraged its expertise in ICE-based forged components to strengthen its position in the industrial segment. By enhancing its product portfolio and focusing on customer relationships, the Company is addressing evolving needs like stricter emission norms and higher precision, providing a competitive edge in the market.

Outlook

In FY2025, Kalyani Forge strengthened its relationships with global OEMs and Tier-1 customers, resulting in long-term collaborations and a shift towards strategic partnerships that focus on high-value engineered forgings and comprehensive component solutions. It has enhanced its capacity with a 4,000T press and increased automation, positioning itself to meet the rising demand for complex components.

Building on the strong performance of FY2025, Kalyani Forge enters FY2026 with renewed confidence, supported by strategic clarity, operational efficiency, and customer-centric innovation. The Company is well-positioned to capitalize on opportunities in key sectors, including automotive, industrial automation, oil and gas, aerospace, construction, and marine.

The Company is optimistic about precision-forged products and focuses on global expansion, product diversification, and process innovation. With an emphasis on operational efficiency and technological advancements, Kalyani Forge strives for sustainable growth while navigating the volatility of raw material prices. They are committed to value creation and are well-prepared to seize future opportunities.

FINANCIAL REVIEW

Income Statement Summary

Kalyani Forges performance for FY2025 demonstrated resilience, with total income amounting to 23,915.44

Lakh, representing a 0.63% decrease from 24,066.32 Lakh in FY2024.

Despite this slight decline in income, the Companys profitability showed remarkable improvement. EBITDA, approximated here as profit before exceptional items and tax increased to 2,651 Lakh, marking a 106.5% rise from 561.92 Lakh in the previous year. Additionally, Profit After Tax (PAT) also saw substantial growth, reaching 831.48 Lakh, an increase of 82.7% compared to 455.01 Lakh in FY2024.

Particulars	2024-25	2023-24	Y-O-Y %
Total Income ( in Lakh)	23,915.44	24,066.32	(0.63%)
Operating Expenses ( in Lakh)	21,264.24	22,292.97	(4.61%)
EBITDA ( in Lakh)	2,651.20	1,773.35	49.50%
Other Income ( in Lakh)	251.11	387.67	(35.23%)
Interest and Finance Charges ( in Lakh)	(703.79)	(589.76)	19.33%
Depreciation and Amortization ( in Lakh)	787.00	621.67	26.59%
Profit Before Tax ( in Lakh)	1,160.41	561.92	106.51%
Total Tax Expenses ( in Lakh)	328.93	106.91	207.67%
Profit After Tax ( in Lakh)	831.48	455.01	82.74%
EPS (Basic) ( in Lakh)	22.86	12.51	82.70%

Key Financial Ratio Changes changes (25% or more) in FY2025 compared to FY2024 is as follows: Keyfinancialratiosalongwiththedetailsof

Particulars	2024-25	2023-24	% Changes Reasons For Change
Debtors Turnover Ratio (in times)	3.32	3.46	(4.13%) Increase in Trade Receivables
Inventory Turnover Ratio (in times)	1.98	4.58	(56.71%) Saving in COGS
Interest Service Coverage Ratio (x)	3.77	1.95	93.18% Increase in Interest Cost
Current Ratio (X)	1.23	1.42	13.44% Increase in Current Liability
Debt-to-Equity Ratio (x)	0.80	0.74	7.84% Increase in Debt
Operating Margin (%)	11.08	7.37	50.34% Increase in Operating Income
Net Profit Margin (%)	3.65	1.89	93.12% Increase in Net Profit

HUMAN RESOURCES

At Kalyani Forge Limited, human capital is regarded as the cornerstone of sustained organizational success, emphasizing a transparent and collaborative workforce.

In FY2025, the Company focused on building a future-ready workforce through strategic hiring, role restructuring, and succession planning as part of the Vriddhi Growth Mission 2027.

The Kaizen Awards initiative enhanced employee engagement and fostered a culture of continuous improvement through innovative, cost-effective ideas.

Operator training modules were refined to incorporate quality, safety, and lean manufacturing, supported by tailored training programs. Additionally, expanded employee welfare initiatives reflected the Companys commitment to a positive, inclusive work environment, as Kalyani Forge prioritizes talent development and innovation aligned with strategic goals.

INFORMATION TECHNOLOGY

In FY2025, Kalyani Forge Limited advanced its digital transformation by expanding technology adoption across various functions. Building on the success of CRM,

Recruitment Management, and Project Management

Software implemented in FY2024, the focus this year shifted to optimizing these platforms for better integration and user adoption, enhancing workflow efficiency and collaboration.

The Company has initiated digital programs to automate tasks, improve reporting, and enhance decision-making through better data access. It focuses on knowledge management, cybersecurity, data integrity, and user training to ensure a secure digital infrastructure. Kalyani Forge views technology as a strategic enabler and aims to invest in digital innovation for long-term growth and operational excellence.

CORPORATE SOCIAL RESPONSIBILITY

Kalyani Forge Limited is committed to the principles of inclusive and sustainable development. The Company believes in giving back to society with purpose and passion, and its Corporate Social Responsibility (CSR) initiatives reflect this philosophy.

A key focus area for the Companys CSR efforts is skill development and job creation, particularly among youth and aspiring professionals. In FY2025, they supported technical education by sponsoring the Automobile

Racing Team at the College of Engineering, Pune (COEP), fostering innovation, engineering excellence, and teamwork while nurturing future talent for the automotive and manufacturing sectors. Kalyani Forge is dedicated to supporting causes that align with its CSR policy, such as community development, environmental sustainability, and health. All activities adhere to the framework established by the CSR Committee, ensuring transparency and a positive impact. The Company aims to deliver meaningful outcomes and create lasting value for society.

RISK MANAGEMENT

Kalyani Forge Limited recognizes that effective risk management is crucial for achieving strategic objectives and ensuring long-term sustainability. Operating in a dynamic environment, the Company faces various operational, financial, risks. To manage these, it has implemented a structured Risk

Management Framework for the proactive identification, assessment, mitigation, and monitoring of risks, aligned with its governance and internal control systems.

Key Risks Identified and Monitored

The Risk Management Policy outlines various critical risks that are periodically reviewed and managed. These include:

y Supply Chain Risks:

Raw material shortages

Press breakdowns affecting production continuity

Die failures and tooling disruptions

Power outages impacting operations

y Strategic and Market Risks:

Changes in government policies and regulatory landscapes

Global trade regulations affecting competitiveness and exports

Entry of new competitors or disruptive market shifts

y Geopolitical and Environmental Risks:

Geopolitical instability impacting international supply chains

Natural disasters such as floods or heavy rains affecting logistics and operations

y Technological and Innovation Risks:

Rapid technological changes that may affect the relevance of existing products or processes

Need for continuous innovation to stay ahead of evolving industry requirements

Kalyani Forge Limited actively monitors risks and has contingency plans to ensure business continuity, including supplier diversification and predictive maintenance. The

Board of Directors and senior management regularly review risks and oversee mitigation strategies, fostering a culture of accountability and transparency.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Kalyani Forge Limited emphasizes the importance of a strong internal control system to ensure operational efficiency, financial accuracy, compliance, and asset protection. Given its focus on precision forging and automation, the Company maintains a dynamic framework to mitigate risks and support strategic goals.

Key components of the internal control system include: y Accurate authorization, recording, and reporting of transactions y Safeguarding of assets from unauthorized use y Compliance with statutory and regulatory requirements y Provision of reliable financial and operational information

Kalyani Forge integrates internal controls into its business processes through the use of automated controls, standard procedures, and manual checks to ensure oversight.

The Audit Committee assessed findings in FY2025 and implemented action plans, finding no significant control failures. The Company is committed to enhancing its internal control environment to support growth and foster stakeholder confidence through ongoing investments in automation and governance.