Kinetic Engineering Ltd Management Discussions

Global economic review Overview

The global economy remained resilient during FY 2025-26, although the operating environment continued to be shaped by geopolitical tensions, trade fragmentation, uneven monetary policy normalisation, supply-chain realignments and uncertainty around energy and commodity prices. Growth remained more resilient than initially expected, but the recovery continued to differ across regions and sectors. Manufacturing activity remained under pressure in several mature markets, while services and selected emerging markets provided support to global activity.

The global automotive industry entered 2025 on a cautious footing and subsequently recorded a recovery in overall vehicle production and sales. According to the International Organization of Motor Vehicle Manufacturers (OICA), global vehicle production increased from 92.7 million units in 2024 to 96.4 million units in 2025, while global sales increased from 95.3 million units to 99.8 million units. Growth was increasingly concentrated in Asia, while several developed markets continued to experience muted demand and policy uncertainty.

The automotive sector continued to undergo structural changes driven by electrification, connected technologies, advanced driver assistance systems, software-defined vehicles, manufacturing automation and evolving emissions and safety regulations. These trends are reshaping component demand and creating opportunities for manufacturers that can combine engineering capability, quality, cost competitiveness and speed of product development.

At the same time, the global industry faced challenges arising from tariff and trade-policy changes, logistics disruptions, volatile raw-material prices, foreign exchange movements and varying pace of electric-vehicle adoption across geographies. The ability of automotive suppliers to maintain resilient supply chains, manage costs and adapt product portfolios remains critical.

Sources: OICA

Global automotive industry - key themes

• Demand recovery remained uneven across regions, with Asia continuing to account for

a significant share of global vehicle production and sales.

• Electrification continued to influence investment decisions, product development and supply-chain strategies, although the pace of EV adoption differed materially by market.

• Connected vehicle technologies, software integration, advanced safety systems and automation continued to increase the technology content of vehicles.

• OEMs and suppliers continued to focus on localisation, supply-chain resilience, dual sourcing and cost optimisation.

• Geopolitical developments, trade barriers, freight costs and commodity prices remained important variables for the automotive value chain.

Outlook

The global automotive outlook remains constructive over the medium term, supported by replacement demand, urbanisation, rising mobility needs, technology-led product development and increasing adoption of cleaner mobility solutions. However, the sector is expected to remain highly competitive and sensitive to macroeconomic conditions. For component manufacturers, opportunities are likely to arise from higher content per vehicle, localisation, new product introductions, EV and hybrid platforms, advanced precision components and greater participation in global supply chains.

Indian economic review Overview

The Indian economy continued to demonstrate strong resilience during FY 2025-26 despite a challenging global environment. According to the provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) in June 2026, Indias real GDP is estimated to have grown by 7.7% in FY 2025-26, compared with 7.1% in FY 2024-25. Real GVA is estimated to have grown by 7.9% during the year.

The economy benefited from sustained domestic demand, improving investment activity, resilient services, a strengthening manufacturing base and continued public infrastructure expenditure. Private consumption remained an important growth driver, while investment in infrastructure and productive capacity continued to support economic activity.

The manufacturing environment improved during the year. The provisional national accounts indicate continued growth in the secondary sector, while higher steel consumption, cement production, vehicle registrations and machinery imports reflected healthy investment and mobility-related activity. The automotive and engineering sectors therefore operated against a relatively supportive domestic demand backdrop.

Indias external environment remained influenced by global trade developments, commodity prices, exchange-rate movements and geopolitical risks. For export-oriented businesses, changes in shipping routes, freight costs and customer demand across international markets remained important considerations.

Source: Ministry of Statistics & Programme Implementation (MoSPI), Provisional Estimates of Annual GDP for FY2025-26 5 June 2026.

Key indicators

Indicator	FY 2025-26	FY 2024-25
Real GDP growth	7.7%	7.1%
Real GVA growth	7.9%	7.3%

Growth drivers

• Strong domestic consumption supported demand across consumer and mobility- linked sectors.

• Public and private investment continued to support infrastructure, manufacturing and capacity creation.

• Improved vehicle registrations and industrial indicators supported the broader automotive ecosystem.

• Technology adoption, localisation and supply-chain diversification continued to strengthen Indias role in global manufacturing.

• Improving financial-sector health and the transmission of lower interest rates supported financing conditions and business confidence.

Outlook

India is expected to remain among the fastest-growing major economies. The medium- term outlook is supported by domestic consumption, investment, infrastructure development, manufacturing expansion, formalisation of the economy and technology adoption. Risks include global trade fragmentation, geopolitical tensions, energy and commodity-price volatility, currency movements and external demand conditions.

Source: MoSPI; Ministry of Finance / Economic Survey 2025-26 and Budget 2026-27. Global automotive industry overview

The global automotive industry is in the midst of a structural transformation. Traditional internal-combustion-engine platforms continue to represent a substantial part of the installed vehicle base, while electric, hybrid and other low-emission technologies are expanding. At the same time, connected vehicles, software, advanced safety systems, automation and data-led manufacturing are changing the economics and technology architecture of the sector.

OICA reported that global vehicle production increased to 96.4 million units in 2025 from 92.7 million units in 2024, while global sales increased to 99.8 million units from 95.3 million units. The growth was not uniform across regions, with Asia accounting for a significant portion of the increase.

Source: International Organization of Motor Vehicle Manufacturers (OICA), April 2026. Key growth drivers Electrification and clean mobility:

The transition towards lower-emission mobility continues to create demand for batteries, electric motors, power electronics, thermal management, lightweight structures, connectors and other specialised components. The pace of adoption varies across vehicle categories and geographies, making technology flexibility important for suppliers.

Connected and digital technologies:

Connected features, telematics, software integration, over-the-air updates and digital manufacturing are increasing the technology content of vehicles and creating opportunities for suppliers with engineering, electronics and software capabilities.

Advanced safety and driver assistance:

Stricter safety requirements and increasing consumer expectations are encouraging OEMs to adopt advanced braking, sensing, stability, driver-assistance and occupant- protection systems.

Supply-chain localisation and resilience:

OEMs are increasingly seeking resilient, cost-effective and geographically diversified supply chains. This trend supports opportunities for Indian component manufacturers that can deliver quality, reliability and competitive total cost.

Emerging-market demand:

Rising incomes, urbanisation and expanding vehicle ownership in emerging markets are expected to support long-term demand for personal and commercial mobility.

Key challenges

• Trade restrictions, tariff changes and geopolitical developments can affect customer programmes, sourcing decisions and export economics.

• Raw-material and energy-price volatility can place pressure on margins and working capital.

• Rapid technology shifts may require continuous investment in product development and manufacturing capabilities.

• The transition to EVs can change the mix of components required by OEMs and alter established supply relationships.

• High customer expectations on quality, delivery, cost and sustainability continue to raise competitive intensity.

Outlook

The global automotive industry is expected to continue evolving towards a more diversified technology landscape. For auto-component manufacturers, long-term opportunities will be driven by localisation, product complexity, higher value addition, EV and hybrid applications, advanced manufacturing and access to global OEM supply chains.

Global electric vehicle industry overview

Electric mobility continued to gain strategic importance during FY 2025-26. The global EV ecosystem is being shaped by improvements in battery technology, charging infrastructure, vehicle affordability, regulatory targets and investments by OEMs and suppliers. The transition is, however, progressing at different speeds across regions and vehicle categories.

The International Energy Agencys Global EV Outlook highlights the continuing expansion of electric mobility and the growing importance of batteries, charging infrastructure, manufacturing capacity and policy support. For component suppliers, the transition creates opportunities in high-voltage systems, electric powertrain components, thermal management, lightweight structures, connectors, electronics and related engineering solutions.

Source: International Energy Agency, Global EV Outlook 2025.

Key drivers

• Improving battery energy density, charging performance and cost competitiveness.

• Government policies and emissions targets supporting cleaner mobility.

• Expansion of charging infrastructure across urban, semi-urban and highway networks.

• Increasing availability of EV models across passenger, two-wheeler, three-wheeler and commercial vehicle categories.

• Growing investment in localisation of EV components and manufacturing capabilities.

Implications for auto-component manufacturers

The EV transition is expected to alter the component mix of vehicles rather than simply reduce the addressable market for suppliers. Manufacturers with established machining, forging, casting, transmission, drivetrain, chassis and precision-engineering capabilities can leverage their engineering base to develop adjacent products for electric and hybrid platforms. The ability to balance existing ICE-related programmes with emerging EV opportunities is likely to remain important during the transition period.

Indian automotive industry overview

The Indian automotive industry remained a key contributor to manufacturing, employment, exports and technological development during FY 2025-26. The sector benefited from improved consumer affordability, lower financing costs, tax and policy measures, replacement demand and a strong second half of the financial year.

According to the Society of Indian Automobile Manufacturers (SIAM), FY 2025-26 was a landmark year for the Indian automobile industry. Passenger vehicle sales reached 46.43 lakh units, growing 7.9%; commercial vehicle sales reached 10.80 lakh units, growing 12.6%; three-wheeler sales reached 8.36 lakh units, growing 12.8%; and two-wheeler sales reached 2.17 crore units, growing 10.7%. Each major vehicle category recorded its highest- ever financial-year sales.

The second half of FY 2025-26 recorded a strong recovery, supported by improved affordability following GST rate changes, personal income-tax relief, lower financing costs and stronger consumer sentiment. The industry also benefited from increased electric- vehicle adoption and continued model launches.

Source: Society of Indian Automobile Manufacturers (SIAM), FY 2025-26 industry performance, 14 April 2026.

FY 2025-26 domestic sales

Vehicle segment	FY 2025-26 sales	Growth
Passenger vehicles	46.43 lakh	7.9%
Commercial vehicles	10.80 lakh	12.6%
Three-wheelers	8.36 lakh	12.8%
Two-wheelers	2.17 crore	10.7%

Key trends

• Passenger-vehicle demand continued to shift towards utility vehicles and higher- value variants.

• Two-wheeler demand benefited from improved rural and semi-urban conditions, affordability and financing.

• Commercial-vehicle demand was supported by replacement demand, infrastructure activity and higher economic activity.

• Three-wheeler demand improved materially, supported by urban mobility and goods movement.

• Exports remained an important growth lever, with manufacturers continuing to diversify their geographical markets.

Outlook

The outlook for FY 2026-27 remains cautiously optimistic. SIAM expects the positive momentum from the second half of FY 2025-26 to continue across vehicle categories. However, the industry will need to monitor geopolitical developments, crude oil and commodity prices, exchange rates, shipping routes and supply-chain conditions.

Indian auto-components industry overview

The Indian auto-components industry is an important part of the countrys manufacturing ecosystem and a key enabler of vehicle production, exports and technological advancement. The sector spans powertrain, transmission, engine, chassis, suspension, braking, electrical, electronic and increasingly EV-specific components.

The industry continued to benefit from rising vehicle production, localisation, exports, increasing vehicle complexity and the growing replacement and aftermarket opportunity. According to ACMA, the Indian auto-component industry recorded turnover of USD 80.2 billion in FY2024-25, representing growth of 9.6%. OEM supplies increased 10%, exports increased 8% to USD 22.9 billion and the domestic aftermarket increased 6% to USD 11.8 billion.

The sector is increasingly moving towards higher-value engineering, technology-led manufacturing and global supply-chain integration. Product development for EVs and hybrids, lightweighting, electronics, advanced machining, automation and sustainability are expected to remain key areas of investment.

Source: Automotive Component Manufacturers Association of India (ACMA), FY2024-25 industry performance.

Key growth drivers Growth in vehicle production:

Higher vehicle volumes across passenger, commercial, two-wheeler and three-wheeler segments support demand for a broad range of components and assemblies.

Shift towards EVs and hybrid vehicles:

The changing powertrain landscape is creating new component categories while also requiring existing suppliers to diversify their product portfolios.

Localisation and supply-chain diversification:

OEMs are increasingly seeking local, reliable and cost-competitive suppliers, creating opportunities for Indian component manufacturers with strong quality and engineering capabilities.

Exports and global sourcing:

Indias cost competitiveness, engineering talent and manufacturing ecosystem support its emergence as a preferred sourcing destination.

Aftermarket growth:p>

A growing and ageing vehicle population, formalisation of repair services and wider distribution channels continue to support the aftermarket.

Technology and automation:

CNC machining, robotics, digital quality systems, Industry 4.0, additive manufacturing and data analytics can improve productivity, consistency and traceability.

Government and policy environment

• Production Linked Incentive programmes continue to support investment in advanced automotive technologies and localisation.

• Policies promoting electric mobility and domestic manufacturing support the development of EV-related supply chains.

• Make in India and Atmanirbhar Bharat continue to encourage domestic manufacturing and supply-chain development.

• Vehicle scrappage and emissions-related measures can support replacement demand and technology upgrades over the medium term.

• State-level industrial policies can provide incentives for capacity creation, employment and manufacturing investments.

Opportunities

• Rising domestic vehicle production provides a broad demand base across two- wheelers, three-wheelers, passenger vehicles and commercial vehicles.

• The shift towards electric and hybrid mobility creates opportunities to diversify into EV-compatible drivetrain, transmission, precision-machined and lightweight components.

• Increasing localisation by OEMs creates opportunities for domestic suppliers with strong engineering, quality and delivery capabilities.

• Growing exports can provide access to new customers and help diversify geographical concentration.

• Automation, robotics, digital manufacturing and process optimisation can improve productivity and enable higher-value products.

• The ageing vehicle parc and expansion of organised service networks support the automotive aftermarket.

• Engineering partnerships and co-development with OEMs can increase value addition and improve programme visibility.

Threats

• Volatility in steel, aluminium, energy and other input costs may put pressure on margins and working capital.

• Customer concentration and dependence on specific platforms can expose suppliers to programme and volume fluctuations.

• Rapid changes in drivetrain technologies may reduce demand for certain legacy components and require accelerated product development.

• Geopolitical tensions, trade barriers and shipping disruptions may affect exports, imported inputs and customer supply chains.

• Foreign exchange movements can affect the economics of export and import transactions.

• Shortages of skilled manpower and rising labour costs may affect productivity and execution.

• Increasing customer requirements relating to quality, traceability, cybersecurity, sustainability and delivery can increase compliance and investment costs.

Outlook

The Company remains cautiously optimistic about the medium-term prospects of the automotive components industry. The combination of strong domestic vehicle demand, increasing localisation, export opportunities, technology transition and the growing need for precision-engineered components provides a favourable platform for sustainable growth. The Company will continue to focus on customer engagement, product diversification, operational efficiency, cost management and technology readiness while maintaining disciplined capital allocation.

Company overview

Kinetic Engineering Limited (‘KEL or ‘the Company) is an established Indian automotive component manufacturer with a long-standing presence in the automotive industry. The Company has evolved from its historical two-wheeler manufacturing roots into a focused engineering enterprise serving the automotive components market.

The Companys core capabilities include transmission assemblies, engine and chassis components, drivetrain parts and precision-engineered components for two-wheelers, three-wheelers and commercial vehicles. The Company leverages its engineering, tooling, machining and manufacturing capabilities to serve leading OEMs and customers in India and select international markets.

The Company continues to strengthen its manufacturing capabilities and customer relationships while exploring opportunities arising from new mobility, electrification, localisation and higher-value engineering. Its focus remains on quality, reliability, cost competitiveness, delivery performance and long-term customer partnerships.

During FY 2025-26, the Company continued to pursue opportunities for new programmes and customers, while focusing on operational efficiency, cost optimisation, product development and strengthening its position in the automotive components value chain.

Company overview updated from the previous-year Management Discussion and Analysis and current business positioning; management to confirm final FY2025-26 developments before publication.

Strategic priorities

• Expand and deepen relationships with existing OEM customers and develop new strategic customer programmes.

• Increase participation in higher-value and precision-engineered component applications.

• Build capabilities relevant to electric and hybrid mobility while continuing to support existing ICE platforms.

• Improve manufacturing productivity, quality, capacity utilisation and cost competitiveness.

• Increase opportunities in exports and diversify customer and geographical exposure.

• Strengthen engineering, tooling and product-development capabilities.

Financial analysis - FY 2025-26

The financial performance of the Company for FY 2025-26 should be read together with the audited financial statements and the notes forming part thereof.

Balance Sheet

Particulars (Rs. in lakhs)	FY 2025-26	FY 2024-25
Borrowings	7,058	6,035
Total non-current assets	14,183	9,248
Net worth	15,086	10,361
Total assets	27,025	21,969
Inventories	6,081	5,409

Profit & Loss statement

Particulars (Rs. in lakhs)	FY 2025-26	FY 2024-25
Revenue	15,830	15,497
EBITDA	1,395	1,813
Depreciation and amortisation	507	669

Working capital management

Current assets as on March 31, 2026 stood at ?16,040 lakhs compared to ?13,486 lakhs as on March 31, 2025. Current ratio as on March 31, 2026 stood at 2.03 compared to 1.83 as on March 31, 2025. Inventories increased from t 5,409 lakhs as on March 31, 2025 compared to ?6,870 lakhs as on March 31, 2026. Current liabilities stood at ?7,885 lakhs as on March 31, 2026 compared to ?7,380 lakhs as on March 31, 2025. Cash and bank balances stood at t 3,911 lakhs as on March 31, 2026 compared to ?3,726 lakhs as on March 31, 2025.

The Company continued to focus on receivables discipline, inventory optimisation, supplier management and efficient utilisation of working capital.

Key ratios

Particulars	FY 2025-26	FY 2024-25	Reason for Change
Debtors Turnover	4.12	4.12	-
Inventory Turnover	1.37	1.47	-
Interest Coverage Ratio	2.40	3.70	Due to lower net profit
Current Ratio	1.84	1.80	-
Debt-equity ratio	0.28	0.27	-
Operating Profit Margin %	9.00	13.00	Due to lower net profit
Net Profit Margin %	1.54	4.73	Due to lower net profit.

Return on Net Worth as compared to previous year has goes down due to increase in Investment in Subsidiary.

Risk management

The Company operates in an industry exposed to cyclical demand, input-cost volatility, technological change, customer concentration, supply-chain disruptions and regulatory developments. The Companys risk management framework focuses on identifying material risks, assessing their potential impact, establishing mitigation measures and monitoring the effectiveness of controls.

Risk: Raw material price volatility

Mitigation: Maintain multiple supplier relationships, negotiate appropriate price pass- through mechanisms where feasible, explore longer-term sourcing arrangements and continuously monitor commodity trends. Cost engineering and productivity initiatives remain important to protect margins.

Risk: Customer concentration risk

Mitigation: Continue to diversify the customer base across OEMs, vehicle categories and export markets. Develop new products and programmes and deepen engagement with existing customers to improve programme visibility.

Risk: Technology obsolescence

Mitigation: Invest in engineering and product development for emerging technologies, including EV-compatible components. Maintain flexibility to serve both existing ICE platforms and new mobility applications during the transition period.

Risk: Regulatory and compliance risk

Mitigation: Monitor changes in automotive, environmental, labour, corporate and other applicable regulations. Maintain appropriate certifications, compliance processes, internal reviews and management oversight.

Risk: Supply-chain disruptions

Mitigation: Develop alternate sources, localise critical inputs where commercially viable, maintain appropriate inventory buffers and strengthen supplier monitoring and supply- chain visibility.

Risk: Cyclical automotive demand

Mitigation: Diversify across vehicle categories, customers and geographies, strengthen export opportunities and maintain a flexible cost structure to manage fluctuations in industry volumes.

Risk: Working capital and liquidity risk

Mitigation: Strengthen receivables collection, optimise inventory, align procurement with production requirements and maintain adequate banking and liquidity arrangements.

Risk: Manpower and skill gaps

Mitigation: Continue technical training, cross-skilling and upskilling programmes, strengthen succession planning and develop a pipeline of skilled manpower for precision engineering and automated manufacturing.

Risk: Foreign exchange risk

Mitigation: Monitor currency exposures, use appropriate hedging mechanisms where required and pursue natural hedging by balancing export receipts and import obligations.

Risk: Reputation, quality and ESG risk

Mitigation: Maintain high standards of product quality, workplace safety, governance and responsible business practices. Monitor customer requirements and stakeholder expectations relating to sustainability and ESG performance.

Human resource management

The Company recognises that people capability is central to manufacturing excellence, product quality, customer responsiveness and long-term competitiveness. The Company continues to foster a performance-oriented work culture focused on customer commitment, quality, operational discipline, innovation and continuous improvement.

During FY 2025-26, emphasis continued on employee engagement, technical capability development, workplace safety, training and upskilling. As manufacturing processes become more automated and technology-intensive, the Company remains focused on strengthening capabilities in precision engineering, machining, quality systems, maintenance, automation and digital tools.

The Company also continues to focus on attracting and retaining talent through structured responsibilities, learning opportunities, performance evaluation and employee-friendly practices. As on March 31, 2026, the total workforce stood at 547.

Internal control systems and their adequacy

The Company maintains internal control systems designed to support orderly and efficient conduct of operations, safeguard assets, ensure accuracy and completeness of accounting records, and facilitate timely preparation of reliable financial information. The control framework is aligned with the size, scale and nature of the Companys operations and is periodically reviewed for adequacy and effectiveness.

The Companys control environment includes appropriate authorisation mechanisms, segregation of duties, financial controls, operational controls, compliance monitoring, internal audit and management review processes. Periodic reviews are undertaken to identify control gaps and implement corrective measures.

The Audit Committee and the Board review significant findings and management actions relating to internal controls and risk management. The Company continues to strengthen process discipline, system-based controls, data integrity and operational oversight.

Overall outlook

The Company views the medium-term outlook for the Indian automotive components industry positively. Strong domestic vehicle demand, increasing localisation, the expansion of exports, the evolution of electric and hybrid mobility, and rising demand for precision-engineered components provide multiple avenues for growth.

The Companys strategy remains centred on strengthening customer relationships, winning new programmes, improving operational efficiency, developing products for evolving mobility platforms, expanding export opportunities and maintaining financial discipline. At the same time, management remains cognisant of risks relating to commodity prices, customer concentration, technology transition, geopolitics, foreign exchange and supply-chain disruptions.

The Company will continue to pursue sustainable growth by leveraging its engineering and manufacturing capabilities, improving productivity and quality, investing selectively in future-ready technologies and maintaining a resilient and responsive operating model.

Cautionary statement

This section contains statements about the Companys objectives, projections, expectations and estimates which may constitute ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied due to several factors, including changes in economic conditions, automotive industry demand, competition, raw-material prices, foreign exchange rates, interest rates, regulatory developments, technological changes, supply-chain disruptions, geopolitical developments and other risks and uncertainties. The Company assumes no responsibility for publicly updating or revising any forward- looking statements, whether as a result of new information, future events or otherwise.

	By Order of the Board of Directors
	For Kinetic Engineering Limited
	Sd/-
Date: August 03, 2026	Arun Hastimal Firodia
Place: Pune	Chairman
	(DIN: 00057324)