KSB Ltd Management Discussions

ANNEXURE II TO BOARDS REPORT

INTRODUCTION

The Company is engaged in the business of manufacture of power-driven pumps and industrial valves. Castings are mainly produced for captive consumption.

INDUSTRY STRUCTURE AND DEVELOPMENT:

General:

Global Macro-Economic Outlook

As we progress through 2025, the global economic environment remains complex and multifaceted. The International Monetary Fund (IMF) projects global GDP growth to stabilize at 3.3% for both 2025 and 2026, consistent with previous forecasts. Inflationary pressures are gradually easing, with global inflation expected to decline to 4.4% in 2025, down from 5.8% in 2024.

India continues to be a significant contributor to global growth. The IMFs January 2025 World Economic Outlook Update projects Indias real GDP growth at 6.5% for 2025, underscoring the countrys economic resilience and growth potential.

Despite these positive indicators, several challenges persist. Geopolitical tensions, particularly in Eastern Europe, ongoing supply chain disruptions, and potential energy market volatility pose risks to the global economic landscape. Additionally, the gradual withdrawal of fiscal support in high-debt economies and the potential for renewed inflationary pressures could impact financial stability and growth prospects.

Indian Economy:

Despite ongoing global challenges, Indias economy continues to demonstrate resilience, driven primarily by robust domestic demand. Inflation is expected to stabilize within the Reserve Bank of Indias target range of 4% to 6%, supporting economic stability. The governments strategic investments in infrastructure and initiatives like the Production-Linked Incentives (PLI) scheme continue to foster growth by encouraging private investment and bolstering domestic manufacturing. The Make in India initiative remains pivotal in promoting self-reliance and enhancing the manufacturing sectors competitiveness, which is poised to benefit from an improving investment climate. While global economic headwinds may impact exports, strong domestic demand is expected to sustain momentum in the service sector. Additionally, Indias manufacturing sector is set to play a crucial role in the countrys economic future, with its contribution to Gross Value Added (GVA) projected to rise significantly by 2032.

Pumps and Valves Industries:

The Indian pumps and valves industries are poised to capitalize on the countrys robust economic growth and the governments strategic focus on infrastructure development. In 2024, increased investments in irrigation, water supply, sanitation, and urban housing projects have significantly boosted demand for pumps in the water segment. The governments commitment is evident through a substantial capital expenditure allocation of 11 lakh crore for the fiscal year, aiming to enhance the nations infrastructure landscape.

Market projections indicate that the Indian industrial pumps market is expected to reach USD 1.23 billion by 2030, growing at a CAGR of 4.80% from 2025 to 2030. Similarly, the industrial valves market is anticipated to grow at a CAGR of greater than 7%, reaching USD 3.62 billion by 2030.

Sustainability continues to be a pivotal focus, with technological advancements leading to the development of more energy-efficient and environmentally friendly pumps and valves. Innovations in materials and manufacturing processes have resulted in submersible pumps that are stronger, lighter, and more corrosion-resistant, enhancing overall performance and reliability.

OPPORTUNITIES AND THREATS

The resilient economic outlook, driven by robust consumption demand, presents a mix of opportunities for our company. We are witnessing an ever-expanding demand for our pumps and valves, and we are well-positioned to capitalize on this trend. Our strategic expansion plans, including entry into untapped geographies and a focused market approach, will further strengthen our market presence. Identifying emerging opportunities and diversifying our product offerings into new market segments, such as hydrogen, firefighting, and railways, will unlock further growth potential. Additionally, our dedication to the aftermarket segment, through readily available spares and on- demand service, fosters long-term customer relationships and opens up valuable revenue streams.

In 2024, the Indian governments initiatives, such as the Jal Jeevan Mission and the PM KUSUM scheme, have created new opportunities for the adoption of solar pumps and water management systems. Moreover, the growing emphasis on sustainability and energy efficiency has led to increased demand for eco-friendly pumps and valves, aligning with our strategic focus on innovation and environmental stewardship. Our investments in automation and digital solutions will enhance operational efficiency and cost competitiveness, enabling us to navigate the evolving market dynamics effectively.

However, we remain vigilant of potential threats such as volatile commodity prices, intensifying competition, and a possible slowdown in exports. Increased emphasis on product life cycle cost and customer expectations for reduced development time are also mounting pressure to create an ecosystem for sustainable developments. Furthermore, geopolitical tensions and supply chain disruptions pose risks to global economic stability. As a company, we are prepared to mitigate these risks through sound strategies, including resource allocation, capacity expansion, and strategic partnerships. By leveraging our established strengths, embracing technological advancements, and adapting to the evolving market dynamics, we are confident in continuing our successful growth trajectory and solidifying our position as a leading player in the industry.

SEGMENT WISE PERFORMANCE (Consolidated):

During the year under review, pumps and related spares worth 21,081 Million (Previous year 18,968 Million) and valves and related spares worth 4,250 Million (Previous year 3,504 Million) were sold. Out of the above, export of pumps, valves and their spares in terms of value were 3,500 Million (Previous year 2,999 Million).

OUTLOOK:

Companys outlook for 2025 remains positive as we are on the growing path and have registered significant growth from past 5 years. Our strategic initiatives to expand into new market segments like Railways and Firefighting, alongside continued innovation in energy-efficient solutions, will help us stay ahead on our growth curve. Strengthening domestic presence with expanding our distribution network and service infrastructure will further solidify our market position and improve customer reach. While acknowledging the global slowdown, we expect slower growth in our export.

RISKS AND CONCERNS THE MANAGEMENT PERCEIVE:

While the 2025 outlook remains promising, potential headwinds such as geopolitical tensions, global inflation, and rising interest rates could impact growth, affecting exports and domestic demand. A slowdown in private sector investments may also influence key industries like agriculture, infrastructure, and manufacturing.

To mitigate these risks, we are diversifying into emerging segments like hydrogen and renewable energy, strengthening our supply chain through strategic partnerships, and expanding our domestic presence. Investments in automation and digital solutions will further enhance efficiency and competitiveness.

With an agile approach and strong risk management, we are confident in navigating challenges, driving sustainable growth, and reinforcing our leadership in the pumps and valves industry.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Internal control systems are implemented -

• To Protect Assets and Optimizing Controls:

Our commitment to effective internal control systems remained unyielding in 2024. These systems safeguard our assets, optimize costs, and ensure reliable financial reporting, all while adapting to evolving business landscapes, regulatory changes, and best practices.

• To keep constant check on Core Control Areas:

For Asset Safeguarding we maintain comprehensive physical and electronic security measures, including regular inventory reconciliations, access control systems, and data encryption, to prevent asset loss or compromise.

For Cost Management we have robust systems monitoring and manage expenditures, utilizing budget variance analysis, automated expense approvals, and stringent procurement controls to ensure efficient resource allocation and oversight.

• To maintain Financial Integrity:

We adhere to the highest accounting standards and maintain rigorous internal financial controls, including segregation of duties, automated reconciliations, and continuous monitoring, to guarantee accurate and transparent financial reporting

• For Continuous Improvement:

For recognizing the need for continual evolution, we have inhouse Internal Audit team to assess control effectiveness, identify potential vulnerabilities, and recommend corrective actions. We proactively address their findings and track progress through a dedicated risk management database. Our periodic reviews ensure adherence to established policies and procedures, identifying areas for improvement and fostering proactive risk management.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL EFFICIENCY

The financial performance of the Company has seen a good contribution from operations perspectives. Various cost optimisation drives by ways of alternate sourcing, standardization, process improvements and operational efficiency improvements has led significant savings. Cost reduction have been achieved in certain areas by implementing efficiency improvement programme within the company.

The following statements cover financial performance review, which are attached to this report.

a) Distribution of income

b) Financial position at a glance

c) Financial summary

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INDUSTRIAL RELATIONS

KSB remains committed to sustainable and responsible business practices. As we continue to expand, we nurture and continue the culture of open communication, execute exclusive skill development programmes, foster a progressive & inclusive work environment and encourage equal opportunities for each employee through our robust gender diversity programme. We undertook various initiatives to enhance the gender diversity at KSB India like hiring female employees on shop floor, appointment of Social counsellor and a female Gynaecologist; suitable

infrastructure and female Security Officer for the safety and wellbeing of women and ensuring measures for their work-life balance.

The HR policies are periodically updated to ensure compliance while fostering a culture of trust and respect. Enhancement to the Service Milestone policy and Leave Policy have helped promote ease and a positive work environment. Also, HR digital transformation has automated and streamlined many HR activities with improvised data analysis, and enhanced employee experiences, ultimately leading to more efficient and data-driven HR operations.

Through such comprehensive strategy, we forge flexible work arrangements, execute wellness programs and ensure boosted safety measures; which has resulted in equitable outcomes, minimized risk and accelerated growth. We have also navigated our efforts towards restructuring and strengthening of departments, digitization of processes, ambitious launch of several new products and addition of new segments, employee engagement activities and employee retention initiatives.

Industrial relations have been our focus and upheld at good levels through open communication with employee representatives, competitive compensation packages, and being committed to providing a fair and rewarding work environment across all our plants.

Year 2024 was a year of transformation and perseverance with two key accomplishments that stand out for the year 2024 being KSB Voice survey with 88% engagement score is a testament to our commitment to creating a vibrant workplace; and successfully meeting our Strategy 2024 targets underscores our dedication to delivering on our promises.

CAUTION:

This report is based on the experience and information available to the Company in the pumps and valves business and assumption in regard to domestic and global economic conditions, government and regulation policies etc. The performance of the Company is dependent on these factors. However, the performance may be materially influenced by the changes therein beyond the Companys control, affecting the views expressed in or perceived from this report.

KEY FINANCIAL RATIOS

Key financial ratios of the Company showing financial performance are as under:

Ratios (Standalone)	Year Ended 31st December, 2024	Year Ended 31st December, 2023
1. Debtors Turnover (days)	83	74
2. Inventory Turnover (days)	165	172
3. Operating Profit Margin (%)	11.75	11.65
4. Net Profit Margin (%)	9.54	9.14
5. Return on Net Worth (%)	18.03	17.48
6. Interest Coverage Ratio (No. of times)	120.26	52.87

Note: Interest Coverage Ratio has increased due to reduction in interest cost for FY 2024.

DISTRIBUTION OF INCOME (STANDALONE)
				Million
	Year ended			Year ended
	31st December, 2024	31st December, 2023
		%		%
1. Raw Materials/Bought-out	14,223	55.24	12,775	55.94
Components Consumed
2. Excise Duty(till 30th June, 2017)	-	-	-	-
3. Employee benefits expense	3,135	12.18	2,697	11.81
4. Other Expenses	4,599	17.86	4,064	17.80
5. Finance cost	27	0.10	53	0.23
6. Depreciation	543	2.11	497	2.18
7. Taxation
Current	815	3.17	722	3.16
Deferred	(4)	(0.02)	(19)	(0.08)
8. Other Comprehensive (Income)/Expense	27	0.10	(24)	(0.11)
9. Dividend (including tax thereon)	609	2.37	522	2.29
10. Retained Earnings	1,772	6.88	1,548	6.78
TOTAL	25,746	99.99	22,835	100.00

FINANCIAL POSITION AT A GLANCE (STANDALONE)

		Million
CAPITAL
	Year ended 31st December, 2024	Year ended 31st December, 2023
ASSETS OWNED
Non-Current Assets
1. Property, Plant and Equipment (including Capital
Work in Progress and RoU assets)	4,720	4,290
2. Intangible Assets	211	224
3. Investments	63	63
4. Other Non-Current Assets (net)	41	227
5. Deferred Tax Assets (net)	191	178
Current Assets (Net) excluding borrowings	9,025	7,496
TOTAL	14,251	12,478
FINANCED BY
1. Borrowings	-	-
2. Net Worth*	14,251	12,478
TOTAL	14,251	12,478
*Represented by
Equity Share Capital	348	348
Other equity	13,903	12,130
TOTAL	14,251	12,478
INCOME EARNED
1. Revenue from operations	25,331	22,472
2. Other Income	415	363
TOTAL	25,746	22,835
INCOME DISTRIBUTED
1. Materials consumed	14,223	12,775
2. Employee benefits expense	3,135	Million 2,697
3. Other expenses	4,599	4,064
4. Finance cost	27	53
5. Depreciation	543	497
6. Taxation
Current	815	722
Deferred	(4)	(19)
7. Other Comprehensive (Income)/Expense (net)	27	(24)
8. Dividend (including tax thereon)	609	522
9. Retained Income	1,772	1,548
TOTAL	25,746	22,835

FINANCIAL SUMMARY (STANDALONE)

	2024	2023	2022	2021	2020
CAPITAL ACCOUNTS (INR Million)
Equity and Liabilities Equity Share Capital	348	348	348	348	348
Other Equity	13,903	12,130	10,583	9,293	8,116
Non-Current Liabilities	591	458	453	537	462
Assets
Non-Current Assets
Gross Block	10,481	9,547	8,467	7,805	7,482
Net Block	4,931	4,514	3,752	3,498	3,435
Investments	63	63	63	63	63
Other Non-Current Assets	632	685	1,015	643	381
Deferred Tax Assets (net)	191	178	167	220	168
Current Assets (Net)	9,025	7,496	6,386	5,754	4,879
REVENUE ACCOUNTS (INR Million) Revenue from operations and Other Income	25,746	22,835	18,674	15,337	12,404
Gross Profit before finance cost and depreciation	3,790	3,299	2,921	2,459	2,001
Finance cost	27	53	61	50	34
Depreciation	543	497	453	436	418
Profit before tax	3,220	2,749	2,407	1,973	1,549
Profit after tax	2,409	2,046	1,793	1,466	973
Dividend amount (including tax thereon)	609	522	435	296	278
Retained earnings	1,772	1,548	1,290	1,176	657
SELECTED INDICATORS
Return on Capital Employed %	23.45	23.20	22.97	20.98	17.46
Current Ratio	2.13	2.05	2.01	2.06	2.01
Earnings per share	13.84	58.78	51.50	42.12	27.96
Debt equity ratio	0	0	0	0.00	0.07
Book value per share	81.88	358.50	314.05	276.99	243.18
Dividend %	175	150	125	85	80
Fixed Assets Turnover	5.22	5.06	4.98	4.38	3.61