LGB Forge Ltd Management Discussions

[Pursuant to Regulation 34(2)(e) read with Schedule V Para B of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015]

After the eventful covid years, the global economy is moderately stable but is still swayed by surges in inflation, continued geopolitical tensions in Asia and Europe resulting in volatile forecasts and high freight prices thus hampering exports. The ripples of this can also be seen in power costs and fluctuations in raw material prices. The International Monetary Fund (IMF) has forecasted the global growth at 3.1% which is the lowest in years. Your Company (LGB Forge Limited) is closely monitoring the effects of these macro economic challenges to see the potential effects on both the Company as well as your customers. We have also been vigilant in adopting streamlined supply chain measures to weather these challenges. The Indian economy has been resilient and stable with a healthy growth being spread across the automotive industry segments and other sectors. The GDP growth is predicted at 6.5% in 2025, despite some volatility in input prices. Strong government policies and reforms, investment in infrastructure and consumption demand have facilitated this growth and economic activity. Though the Indian economy seems unaffected by global conditions, it is prudent to be wary of its effects across markets. Taking this into cognizance, your company has been conscientious in reviewing and optimising the capabilities in quality, production and supplies to your customers.

Your Company strives to be the preferred supplier to your customers in hot and cold forged products that cater to various industrial and automotive segments. Companys focus is to develop and manufacture specialised components and products in stainless, alloy and carbon steel, as well as semi-finished and finished machined components. The Company is always looking for new opportunities to grow into other areas of manufacturing that will be a core part of the business. One of the salient strength is having strong and sustainable long-term relationships with your customers in addition to the technological know-how and a dedicated team. Your Company will continuously strive for manufacturing excellence by consistently reviewing the processes, implementing new infrastructure wherever needed, emphasising on new product development and optimising volumes in existing products.

Your Company is equipped with Hot Forging, Cold Forging and Open Hammer Presses as well as various CNC Machines for the finishing operations. Your in-house tool room uses design and analysis software to design and manufacture dies and tooling that plays a key role in the efficient production of forgings. The manufacturing plants are fully integrated with complete facilities for inspection, testing, cutting, forging, heat-treatment, finishing, machining, cleaning and surface treatment.

The forging industry in India is full of opportunities but at the same time riddled with uncertainties - volatility in input prices, increasing power costs, competition from other countries like China and South East Asian nations and global chain disruption makes the business environment complex and precarious to navigate. In the past year, despite being confronted with various challenges, we have as a part of the optimisation drive, exited from Pondicherry thereby improving the utilisation of the resources.

Ongoing efforts in the areas of machinery maintenance, optimal use of human resources and improving operational efficiency are beginning to reflect positively in the operations.

Your Companys goals for this year are to:

1. Ensure customer satisfaction by quick responses and on-time delivery of qualitative products.

2. Enhance focus on value engineering activities and improve productivity systems for better cost control and aim to enhance capacity.

3. Carry out a thorough overhaul and assessment of all production assets and improve the production within the potential envelope.

4. Improve sales and add new products and customers.

5. Work towards meeting customer requirements for carbon footprint reduction.

As mentioned earlier, the forging industry has potential for growth but also faces many challenges. India is emerging as one of the key global manufacturing hubs in the place of China, thanks to robust government initiatives, its resilient economy against the global currents and relatively stable financial indicators. This gives way to a wide web of opportunities. The major threat to the growth of Indian Industry is the geopolitical situation which has a big impact on demand, increase in raw material and freight costs which will in turn impact revenue. The shift towards the EV segment will also impact the forging industry which is dependent on the automotive sector.

The Company operates in only one segment viz., Forging and Machining. The performance is explained briefly below.

The Company has an active risk management framework which enables diligent checks and appraisals of various activities for promptly identifying, responding and mitigating potential risks both internally and externally. The key risks for your company include raw material, technology, manpower competency and cyber security. The Company is taking requisite steps to mitigate the risk areas.

The Company has adequate internal financial control systems in place. It has also engaged Internal Auditors, being third party consultants to regularly assess the adequacy of the internal control systems and to suggest appropriate measures to improve the controls. This has also been monitored at periodic intervals by the Audit Committee and the Board.

Your Company currently has 228 employees. LGB Forge Limited has and continues to focus on fostering, nurturing, developing and retaining a proficient work force by conducting training programs and other HR initiatives for boosting morale and motivation. The Company has successfully concluded all the applicable settlements in the respective plants. The industrial relations continue to be peaceful and harmonious throughout the year.

The Company has always prioritised the health and safety of its employees and ensures a safe and healthy working environment. Training programmes on health and safety are conducted in regular intervals and periodic inspections and reviews are done to ensure that adequate safety measures are taken in the company premises.

40 LGB FORGE LIMITED

The following are the summary of results of operations, breakup of expenditure and cash flows of the Company:

( in Lakhs)

Major heads of Expenditures: a) Continuing Operations

There is significant change in some key financial ratios when compared with previous years and below are the ratios:

Further, the Company confirms that there is no different accounting treatment that has been followed than prescribed in accounting standard while preparing financial statements.

The statements in the Management Discussion and Analysis Report describing the Companys view, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied. Any investment by shareholders / investors should therefore be based on their individual analysis.