Lokesh Machines Ltd Management Discussions

Global Economic Overview

The global economy in FY 2024-25 demonstrated moderate resilience amid a complex backdrop of geopolitical tensions, uneven recovery in developed markets, and continued inflationary pressures. According to the IMF, global GDP grew by approximately 2.9%, slightly below long-term averages but a recovery from the prior years stagnation.

While North America and Europe showed signs of economic stabilization, growth was largely driven by emerging markets in Asia and Latin America, with countries like India, Vietnam, and Brazil leading industrial output. High interest rates in the U.S. and Eurozone gradually began to ease by Q4, bringing some relief to global capital expenditure and manufacturing investments.

Impact on Machine Tools Industry

The machine tools industry, closely tied to capital goods and manufacturing sectors, saw a gradual rebound in demand, especially in Asia-Pacific. Key developments included:

China faced headwinds due to a slowdown in real estate and exports, impacting demand for heavy machine tools.

India emerged as a growth engine, driven by government incentives, infrastructure investments, and increased manufacturing localization.

Europe, especially Germany and Italy, maintained stable output but faced high energy costs and labor shortages.

North America benefited from nearshoring trends, with demand rising for automated and high-precision machine tools in automotive and aerospace sectors.

Supply chain normalization, especially for semiconductors and electrical components, allowed machine tools manufacturers to clear backlogs and meet pent-up demand. However, volatile raw material costs (steel, copper, aluminum) and elevated shipping charges continued to affect margins across global players.

Technology and Investment Trends

Digitalization & Industry 4.0: Global OEMs continued integrating IoT, predictive maintenance, and cloud-based analytics into CNC and SPM solutions.

Sustainability Focus: Increased investment in energy-efficient machines and green manufacturing processes.

Capital Expenditure: Slower than expected in Europe and Japan but picked up in India, the U.S., and select ASEAN nations. Outlook for FY 2025-26

The global machine tools industry is expected to grow at a CAGR of 4-5% over the next few years, supported by:

? Easing monetary policy

? Demand for EV-related manufacturing systems

? Increasing automation across mid-sized enterprises

? Geopolitical realignments driving regionalized supply chains

However, risks remain in the form of currency fluctuations, prolonged conflicts (e.g., Ukraine, Middle East), and policy uncertainties in key markets.

2. Indian Economic Overview

India continued to position itself as one of the fastest-growing major economies in FY 2024-25, registering an estimated real GDP growth of 6.8%, according to data from the Reserve Bank of India (RBI) and the Ministry of Finance. This growth was driven by strong domestic consumption, increased private investment, and sustained government spending on infrastructure and manufacturing.

Despite global headwinds such as geopolitical instability, high commodity prices, and interest rate fluctuations, India demonstrated economic resilience, supported by:

? Moderating inflation (averaging around 5.1%)

? Robust GST collections and tax compliance

? Improvement in ease of doing business and digital governance

• Continued FDI inflows, particularly in manufacturing and infrastructure Impact on the Machine Tools Industry

Indias strong industrial and manufacturing performance had a direct and positive impact on the machine tools sector, which is deeply linked to capital goods, automotive, aerospace, and heavy engineering segments.

Key developments in FY 2024-25 included:

• PLI (Production-Linked Incentive) Schemes: Investments from global and Indian OEMs in sectors like automobiles, electronics, and semiconductors boosted demand for advanced and automated machine tools.

• Make in India &Atmanirbhar Bharat: These initiatives accelerated the localization of manufacturing processes, especially in defense, railways, and precision engineering, leading to higher demand for CNC machines, turning centers, and special-purpose machinery.

• Infrastructure Push: Government expenditure in roads, railways, ports, and housing created a multiplier effect for metal forming and fabrication machines.

• EV Manufacturing Boom: Rapid growth in electric vehicle manufacturing prompted demand for highly customized and accurate machine tools, especially for battery, motor, and chassis components.

Export and Import Trends

• India exported machine tools worth over 4,200 crore in FY 2024-25, with key markets including the U.S., Germany, Vietnam, and UAE.

• Imports remained strong for high-precision, multi-axis, and automation-integrated machines, though domestic manufacturers started closing the gap through technology collaborations and in-house R&D.

Investment and Capacity Expansion

Several Indian machine tool manufacturers, including Lokesh Machines, expanded their capacity or invested in automation upgrades to meet growing demand and improve competitiveness.

Key Challenges

• Skill shortages in advanced CNC programming and machine integration.

• Rising cost of capital impacting MSME investment cycles.

• Persistent dependence on imports for high-end electronics and motion control systems.

• Delayed payments from government-linked projects, affecting working capital.

Outlook for FY 2025-26

The Indian economy is expected to grow between 6.5% and 7.0% in FY 2025-26, maintaining its trajectory as a key engine of global growth.

Implications for the Machine Tools Sector:

• Anticipated double-digit growth in capital goods demand.

• Increasing penetration of Industry 4.0 and smart factory solutions.

• Strong potential in export markets as Indian firms gain technological parity.

• Rising integration of AI, robotics, and cloud in industrial machinery.

Overall, the machine tools industry is poised to benefit significantly from Indias manufacturing renaissance, infrastructure momentum, and proactive industrial policy framework.

Global Machine Tools Market - FY 2024-25 Market Overview

• The global machine tools market is estimated to have reached USD 82.3 billion in 2024.

• Projected to grow to USD 109.8 billion by 2031, at a CAGR of 4.1%.

• Growth is driven by increased automation, customization needs, and smart manufacturing.

• Key segments: Milling machines, CNC machines, Electrical Discharge Machines, and Hybrid additive-subtractive systems.

Regional Insights

Region Share (%) Growth Drivers

Asia-Pacific ~54% China, India, and Japan driving production and adoption North America ~18% Reshoring, semiconductor & EV investments Europe ~17% Precision manufacturing, green industrialization

Technology Trends

• Industry 4.0: Integration of IoT, AI, and digital twins in CNC tools

• High-Precision Demand: Especially from aerospace and medical device industries

• Sustainability: Energy-efficient and eco-friendly machine tools are gaining traction Challenges

• High capex and maintenance costs for SMEs

• Shortage of skilled machine operators

• Geopolitical risks affecting supply chains Outlook:

The market is poised for steady growth as global industries shift towards digitally integrated, high-precision, and energyconscious production systems.

Indian Machine Tools Market - FY 2024-25 Market Overview

• Valued at USD 1.5 billion in 2023, expected to reach USD 3.2 billion by 2032

• Growing at a CAGR of 8.2%, outpacing the global average

• Driven by:

• PLI Schemes in automotive, defense, and capital goods

• Make in India &Atmanirbhar Bharat

• Increasing adoption of CNC and automation Market Structure

Segment	Growth Drivers
Metal Cutting	Used across auto, aerospace, defence
Metal Forming	Construction, infrastructure sectors
CNC Technologies	Automation, precision, Industry 4.0
SMEs/Job Shops	Need cost-effective, versatile machines

Regional Spread

Region	Highlights
South India	Major manufacturing hub (esp. Tamil Nadu, Karnataka)
West & Central	Automotive and engineering clusters
North India	Heavy industries and public sector units
East India	Emerging hub with government investment focus

Key Opportunities

• Exports: Expanding demand from Africa, LATAM, and Southeast Asia

• EV and Defense: Surge in component demand and indigenization

• Automation: SMEs investing in smart machining for competitiveness Challenges

• Dependence on imports for advanced components

• Financing constraints for smaller manufacturers

• Skill gap in advanced CNC operation and integration Outlook:

With strong government backing and rising domestic demand, Indias machine tools industry is set to play a critical role in the countrys industrialisation and export competitiveness over the next decade.

Opportunities

1. Government Initiatives:

• Atmanirbhar Bharat: The governments push for self-reliance and reducing imports creates a huge opportunity for Indian manufacturers. With policies like "Make in India," there is a focus on boosting local production, reducing dependency on foreign technology, and encouraging innovation.

• Atmanirbhar Bharat: The governments push for self-reliance and reducing imports creates a huge opportunity for Indian manufacturers. With policies like "Make in India," there is a focus on boosting local production, reducing dependency on foreign technology, and encouraging innovation.

• PLI Schemes: The Production-Linked Incentive (PLI) schemes for the manufacturing sector incentivize companies to enhance their production capacity and competitiveness, especially in critical sectors like defense, aerospace, and automotive.

• Defense Manufacturing: The recent developments regarding licensing and certification for defense manufacturing open up significant opportunities in the defense sector, which is increasingly focusing on domestic suppliers.

2. Rising Demand from Key Sectors:

• Automotive Industry: India is a major hub for automotive manufacturing, and with the shift toward electric vehicles (Evs), machine tool manufacturers can cater to new needs such as precision parts for batteries, motors, and other key components.

• Aerospace and Defense: With rising investments in defense and aerospace, theres growing demand for advanced machine tools for the production of highly precise components required in aircraft, weapons systems, and military vehicles.

• Renewable Energy: The increasing shift toward clean energy solutions (solar, wind, etc.) demands machinery for manufacturing components like wind turbines, solar panels, and other related equipment, providing another lucrative market for machine tools.

3. Technological Advancements:

• Automation and Robotics: The global trend of adopting automation, AI, and robotics in manufacturing is a significant growth opportunity for the machine tool industry. Indian manufacturers can upgrade their machines to incorporate AI-driven tools, CNC (Computer Numerical Control) machinery, and automation to meet global standards.

• Industry 4.0: The advent of Industry 4.0 technologies, such as IoT, smart factories, and data analytics, can help Indian manufacturers improve efficiency, reduce costs, and enhance product quality, making them more competitive globally.

4. Export Potential:

• As global markets seek alternative sources due to geopolitical tensions or supply chain disruptions (like the China- US trade war), Indian machine tool manufacturers have a golden opportunity to expand their exports, particularly to neighbouring countries and other emerging economies.

5. Skill Development and Training:

• As demand for more sophisticated machinery increases, theres an opportunity for skill development in the workforce. Developing a talent pool of highly skilled engineers, technicians, and machinists is a long-term growth opportunity for the sector.

6. Preference for Domestic High-Quality Machines:

• Due to cost advantages and improved quality standards, domestic manufacturers are increasingly preferred over imported alternatives. This trend is expected to benefit the Companys offerings significantly.

7. Defence Sector Prioritization:

• The success of indigenous equipment during Operation Sindoor has reinforced the Governments commitment to domestic sourcing. This policy shift is expected to create sustained demand for locally manufactured defence components and machinery.

8. Reserved Contracts for Indian Manufacturers:

• The Government of India has mandated that tenders below 250 Crores be reserved for Indian manufacturers. This policy is a major enabler for the Companys growth in both the machine tool and defence equipment segments.

9. Export Potential via Global OEMs:

• Once successfully deployed in Indian operations, global OEMs are likely to export these machines to their parent companies abroad, leveraging Indias cost arbitrage and manufacturing capabilities.

10. Growth of SMEs:

• The rise of small and medium-sized enterprises (SMEs) necessitates affordable and efficient machine tools. The industry can capitalize on this by providing tailored solutions that meet the stringent quality standards required by SMEs.

11. Emerging Markets:

• Fast-growing markets in Southeast Asia, Latin America, and Africa present significant opportunities for machine tool manufacturers. As these regions industrialize, there is potential for expanding customer bases and capturing new demand.

12. Low-Cost Manufacturing Hub:

• Indias position as a hub for low-cost manufacturing attracts global companies. This creates demand for cost- effective machine tools, which Indian manufacturers can provide, leveraging their expertise in producing competitive solutions.

Threats

1. Dependence on Imported Technology:

• Technological Gaps: While India has strong potential in manufacturing, there are still technological gaps in comparison to global leaders like Germany, Japan, and South Korea. A heavy reliance on foreign technology and expertise in high-end machine tools remains a threat, making the industry vulnerable to fluctuations in global supply chains and trade policies.

• Intellectual Property (IP) Challenges: Foreign machine tool manufacturers often bring cutting-edge IP to the table, and Indias ability to innovate or protect local IP is still developing, which could put Indian companies at a disadvantage..

• Quality Perception: Indian machine tools are sometimes viewed as lower-quality compared to international brands, which could limit their appeal in high-end industries like aerospace, defence, and automotive.

2. Supply Chain Disruptions:

• Geopolitical tensions (such as the Russia-Ukraine conflict) have exposed vulnerabilities in global supply chains. Any disruption in the supply of key raw materials, components, or high-precision tools from other countries could affect production timelines and quality.

3. Rising Raw Material Costs:

• The global rise in the cost of steel, aluminum, and other essential materials used in machine tool manufacturing has an impact on the cost structure for Indian manufacturers. Without the ability to pass on these costs to customers, it could erode profit margins.

4. Labor Issues:

• While theres an opportunity to develop skilled labor, the Indian machine tool industry still faces challenges related to labor shortages, especially in high-tech areas that require advanced skills. Additionally, labor unrest or strikes could disrupt production.

• Labor cost inflation and difficulties in attracting highly skilled professionals could also limit the potential for growth in advanced manufacturing.

5. Limited Financing:

• Access to financing is often restricted, impacting the industrys ability to invest in research, development, and expansion. Insufficient funding can hinder innovation and growth

6. Environmental and Sustainability Pressures:

• As industries globally focus on reducing their carbon footprint and adhering to stringent environmental norms, Indian machine tool manufacturers will face increasing pressure to meet these standards. This could lead to higher compliance costs and investment in green technologies.

Company Overview

Established in 1983 and commencing operations in 1985 in Hyderabad, Lokesh Machines Limited (LML) has established itself as a specialist in manufacturing CNC Machines and Special Purpose Machines,Auto components and Small arms. The company excels in producing Finish Cam & Crank Boring, Finish Barrel Boring, and Finish Joint Faces Milling machines besides the regular General Purpose machines. LML serves a diverse range of industries including automotive, agri-implements, gas turbines, aerospace, defence, medical devices and railways. Renowned as a leading exporter of CNC machines, LML has built a robust global presence in markets such as Turkey, Italy, USA, the Middle East, etc. supported by a widespread dealer network spanning South Africa, Italy, Turkey, and Bahrain.

In collaboration with IIT Madras, LML continues developing cost-effective, cutting-edge technologies. After the launch of Indias first Indigenous Laser-Based Direct Energy Deposition Hybrid Additive Manufacturing Machine in association with RRCAT, the company has now developed a couple of more cost effective solutions for the Metal Additive Manufacturing.The company continues to enhance its range of CNC Machines with cutting edge technologies that would help in import substitutes.

After an unforeseen setback last October due to the imposition of Sanctions by the US and the resultant slowdown in growth over two quarters, the company has since bounced back as evidenced in the last first quarter of this fiscal year. The machine tool orders have been increasing steadily with many customers actively supporting the company with business. Similarly the auto component division has also started seeing green shoots with businesses from new customers.

LML continues its focus on cost reduction, market expansion, diversification, product development, leadership investment, and continuous innovation. LML remains committed to strengthening core operations and exploring new growth avenues, ensuring a promising future.

Office of Foreign Control Assets ("OFAC Sanctions"):

On October 30, 2024, the Company was sanctioned by United States Office of Foreign Control Assets ("OFAC Sanctions”). Because of OFAC Sanctions, the Companys turnover has decreased to the extent of 22.18 % as compared to the last financial year.

Furthermore, starting from October 30, 2024, the Company was unable to enter into any foreign currency transactions.

The Company is in the process of getting its name removed from the sanction list of the United State Department of Treasury for which the Company through a US based law firm filed an application before Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC”) for expedited removal/reconsideration of Designation on the list of Specially Designated Nationals and Blocked Persons on January 31,2025 (EST).

In continuation of this, the Company, through its U.S.-based legal counsel, submitted the response to the questionnaire issued by the Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC”) on August 20, 2025.

We assure our shareholders that the Company is taking all necessary measures to secure the removal of its name from the OFAC sanctions list. We believe this submission marks a significant step forward in that direction. The Company remains committed to keeping the exchange and our shareholders informed of all future developments in this matter.

Strategic Measures to Offset this OFAC Sanctions related setback:

The Company experienced a discontinuation of business with Mahindra & Mahindra, a key customer for the Auto Component Division and other general customers in the Machine Tool Division, due to compliance-related constraints arising from OFAC (Office of Foreign Assets Control) regulations. While this development posed a temporary challenge, the Company responded swiftly and strategically to mitigate the impact and realign its growth trajectory:

• Leadership Strengthening: Senior-level professionals were appointed across Production, Sales, and Procurement functions to enhance operational efficiency and drive strategic execution.

• Customer Diversification and Order Growth: The Company secured new orders from recently onboarded customers and received substantial repeat orders from existing clients, reflecting strong customer confidence and product reliability.

• Product Portfolio Enhancement: High-value machines were added to the product range to improve average sales value and enhance profit margins.

• Expansion into Forgings Segment: Multiple inquiries and initial orders were received from new customers in Pune for the supply of forgings, opening new avenues for growth.

• Defence Sector Engagement: The Company actively participated in defence tenders and anticipates significant orders in this segment, supported by favorable government policies and increased emphasis on indigenous manufacturing.

• Infusion of Promoter Capital to Strengthen Liquidity

During the financial year 2024-25, the Company infused a total capital of 15.56 Crores to bolster its liquidity position. This infusion was executed through the conversion of warrants into equity shares allotted to the Promoters. The move reflects the Promoters continued confidence in the long-term growth trajectory of the Company and provides a robust financial foundation to support operational and strategic initiatives.

Segment-wise Performance Machine Tools Division

The first two quarters of the year started well with a healthy growth. However the imposition of sanctions had derailed the growth over the next two quarters. But thereafter, with renewed efforts by the company and its associates, the machine tool business started a quick recovery. The efforts of increasing the sales force and also entering new territories have helped in the recovery of sales. The Machine Tools Division is segmented into General Purpose Machines, Special Purpose Machines, and Automation. The General-Purpose category includes CNC Turning centers, Vertical Machining centers, Drill and Tap centers, Vertical Turning lathes, and Horizontal Machining centers. The Special Purpose segment comprises milling machines, drilling machines, boring machines, and transfer lines. In the Automation segment, LML offers gantry automation, robotic automation, 4th Axis automation, and customization of standard machines. The company has successfully expanded its presence in the non-automotive sector and expects this growth trend to continue. By consistently enhancing technological competencies and increasing cost competitiveness, LML is effectively broadening its market reach, making significant strides in both domestic and international markets.

Auto Component Division

The Component Division was entirely focused on supply of Niche Cylinder Blocks and Connecting Rods to Mahindra and Mahindra. Sanctions by OFAC had resulted in suspension of business by M&M. This has resulted in a near Zero business in the last quarter. The company has since approached several other customers and the results have been fruitful. Given the expertise and experience, several new customers have been onboarded and the company is now expanded its range of offerings besides the earlier products such as Cylinder Blocks and Connecting Rods.

Defense Division:

In the defense sector, LML has initially ventured into Small Arms with a portfolio including the 9x19 Sub Machine Gun and the 7.62x51 Light Machine Gun. The Ministry of Home Affairs, Government of India, has issued the license for the Commencement of Commercial Production for the manufacturing, proof-test, and sales of firearms. A state of the plant has been setup for manufacturing the small arms.

In September 2024, the company successfully delivered its first major consignment of 550 weapons to the Indian Army. Its a proud moment that the company is first in India in the private sector to have indigenously developed small arms and supplied to the Armed forces.

Further, intimation has been received from Department for Promotion of Industry and Internal Trade, Government of India, stating that the Licensing Committee has recommended for the grant oflicence to Lokesh Machines Limited under the Arms Act, 1959 in Form VII for the manufacture of Fixed / Towed Heavy Machine Guns of caliber above 12.7mm and up to 30mm. The company is now working on the development of new weapon platforms.

Also, Director General of Quality Assurance (DGQA), Ministry of Defence, Government of India, has granted the Registration Certificate for manufacturing capacity/ capability for defence items. This will extend our existing product portfolio and enable us to manufacture defense products at our In-house facility.

These strategic initiatives underscore LMLs commitment to enhancing its technological capabilities, maintaining cost efficiency, and expanding its market footprint across both automotive and defense sectors.

Outlook

Machine tool Division:

Despite the earlier setbacks and the current geopolitical situation and other multitude of challenges, the company remains confident of its future and is poised for a significant growth. With new initiatives taken by the company and with a new senior management team at the helm, the company would continue its growth momentum. This would of course be supported by the increasing adoption of CNC technology and automation by the Indian industry, which is driving productivity and precision in sectors such as power, agri sector, aerospace, defense, medical devices etc.... The automotive industrys resurgence, bolstered by a good monsoon and initiatives like the Production-Linked Incentives and Vehicle Scrappage Policy, is expected to boost the global competitiveness of the Indian market.. The efforts taken by the company will enable LML to meet rising demand and explore new opportunities in both automotive and non-automotive industries.

Auto Component Division:

Despite the OFAC setback and loss in the Mahindra Business, the company continued to pursue other customers as well as continue with its expansion in the manufacture of forgings. The results have been positive and with the on-boarding of new customers the operations are set to normalise in the months to come followed by a renewed growth in this division. The focus is now to cater to the EV space and the company has been successful is securing the orders in this space.

Defence Division:

After successfully delivering the 9x19 Machine Pistols to the Indian Army thus becoming the first company in the private sector to have delivered a 100% indigenous weapon to the armed forces, the company has been regularly participating in tenders. The results of most of these are expected to be unveiled soon and the company is confident of being successful in several of these tenders. Besides the weapons, the company has also developed allied precision components for in-service weapons and thereby successfully bagged an order for supply of precision assemblies to the Indian Armys MMG weapons. The company is confident that the steps undertaken would results in good tidings in the days to come for the defence division.

Financial Performance

During the financial year ended on March 31,2025, the Company recorded Revenue from Operations of Rs.22,832.16/- lacs, as compared to Rs. 29,353.99/- lacs in 2023-24. Furthermore, during the financial year, the company has made profit after tax of Rs. 53.68 lacs as compared to Rs. 1384.79 lacs in 2023-24.

Particulars	Numerator	Denominator	2024-25	2023-24	0/ % Variance	Reason for variance
(a) Current Ratio	Current Assets	Current Liabilities	1.36	1.41	-4%	Not Applicable
(b) Debt Equity Ratio	Debt	Equity	0.63	0.60	4%	Not Applicable
(c) Debt Service Coverage Ratio	EBITDA	Interest + Principal	1.08	1.82	-41%	Not Applicable
(d) Return on Equity Ratio	PAT	Average equity	0.26%	7.80%	97%	Refer Note - I
(e) Inventory turnover ratio	Revenue From Operations	Average Inventory	1.80	2.56	-30%	Refer Note - I
(f) Trade Receivables turnover ratio	Net sales	Average trade receivable	5.14	6.58	-22%	Not Applicable
(g) Trade payables turnover ratio	Net Purchases	Average trade payable	3.74	5.21	-28%	Refer Note - II
(h) Net capital turnover ratio	Net sales	Working capital	4.34	5.34	-19%
(i) Net profit ratio	PAT	Net sales	0.24%	4.72%	-95%	Refer Note -I
(j) Return on Capital employed	EBIT	Average capital employed	4.71%	11.04%	-57%	Refer Note -I
(k) Return on investment	PAT	Average equity	NA	NA

Note: i) Decrease in these ratios in FY 24-25 is on account of lower profitability due to lower turnover owing to sanctions from OFAC. ii) Decrease in the Ratio in FY 24-25 is due to decrease in Purchases during the year.

Risks and Concerns

The machine tools industry is highly sensitive to global economic fluctuations, with a direct correlation between sales and manufacturing expenditures. Consequently, an economic downturn can lead to a significant revenue decline for the industry. Intense competition, particularly from new entrants in low-cost manufacturing regions, further pressures prices and margins. The sector is also heavily influenced by trends in the automotive industry, a major consumer of machinery. The cyclical nature of the automotive sector impacts demand for machine tools, affecting order volumes. Additionally, the industry faces challenges related to a shortage of skilled labor necessary for design, manufacturing, and maintenance, which can reduce productivity and increase labor costs. Lokesh Machines Limited is proactively addressing these risks by focusing on export orders and diversifying into non-automotive sectors, yielding positive results. The company has implemented effective risk management strategies, including identifying and prioritizing risks, streamlining mitigation measures, and regularly monitoring their effectiveness. This careful monitoring, combined with judicious caution and cutting-edge innovation, is crucial for maintaining margins in a competitive landscape.

The autocomponent industry is also cyclical in nature and is dependent in several macroeconomic forces both internal and external. Though the domestic market is robust, there could be short terms impacts due to conditions such as drought, flooding, global economic outlook, introduction of newer technologies etc. Labor shortage is also a limiting factor in several regions. The company has been building effective mitigation plans against this by entering into areas with long term demand.

The defense business is entirely dependent on the central and state governments for the revenues. Although these is a great need for the modernization of the security apparatus and the actions are underway by the union government, the results might not be as fast as anticipated. Sometimes the delay in the procurement process gives way for changed scope of supplies and changed tender conditions. The company is keeping itself compact to swiftly deal with these requirements.

ESG Commitments

Lokesh Machines Limited (LML) is embarking on a dynamic future with a strategy focused on enhancing production capacities, boosting defence sector revenue, exploring new markets, and advancing ESG initiatives. Central to its vision is the effective use of increased production capabilities to improve efficiency and meet growing demand. LML plans to expand its defence Division by introducing new products and capitalizing on emerging opportunities, establishing itself as a key player in this sector.

The company also aims to broaden its market presence, both domestically and internationally, through new product launches and market expansion. Additionally, LML is committed to accelerating its ESG initiatives, integrating environmental, social, and governance principles to foster sustainable development and ethical practices. The company has been steadily increasing the green cover at some of its manufacturing locations at Hyderabad and Pune and has also been investing on STPs to recycle waste water and reuse the treated water to maintain the green cover. Significant measures have also been deployed to conserve electricity.

Internal Control Systems and Their Adequacy

Lokesh Machines maintains effective internal control systems appropriate to its size. These are complemented by an internal audit conducted by external Chartered Accountants. The internal auditors assess the performance of various departments, functions, and locations, including compliance with statutory requirements as per an annual audit plan developed in collaboration with the Audit Committee. Their findings and recommendations are reported to the Audit Committee of the Board of Directors, which includes two non-executive Independent Directors. The Audit Committee reviews these audit findings, oversees the implementation of recommendations and corrective actions, and recommends broader audit coverage as needed.

Human Resources and Industrial Relations

Lokesh Machines considers its employees as its most valuable asset and places significant emphasis on fostering a positive work environment that encourages innovation and professional development. The company invests substantially in training its workforce, ensuring they are adept with the latest technologies essential for their roles. By integrating technological advancements into its production processes, Lokesh Machines achieves efficient and cost-effective production, crucial for its sustained success. As of March 31,2025, the company employs a robust workforce(excluding directors) of647employees.

Cautionary Statement

Statements in the Managements Discussions and Analysis report describing the Companys objectives, projections, or predictions may be forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied.