Menon Bearings Ltd Management Discussions

2. Industry Review

Industry Overview Auto Component Industry

The Indian auto component industry continues to be a vital driver of economic growth, supported by a mature manufacturing ecosystem, strong policy backing, and rising global demand. The sector manufactures a diverse range of products, including engine components, transmission systems, chassis and suspension parts, electrical equipment, and EVspecific modules, catering to both domestic and international markets.

In FY 202425, the industry recorded a turnover of approximately US$ 80 billion, building on steady demand and increased sourcing by global OEMs as they diversify supply chains. Indias expanding middle class, rising vehicle ownership, and the shift towards electric mobility have further driven sectoral growth. With over 25% of production exported and a trade surplus of US$ 600 million in H1 FY2425, India has solidified its role as a global auto component hub.

The governments continued emphasis on the PLI Scheme, worth nearly INR 75,000 crore, along with policies such as FAMEII and the National Mission on Battery Storage, has attracted both domestic and foreign investment. The EV market is rapidly growing, with annual sales projected to reach 4.5 million units by 2025 and 10 million by 2030, fuelling demand for advanced components. Moreover, the aftermarket segment has shown healthy growth, supported by an increasing vehicle base and longer ownership cycles.

The sector currently contributes around 2.3% to Indias GDP and employs over 1.6 million people, with projections to contribute 57% of GDP by 2026. With strong policy support, growing R&D investment and rising localization under the SelfReliant India initiative, the industry is reducing its import dependence while enhancing competitiveness. India has emerged not only as a preferred destination for sourcing and manufacturing but also as a center for innovation in mobility solutions. The road ahead presents immense opportunities, as the industry moves toward its goal of becoming a US$ 200 billion sector by FY 2026, driven by innovation, sustainability, and global integration.

Automotive & Engineering Sector

The auto components industry, which includes engine bearings and aluminium die casting parts, is witnessing a revival due to the resurgence in OEM demand, growth in electric vehicles (EVs) and increasing exports. Indias auto component industry grew by over 25% in FY 202324, and further expansion is expected with rising vehicle production and aftermarket demand.

Engine Bearings: The demand is closely linked with internal combustion engine (ICE) vehicle production, particularly commercial vehicles, tractors, and twowheelers.

Aluminium Die Casting: This segment is gaining traction in both ICE and EV vehicles due to its lightweight and strength properties, aiding fuel efficiency and emission reduction.

Engine Bearings

Aluminium Die Casting Components

Menon Alkop Ltd., Wholly Owned Subsidiary of the Company, specializes in aluminium die casting parts. With the automotive industry shifting towards lightweight materials to meet fuel efficiency and emission norms, aluminium components are witnessing high demand, especially from EV and hybrid platforms. The Company is wellpositioned with inhouse capabilities and growing client base across OEMs and Tier 1 suppliers.

3. Achievements

The Company expanded its product offerings in highperformance bearings suitable for BSVI engines.

Menon Alkop Ltd. enhanced its aluminium casting capacity and adopted advanced machining technologies.

Strengthened relationships with key OEMs across India and international markets.

Cost optimization initiatives led to improved EBITDA margins despite raw material price volatility.

Significant improvement in export revenue, with new contracts in Europe and the Middle East.

4. Productwise Performance

The segmentwise products consist of Original Equipment (OEM), After Market and Exports. The Company has a strong share of business in the OE Segment and has been upgrading its capabilities to stay technologically relevant to the segment. In the After Market and Export Segments, the Company supplies parts for several applications. The Companys constant endeavour to upgrade technology and reduce costs has been its strength. The products manufactured consist of bearings, bushes, thrust washers, strips and aluminium die casting components. OEM and Exports both segments have shown improvement.

5. Road Ahead / Future Outlook

India is rapidly emerging as a global hub for auto component design and manufacturing, driven by increased global OEM sourcing, rising indigenization, and supportive policy frameworks. Under the SelfReliant India initiative, the industry is targeting a significant reduction in its INR 1 trillion (US$ 13.6 billion) import bill over the next few years, creating strong growth opportunities for both existing players and new entrants. Backed by a growing middle class and favorable demographics, market demand is expected to remain robust. Between April 2000 and December 2023, the sector attracted US$ 35.65 billion in FDI, reflecting investor confidence. The governments PLI Scheme, with an outlay of US$ 7.8 billion specifically for the auto and components sector, is expected to generate capex of over INR 74,850 crore in five years.

The medium to longterm outlook remains positive OEM production is expected to grow with increasing mobility demand and infrastructureled rural development.

EV penetration, while a challenge for engine bearings, opens up opportunities for aluminium components in electric drivetrains and chassis systems.

Government incentives and localization policies will continue to support growth.

The Company plans to:

Diversify product applications into offroad and industrial segments.

Invest in R&D to support the transition towards lightweight, highperformance products.

Expand exports with a focus on Europe, ASEAN, and the US markets.

6. Opportunities and Threats Opportunities

Rising vehicle production across segments.

Increasing demand for lightweight, emissioncompliant components.

Export potential due to cost competitiveness and global supply chain diversification.

Demand for highprecision components in EV and hybrid platforms.

Threats

Transition to EVs reducing demand for traditional engine bearings.

Volatility in aluminium and copper prices affecting input costs.

Global supply chain disruptions and geopolitical risks.

Currency fluctuation impacting export margins.

7. Future Challenges

Adapting to fastpaced technological changes in the automotive sector.

Sustaining margins amidst rising input costs and competitive pricing pressure.

Managing capacity expansion and skilled workforce availability.

Ensuring compliance with evolving emission and environmental standards.

Maintaining growth and profitability during the automotive transition phase (ICE to EV).

Sustained investment in R&D and technology for nextgen products.

Scaling up aluminium casting operations without compromising quality.

Attracting and retaining skilled manpower in TierII cities like Kolhapur.

8. Risks and Concerns

The Audit Committee and Board of Directors of the Company regularly overview external and internal risks associated with the operations of the Company and carries out its impact assessment and effective implementation of the mitigation plans and risk reporting is conducted.

9. Internal Control Systems and Their Adequacy

The Company has proper and adequate Internal Audit System in place that promotes reliable financial reporting, safeguards assets, encourages adherence to fair management and ethical conduct. Additionally, the Company has proper and adequate internal control systems in place, which have been designed in a way that they not only prevent fraud and misuse of the Companys resources but also protect shareholders interest. Internal control systems comprise of policies and procedures which are designed to ensure reliability of financial reporting, compliance with policies, procedures, applicable laws and regulations. The Audit Committee of the Board of Directors, on regular intervals and in coordination with Internal and Statutory Auditors, reviews the adequacy of internal control systems within the Company.

Based upon the recommendations of the Audit Committee, an Annual Audit Plan (AAP) is prepared and is reviewed periodically by the top management and the Audit Committee. The internal audit focuses on compliances as well as on robustness of various business processes. A feedback on nonconformities along with recommendation for process improvements is directly provided to the top management of the Company. Compliance on audit findings and tracking of process improvements is regularly carried out.

Financial Performance:

11. Material Developments in Human Resources / Industrial Relations Front, Including Number of People Employed

Since its inception, the Company has always regarded its employees as its greatest strength. It continues to focus on developing a superior workforce that aligns with both individual growth and organizational goals, ensuring highquality service to customers and stakeholders.

The Companys WE approach emphasizes collective energy and teamwork, fostering a culture of excellence and empowering employees to realize their full potential. As of 31^st March, 2025, the Company employed 203 permanent staff members.

In line with technological advancement and operational efficiency, employees in manufacturing departments have been actively engaged in various projects aimed at reducing raw material wastage, minimizing setting times, maximizing automation, optimizing energy consumption, improving packaging safety, developing new products rapidly, and increasing yield to reduce costs.

These ongoing initiatives have contributed positively to both the top and bottom lines. Globally, the Company maintains a strong presence, operating across 24 countries, with exports constituting approximately 30% of production. This global footprint reinforces the Companys brand equity with leading OEMs worldwide.

12. ForwardLooking Statements

Certain statements in this report relating to objectives, projections, and expectations may constitute forwardlooking statements as defined by applicable laws. Actual results may vary due to factors such as raw material availability and pricing, demand cycles, government regulations, economic conditions in India and other countries where the Company operates, and other unforeseen factors.

13. Details of Significant Changes in Key Financial Ratios

As per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company reports significant changes (25% or more) in key sectorspecific financial ratios compared to the previous financial year. The following are the key financial ratios for FY 202425 and their changes from FY 202324:

The significant changes in Interest Coverage Ratio and Debt Equity Ratio are primarily due to the Company availing a term loan of INR 22 Crore from Bajaj Finance Limited during the year, impacting the cost of finance and capital structure.

14. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

Return on Net Worth in the financial year 202425 is 15.26% as compared to 16.78% in the immediately preceding financial year 202324. During the financial year under review, return on Net Worth decreased by 6.25% as compared to the immediately preceding financial year, mainly because of separation of Aluminium Division (Alkop) from Menon Bearings Limited.