Menon Pistons Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Your Company is in manufacturing of auto components such as Pistons, Gudgeon Pins, Rings, Auto shafts required for commercial vehicles, tractors and heavy duty stationery engines. The market is divided into segments such as export market, replacement market, OEM market. These are distinct from one another and have distinct advantages and plights. The auto component manufacturers mainly cater to two types of buyers, i.e. the original equipment manufacturers (OEMs) and the engine overhauling segment. While demand in the former is dependent on the production of new vehicles, the later, i.e. the replacement segment, is lucrative due to its size and unlike the OEM segment, it is not cyclical. The Company has very good opportunities because of long term business relationship with valued customers both in domestic OEMs and export. The Companies reputation for quality, reliability, timely supply and innovation, has been instrumental in maintaining relationship with OEMs, positioning company as a preferred supplier. The Company continues its drive for sustainable growth in this growing domestic automotive industry. In view of strong support of OEMs and because of establishing good distribution network, the Company is poised for good growth.

INDUSTRY OVERVIEW:

Automotive Industry, globally as well as in India is one of the key sectors of the economy. Demographically and economically, Indias automotive industry is well-positioned for growth, servicing both domestic demand and increasingly export opportunities. Innovation, technological upgradation and cost saving hold the key to success to meet the expectations of the exigent competitive circumstances. India is emerging as a global hub for auto component sourcing and the industry exports over 25% of its production annually. The Indian auto components industry is experiencing substantial growth, with projections significantexpansion in the coming years. for The industry is driven by increased vehicle production and sales, technological advancements, and government support. The Indian automotive sector is a vital growth driver of the Indian economy, with valuable contribution to GDP and creating jobs for millions. Indias auto component industry is an important sector driving macroeconomic growth and employment.The Indian automobile industry has historically been a good indicator of how well the economy is doing, as the automobile sector plays a key role in both macroeconomic expansion and technological advancement. With plans to reduce auto components import dependence domestic players are expected to witness a demand surge.

GOVERNMENT INITIATIVES:

The Bharat New Car Assessment Program (BNCAP) will not only strengthen the value chain of the auto component sector, but it will also drive the manufacturing of cutting-edge components, encourage innovation, and foster global excellence. The Government supports the sector through policies like 100% FDI, PLI scheme, promoting advanced technology etc. The scrappage policy and strict inspection of Pollution under Control (PUC) certificates would boost the auto component industry. The introduction of BharatTradeNet and the Export Promotion Mission will help integrate

Indias auto component sector into global supply chains.

ROAD AHEAD:

The growth prospects in medium to long term remain positive and the automotive component industry is also expected to grow in line with the growth in automobile production. The growth of global original equipment manufacturers (OEM) sourcing from India and the increased indigenisation of global OEMs is turning the country into a preferable designing and manufacturing base. The Company is targeting to achieve growth, by increasing its market share with key OEMs and increased focus on the aftermarket both in domestic and exports market. As the automotive industry continues to evolve, the auto components sector will play a crucial role in shaping the future of mobility. Collaboration with automakers, investment in research and development, and adaptation to changing regulations will be key factors for success in this dynamic and competitive market. The Company is investing in advanced machinery to cater to the growing automotive sector. The Company remains committed to innovation and technology advancement, with a focus on developing products that are aligned with the Industrys demands.

OPPORTUNITIES:

One of the primary drivers is the robust growth of the automotive industry in India. As the demand for automobiles, both passenger and commercial vehicles, continues to rise, the need for piston rings as critical engine components is also increasing. With the Self-Reliant India mission, the auto industry is looking to half its auto component imports over the next 4-5 years. This will providesignificantopportunities for existing and new auto components players to scale up. India has taken steps to improve its infrastructure, develop port facilities, develop agricultural industry and focus on developing manufacturing. Due to these developments, many foreign companies have increased their investments in Indias labor force. The automotive industry in India is poised significantgrowth, drivenfor by a multitude of factors. With widely recognized brands, superior technology, strong distribution network and a committed team of employees, the Company is well positioned to take advantage of the opportunities and withstand the market challenges.

The piston market size has grown strongly in recent years. The growth in the historic period can be attributed to growth in automation, economic growth in emerging markets, increasing urbanization, growth in the agricultural sector, rise in construction activities.

The Company has got a diverse product portfolio across all market segments i.e., OEMs, after Market and Export Market and all vehicle segments and a very strong distribution network at aftermarket sales. The Company strives to create sustainable profitable growth by using superior technology and maintaining product quality and offering wide range of products at competitive prices, which will give it a competitive edge in the market.

The piston market size is expected to see strong growth in the next few years. Major trends in the forecast period include development of lightweight materials, development of hybrid engines, advancements in manufacturing processes, shift towards downsizing engines, investment in infrastructure projects.

CHALLENGES:

prospects, Despitesignificant the industry is also confronted with a range of issues including logistics and supply chain disruptions, escalating energy costs, shortages in skilled labour, complex economic and political landscape, and growing expectations of an increasingly discerning and demanding consumer base, among others.

Major regulatory interventions, such as the accelerated transition to BSVI, OBD-II, safety rules, scrappage policy, and stringent vehicle standards are leading to a shift in vehicle technology. This is creatingsignificantchallenges and your

Company perceives these challenges as potential opportunities. The auto industry consisting of organized as well as unorganized sectors and is highly fragmentedwith significantnumber of small and medium-sized companies because of which the business rules are changing to meet the tough competition prevailing in the industry. Innovation, technological upgradation and cost saving hold the key to success to meet the expectations of the exigent competitive circumstances.

Technological edge, specialization, innovation, and networking will determine the success of the Company in this competitive environment. Further, the policies of the Government play a vital role in the development of the automobile sector. The industry faces infrastructure constraints, such as inadequate road networks and logistics issues, which hinder fficient transportation of goods and components, affecting overall productivity. The auto component industry is facing challenges in production planning and inventory managementduetofluctuatingdemand due to economic conditions and consumer preferences. However, challenges such as the need for stringent quality control and the competition from aftermarket piston rings may impact the markets expansion.

SEGEMENTWISE AND PRODUCTWISE PERFORMANCE:

The Company has only one segment of activity namely "Automotive Component". Therefore, segment-wise performance is not applicable.

OUTLOOK:

The auto sector is expected to bounce back but the pace could be slower compared to the previous year. To remain competitive in the challenging and demanding environment, the benchmark needs to be kept high in anticipation of the stated and unstated need of the customers and markets. Factors like normal mansoon, increasing infrastructure and overall economic growth indicators shall strengthen the positive outlook and will help the industry to perform better. Indias automotive industry is gaining importance in global supply chains due to strategic localization economic growth, resilience, and strategic investments in infrastructure and technological advancements.

The automotive industry ispoisedforsignificantgrowth driven by several key factors. Foremost among these is the rapid adoption of new technologies, coupled with robust government support policies. Moreover, factors such as rising vehicle penetration rates, and favourable policy environments, percapitalincomes, evolvingdemographicprofiles, including infrastructure development, are all contributing to a steady rise in industry demand. India is leveraging advanced technologies like robotics, automation, and Industry 4.O to boost productivity and meet international quality standards, positioning it as a competitive player.

RISK AND CONCERNS:

The Company operates in a highly competitive environment that is subject to innovation and varying level of resources available to each player in this segment of business. Increasing competition in the auto equipment sector, may put some pressure on the market share. The sector is vulnerable to global supply chain disruptions and currency fluctuations due to high reliance on imported advanced components. Indian manufacturers face increasing competition from domestic and international players, necessitating innovation and product enhancement to maintain market share in the increasingly competitive global market. Further the continuous demand from customers for price reduction along with increase in price of raw materials may affect the margins of the Company. The Company is constantly reviewing the risk that would impact adversely. The Companys Human Risk is minimal as it enjoys a harmonious industrial relationship in the manufacturing units of the Company. Regulatory and taxation related updates will make significant impact on the industry. The market faces restraints such as skilled labor shortages, stringent regulations, raw material price fluctuations etc. The high capital and operational costs, complexity of operations, and high maintenance costs also impact market growth. The automotive sector faces escalating raw material prices, particularly for steel, aluminium, copper and precious metals, stringency in regulations, technology up-gradation, discerning customer demand pose a threat to Companys margin.

The Indian economy has been performing well despite global challenges. The Company operates in an environment, which is affected by various risks, some of which are controllable while some are outside the control of the Company. However, the Company has been taking appropriate measures to mitigate these risks on a continuous basis.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Companys internal control system has been designed in order to provide the directors and the audit committee with reasonable assurance that its assets are safeguarded, transactions are properly authorized and recorded, material errors and irregularities are either timely prevented or detected. The Company has an Audit Committee headed by a non-executive independent director, inter-alia, to oversee the Companys financial reporting process, disclosure of financial information, performance of statutory and internal auditors, functions, internal control systems, related party transactions, to name a few, as well as other areas requiring mandatory review as per provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with the stock exchanges. The internal controls system provides the board an independent, reasonable assurance of the adequacy of effectiveness of the organizations risk management, control and governance process. The board of directors continuously assesses opportunities for improvements in business process, systems, control and also putting in place standard operating practices.

The Company has a well-defined internal control system, which aims at protection of Companys resources, efficiency of operations, compliances with the legal obligations and Companys policies and procedures. Thus effective internal control structure has been set up in the company to enhance organizational performance and contribute towards accomplishment of its objectives.

DISCUSSION ON FINANCIAL AND OPERATION PERFORMANCE:

During the year, Company has made revenue from operations of Rs.212.35 Crores as compared to Rs. 210.86 Crores during the previous financial year whereas profit after tax for the year is Rs. 17.32 Crores as against Rs. 24.19 Crores in the previous financial year. The required information on financials and the members may refer the same.

ENVIRONMENT:

The Company is committed to being a responsible corporate citizen. The Company believes that, by nature, our operations have a minimal impact on the environment. However, we acknowledge that there are inevitable environmental impacts associated with daily operations. We strongly encourage the internationally established 3 Rs reduce, re-use, recycle. In the course of our operations we seek to identify opportunities to reduce/keep it at minimum consumption of energy, water and other natural resources. We also strive to re-use and recycle where possible and dispose of non-recyclable items responsibly, thereby minimizing impact on the environment.

HUMAN RELATIONS, WORKERS WELFARE, INCLUSIVE DEVELOPMENT ACTIVITIES:

At your Company, we assure to provide environment for continuous innovation and improvement by rewarding the employees for the dedicated efforts made by them in achieving Companys goal. We believe whatever we achieved from where we started our journey long back is the result of our team. The Companys core values include dignity, respect, fairness, transparency and provision of growth opportunities for all employees. So, we consistently aim to provide a sustainable environment for learning right from the stage of recruitment to retention.

FINANCIAL STATEMENTS:

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and Indian Accounting Standards as prescribed by the Government. The Board of Director believes that it has been the objective and prudent in making estimates and judgments relating to the financial statements and confirms that these financial statements are a true and fair presentation of the companys operations of the year.

KEY FINANCIAL RATIOS:

S. N. Particulars	2024-25	2023-24	Reasons For variance more than 25%
1 Debtors Turnover Ratio	4.21	4.00	N.A.
2 Inventory Turnover Ratio	9.41	10.26	N.A.
3 Interest Coverage Ratio	6.71	8.30	N.A.
4 Current Ratio	2.24	1.73	29.42%
			This ratio is improved due to decrease in current liabilities mainly because of less utilization of cash credit facility in current year 2024-25
5 Debt Equity Ratio	0.11	0.15	- 27.00%
			This ratio is improved due to repayment of loan during the current year 2024-25
6 Operating Profit Margin	13.08	15.48	N.A.
7 Net Profit Margin	8.16	11.48	-29.00%
			This ratio is decreased because during previous year dividend was received from subsidiary company.
8 Return on net worth	11.83	17.96	N.A.

STATUTORY COMPLIANCE:

The Chairman & Managing Director and Chief Financial Officer makes a declaration at each Board Meeting regarding the compliance with provisions of various statutes after obtaining confirmations from all the units of the company. The Company ensures compliance with SEBI regulations and provisions of the listing agreement.

CAUTIONARY STATEMENT:

Statements made in this Management Discussion Analysis report describing the Companys projections expectations, estimates, global conditions, government policies etc. contain forward looking statements based upon the data available with the Company. Forward-looking statements inherently involve risks and uncertainties, as they require the Company to make assumptions. Readers are cautioned not to place undue reliance on forward looking statements, as several factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements.

For and on Behalf of The Board of Directors

	Sachin Menon
Place: Kolhapur	Chairman & Managing Director
Date: 28.05.2025	DIN: 00134488