Modern Insulators Ltd Management Discussions

Economic and Industry Overview

The objective of this report is to present the Managements perspective on the external environment, strategy, operating and financial performance, material developments in human resources and industrial relations, as well as the risks and opportunities impacting the business.

The power sector continues to be a strategic and critical pillar of the Indian economy, enabling growth across industries and households. Over the past decade, India has added substantial power generation capacity, transforming itself from a power-deficit to a power-surplus nation. With growing renewable integration, transmission expansion, and modernization of distribution networks, the sector continues to offer sustained opportunities. Insulators, being an integral part of transmission and distribution infrastructure, have witnessed steady growth in demand both domestically and internationally. In India, large-scale transmission projects, renewable evacuation corridors, and distribution reforms are driving requirement for insulators. Globally, rising investments in grid modernization, renewable energy integration, and replacement of aging infrastructure are also supporting higher insulator demand. Looking to this the overall medium to long-term outlook for the industry remains robust.

Global Economic Outlook

The global economy continues to face headwinds from post-pandemic disruptions, geopolitical tensions, and tight monetary conditions. While central banks have maintained higher interest rates to manage inflation, price pressures remain above target in many regions.

According to the IMFs July 2025 World Economic Outlook, global growth is projected at 3.0% in 2025 and 3.1% in 2026, supported by resilient demand and trade front-loading. Global headline inflation is expected to ease to 4.2% in 2025 and further to 3.6% in 2026.

The OECD also forecasts moderation, with inflation across G20 economies declining from 6.2% in 2024 to 3.6% in 2025 and 3.2% in 2026, while global GDP growth is expected at 2.9% in both 2025 and 2026.Overall, while inflation is gradually easing, trade tensions, fiscal imbalances and geopolitical uncertainties continue to weigh on the global outlook.

Indian Economy

India sustained its position as one of the most dynamic major economies in FY 2024-25, with GdP growth estimated at 6.5%. Though moderating from 7.0% in FY 2023-24 and 7.2% in FY 2022-23, growth remains significantly higher than global peers, reaffirming Indias role as the fastest-growing large economy (IMF WEO July 2025; OECD June 2025 Outlook). Macroeconomic stability was underpinned by a benign inflation environment and prudent policy management. Retail inflation averaged 4.6% in FY 2024-25, the lowest in five years, aided by easing food prices and supply-side interventions and remained within the RBIs target band. The RBI maintained the repo rate at 6.50%, ensuring monetary stability while supporting demand momentum.

On the fiscal front, the Union Governments capital expenditure rose to ^ 11.11 lakh crore (3.4% of GDP), focused on infrastructure creation, energy transition, and crowding-in private investment. Flagship initiatives such as the Green Hydrogen Mission, renewable energy expansion, and digital public infrastructure are laying the foundation for long-term competitiveness. At the same time, fiscal consolidation remained on track, with the fiscal deficit narrowing to 5.1% of GDP, compared to 5.9% a year earlier.

External sector performance remained robust. Gross FDI inflows of $70.9 billion highlighted sustained investor confidence, even as net inflows moderated. Foreign portfolio investors returned as strong buyers, bringing inflows of around ? 2.3 lakh crore. Foreign exchange reserves stood at $651 billion as of March 2025, ensuring a comfortable import cover and financial resilience. India also joined the worlds top five stock markets, with market capitalization surpassing $5 trillion, reflecting global recognition of its growth potential.

Looking ahead, Indias growth prospects are supported by structural reforms, demographic advantage, digital adoption, and policy thrust on manufacturing and green energy. While challenges from global volatility in

crude oil, geopolitical uncertainties, and uneven external demand remain, India is well-positioned to deliver sustained high growth with macroeconomic stability in the coming years.

Global power sector overview

The global power sector is undergoing a rapid transformation, driven by electrification, digitalization, and the clean energy transition. Global electricity demand grew by 4.3% in 2024 and is projected to expand at an average of ~4% annually through 2027, outpacing overall energy demand growth (IEA, 2025). Over the longer term, global electricity demand is expected to more than double by 2050 from around 25,000 TWh today to 52,000-71,000 TWh reflecting population growth, rising per-capita incomes, electrification of transport and industry and the accelerating shift towards digital technologies.

A key emerging trend is the rapid growth of electricity consumption by data centres, artificial intelligence (AI), and cryptocurrency mining. Data centres alone, which consumed an estimated 460 TWh in 2022, are expected to more than double consumption to over 1,000 TWh by 2026, making them one of the fastest-growing drivers of power demand worldwide.

On the supply side, investment dynamics are shifting decisively. Global energy sector investment is projected to rise by ~5% annually, reaching $ 1.3-2.4 trillion by 2040. Transmission and distribution (T&D) networks are expected to see the sharpest growth, with annual investments of $0.6

1.2 trillion, while renewable energy deployment will attract $0.5-1.0 trillion per year led by solar PV and wind power additions. Nuclear generation is also expected to expand, while coal-based power is forecast to decline by an average 1.7% annually through 2026, marking a decisive structural shift in the generation mix.

The transport sector represents another major source of future electricity demand. With accelerating adoption of electric mobility, the global passenger EV stock could reach 1.3 billion by 2050 equivalent to todays entire global car fleet reshaping both demand patterns and grid requirements.

Overall, the outlook for the global power sector is characterized by robust demand growth, record levels of investment in grids and renewables, and structural decarbonization of supply, presenting significant opportunities for T&D equipment manufacturers, including the insulator industry.

Indian power sector overview

India, the worlds third-largest producer and consumer of electricity, continues to strengthen its energy landscape with rapid capacity expansion and clean energy transition. As of January 2025, the countrys installed capacity stood at 466 GW, including 209 GW from renewables. Power consumption grew by 5% in FY 2024 to 1,821 BU, and the CEA projects total requirement to rise to 817 GW by 2030, with renewables expected to contribute 44% of generation.

The Government has set a target of 500 GW non-fossil fuel capacity by 2030, supported by large-scale investments in renewable corridors, nuclear expansion, and grid modernization. Recent policy initiatives include the Nuclear Energy Mission (21 new reactors, 15.7 GW by 2031), accelerated rooftop solar under PM Surya Ghar Yojana, and a ? 9.15 lakh crore national plan to strengthen transmission and distribution. Power Grid Corporation alone has outlined a ? 2,00,000 crore capex pipeline, underscoring opportunities in T&D infrastructure.

India is also witnessing strong investor interest: FDI inflows in the energy sector reached US$41 billion cumulatively by FY 2025, with nonconventional energy leading the surge. This reflects global confidence in Indias clean energy ambitions, aided by supportive policies such as the PLI scheme for solar manufacturing and tariff-based competitive bidding for transmission projects.

Looking ahead, Indias power sector is poised for transformational growth, driven by clean energy adoption, digitalization of grids, decentralization, and electrification of transport. With its scale, policy push, and investor confidence, India is emerging as a global leader in the energy transition, offering significant opportunities across generation, transmission, and distribution.

BUSINESS PERFORMANCE REVIEW Insulators Division

The Insulators Division delivered a strong performance during the year, registering a turnover of ? 417.34 crores, up from ? 385.45 crores in the previous year. Profit before interest and depreciation grew to ? 41.83 crores, compared to ? 37.96 crores last year. The company continues to maintain its leadership position in the manufacture of Extra High Voltage (EHV) Insulators in India.

The division is benefiting from a virtuous cycle of rising domestic energy demand and growing international orders, driving higher export volumes and enhancing overall financial performance. By effectively capitalizing on both internal and external market opportunities, the company is strengthening its competitive edge and positioning itself for sustained growth.

Terry Towels Division

Terry Towels Division also registered a healthy growth trajectory, with turnover rising to ? 56.87 crores, up from ? 46.25 crores in the previous year. Profit before interest and depreciation increased to ? 1.39 crores, compared to ? 1.33 crores previously. This growth reflects the divisions focus on quality, market responsiveness, and operational efficiency, reinforcing its contribution to the companys overall performance.

Exports

The company continues to be Indias largest exporter of Extra High Voltage (EHV) Porcelain Insulators, achieving exports of ? 192 crores in the year, up from ? 176 crores in the previous year-a strong growth of ~9% despite intense global competition. This growth reflects the companys focus on consistent quality, timely delivery, and revival ofkey customer relationships. To further strengthen its international presence, the company is exploring new applications and product innovations including RTV-coated insulators, semi-conducting glaze, large-diameter and high-strength hollow insulators, HVDC insulators, and specialized insulators for reactors. These initiatives enhance the companys ability to serve diverse global customer requirements and capture emerging opportunities in HVDC and renewable energy projects. Operational efficiency remains a key focus area. Through R&D, process optimization, and optimal resource utilization, the company ensures its products remain competitive in quality and price. The company is also actively securing approvals from overseas utilities, recently obtaining clearance from a major Gulf utility and winning a significant order for RTV-coated Porcelain Longrod Insulators. Additional frame contracts have been secured with EU utilities, further consolidating the companys international footprint.

The global electrical insulator market is projected to grow at a CAGR of 5.7% from 2024 to 2030, driven by investments in renewable energy and expanding transmission infrastructure. The companys active participation in international tenders, OEM/EPC projects, and global exhibitions including Elecrama 2025, Grid Con 2025, IEE 2024 and Middle East Energy, Dubai reinforces its brand presence and engagement with potential clients worldwide.

With its Two-Star Export House status, strategic product diversification, and focus on global market opportunities, the company is well-positioned to leverage the growing demand in the international insulator market and strengthen its leadership in the EHV segment.

ANALYSIS AND REVIEW

The company continues to maintain its leadership in the manufacture of Extra High Voltage (EHV) Insulators in India, consistently earning buyer confidence through superior quality and timely delivery. Central to this success is the companys state-of-the-art in-house R&D laboratory, which focuses on understanding customer requirements, ensuring product reliability, and driving qualitative improvements including the development of cost-effective raw material alternatives and consistent product quality. Reinforcing its commitment to international standards, the companys testing facility has been accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL) under ISO/IEC 17025:2017. This certification underscores the companys adherence to rigorous global testing protocols and its capability to certify diverse types of EHV Insulators with precision and reliability.

nisuidiuis Limueu

Innovation remains at the forefront of the companys strategy. As part of the Make in India initiative, the company has designed and developed a fully automated RTV Silicone Coating Machine, a first-of-its-kind innovation which has been successfully deployed in manufacturing operations for an overseas client, demonstrating the companys ability to combine indigenous innovation with global application.

The company operates a fully equipped foundry that not only meets its major in-house casting requirements but also caters efficiently to the demands of diverse external segments.

OPPORTUNITIES & CHALLENGES

Indias power transmission sector is poised for significant growth, driven by rising electricity demand, the integration of 500 GW ofrenewable energy by 2030, and ongoing modernization of the grid. Expansion is not only in physical infrastructure but also in higher-voltage lines and advanced bulk power transmission technologies. The Central Electricity Authority (CEA) projects the addition of 114,687 CKM of transmission lines and 776,330 MVA of transformation capacity by 2027, representing a total investment of ? 4,252.22 billion. Schemes like Intra-State GEC Phase II and railway electrification, including high-speed rail, further expand the investment landscape.

The insulator industry stands to benefit from these developments, with the Indian market valued at USD 438.6 million in 2024 and projected to reach USD 844.3 million by 2033 at a CAGR of 6.59%. Private sector participation under the TBCB (tariff-based competitive bidding) route provides significant opportunities, while adoption of energy-efficient, low- maintenance solutions enhances growth prospects.

On the global front, the electric insulator market is projected to grow from USD 15.01 billion in 2024 to USD 22.14 billion by 2032 (CAGR 4.98%), driven by grid modernization, renewable integration, and smart technologies. Key markets include Asia Pacific, Europe, North America, and the Middle East, where massive transmission upgrades and decarbonization projects are underway. Smart grid adoption, electrification of transport, data center expansion, and renewable energy integration are key drivers of insulator demand.

Overall, domestic and global power sector expansion, renewable energy integration, smart grid adoption, and rising electrification present robust opportunities for the company to strengthen its market position, expand exports, and participate in high-value projects worldwide. Strategic focus on innovation, customer-centric solutions, and international certifications will help capitalize on these trends.

RISKS & CONCERNS

While your Company operates in a dynamic economic environment, it remains well-positioned to navigate potential challenges. Inflationary pressures, influenced by global geopolitical tensions and supply chain disruptions, could affect input costs; however, disciplined cost management and operational efficiencies provide strong mitigation. Anticipated interest rate adjustments by central banks may moderate growth in certain markets, yet the Companys diversified business and strategic planning offer resilience against such fluctuations.

Overall, by leveraging its robust operational framework, financial prudence, and market expertise, the Company is well-equipped to turn challenges into opportunities, sustain profitability, and continue delivering value to shareholders even in a complex macroeconomic environment.

OUTLOOK

The insulator industry is optimistic about ongoing power sector reforms, which are expected to boost order inflows and create new avenues for investment, employment, and technological innovation. The Companys robust order book both domestically and internationally reflects strong demand for its products and ensures a stable and healthy cash flow. Looking ahead, the Company is well-positioned to enhance operational efficiency, optimize costs and explore innovative sourcing solutions, while strategically adjusting pricing to sustain profitability without compromising market competitiveness. With a proactive approach and focus on excellence, the Company is ready to capitalize on industry growth and strengthen its leadership in both domestic and global markets.