MRF Ltd Management Discussions

(Within the limits set by Companys competitive position)

World economy performed better than expectations in calendar year 2025, growing at 3.4%, aided by steady inflation, accommodative financial conditions and lower than expected disruption to global trade from tariffs.

Even as the world was coping with tariff uncertainties and on going geopolitical issues, the conflict in the middle east has come as the latest in a series of shocks, severely testing the resilience of the global economy. Economies around the world are faced with higher commodity costs, supply chain disruptions, rising inflation and financial market disruptions. International Monetary Fund (IMF) estimates show that the conflict will take away 0.3% from global growth in calendar year 2026, estimated at 3.4%, on the assumption that the conflict will be short lived. Under an ‘adverse scenario where the conflict gets protracted, global growth would drop to 2.5% and to 1.3% in a ‘severe scenario. Commodity prices are expected to remain elevated for some time even after the conflict ends, as it will take time for facilities to come back to normal operations. Besides, a risk premium is likely to get added to commodity prices, particularly Crude.

Impact from the conflict was visible in March, 2026 and April, 2026 with sharp declines in portfolio flows to emerging markets and reversal of portfolio flows to home countries. Global economic activity already moderated to a 11 month low in March, 2026. The way ahead for world economy depends on the duration of the conflict in the middle east.

The uncertainty around United States (US) tariffs continues with the recent US Supreme Court ruling invalidating the higher tariffs levied. Shifting of global trade patterns were visible as countries negotiated tariff headwinds. Trade uncertainties drove many countries to move towards finalising trade agreements. However, geo economic fragmentation and geo political risks are increasingly becoming a reality, which the world economy needs to navigate.

Indian economy

Indian economy continued into 2025-26 the growth momentum observed in the second half of 2024-25, growing at an estimated 7.6%. Strong manufacturing, services and farm growth underpinned the performance of the economy. Even as the external environment posed difficulties domestically, the economy was in a sweet spot, with high demand, low inflation and declining interest rates. Robust domestic drivers helped overcome global challenges, including the impact of high US tariffs. With the GST rate cuts in September 2025, coming on top of the Income tax cuts last year, the stage was set for a sustained pick up in domestic consumption. But the conflict in the middle east changed the dynamics, with rising cost pressures beginning to impact growth.

The year saw global rating agencies including S&P Global upgrading Indias sovereign rating citing robust growth, fiscal consolidation and external stability. The upgrade, underscoring Indias resilience amid global headwinds, could result in lower overseas borrowing costs for Indian companies and increased financial flows to India.

The Rupee depreciated in 2025-26 due to adverse capital flows arising from uncertainties around trade and tariffs. There was record exit of Foreign Institutional Investors (FII) money out of India. The conflict in West Asia added to the depreciation. Rupee depreciated 10% over the last year and 4% since the conflict began, which will likely contribute to inflation in the economy.

Union Budget for financial year 2026 focuses on promoting manufacturing and investment through measures like electronic components manufacturing scheme, support for capital goods manufacturing and tax breaks on building data centres, while maintaining the infrastructure push.

The Government expected growth for 2026-27 to be in the range of 7-7.4% before the conflict in the middle east. The conflict poses considerable downside risks to the growth projected, with adverse impacts on inflation, fiscal deficit and external balances. Cost pressures are already being felt in the economy. Given that India is a key energy importer with strong trade and remittance linkages with West Asia, the conflict can impact India in many ways. Supply chain disruptions concerning oil and gas, fertilisers and higher logistics costs are already felt in the economy. Higher energy prices can dampen domestic demand while higher subsidy outgo can strain Government fiscal deficit. International agencies have estimated the impact of the conflict on Indias growth to be between 0.5%-0.8%.

Forecast for a below normal monsoon will be another negative for India which will impact agriculture sector and rural demand.

The near term outlook of the economy looks uncertain, with higher input costs and supply constraints posing risks to growth. However, strong macro economic fundamentals and the resilience that the Indian economy has displayed in recent years should help the economy negotiate the risks and uncertainties better.

Market and Industry Overview

Global passenger vehicle sales grew by over 4% in calendar year 2025, driven by China while sales was subdued in the western world. Growth is expected to be muted in 2026 as Global automakers face greater uncertainty navigating an environment of regulatory changes, trade tensions and uncertain economic outlook. European auto companies are particularly impacted, unable to compete on costs with Chinese companies while tariff back and forth in US is impacting exports into US.

Indian Auto industry had a muted first half weighed down by subdued demand. Goods and Service Tax (GST) rate cuts in September,2025 revived the market and led to sustained momentum in demand. After 2 years of subdued sales, there was a resurgence in Commercial Vehicles (CV) sales in the 2nd half of the year. Share of Electric Vehicles (EV) in total vehicle sales improved despite the increase in price difference with Internal Combustion Engine (ICE) vehicles, post GST rate reductions. GST rate cut also gave a fillip to the sale of small cars as the budget segment was the backbone of sales in the festive season.

As in the previous year, growth in automobile exports was better than the growth in the domestic market. Exports of Passenger Vehicles and Motorcycle grew significantly at 15% and 27% growth respectively in the calendar year 2025.

Commercial Vehicles

The Truck Medium and Heavy Commercial Vehicles (M & HCV) industry has seen a good growth of close to 15% in the financial year 2025-26 over the previous year. GST revision has helped the industry in recording such high growths, allowing large fleet operators to replace their old fleets. The long haul segment remains the back bone of the industry, contributing to the volume and the growth, while the infrastructure development has helped the Construcks to maintain a stable growth. The bus segment has also seen significant increase over the years with the state transport corporations refurbishing their depleting fleets with the new age buses, with increased focus on EVs. The second phase of Automotive Industry Standard (AIS) 142 norms are likely to be implemented towards the second half of financial year 2026-27 which will have impact on the use of nylon tyres by the Original Equipment Manufacturers (OEM) as nylon tyres will not meet the noise levels. The year ahead could see a surge in truck production towards the first quarter and then see a relatively flat performance for the rest of the year.

We have continued to grow at a good and consistent pace during the year enabling us to further consolidate our market shares in the replacement and Original Equipment (OE) segments.

Passenger Vehicles

During financial year 2025-26, the Passenger Vehicle (PV) industry recorded a growth of 9%, aided by strong demand seen post the introduction of the GST 2.0 reforms in the second half of the year. Your company outperformed the industry, improving its market share and establishing a leading position in the PV OE segment. It continues to be a preferred OE fitment supplier to most of Indias large OEMs and is a fitment on most of Indias top selling PVs, including next generation EV models.

The Company achieved key milestones by becoming the first in India to supply 20-inch rim size tyres in the OE segment for domestic PVs and by introducing advanced technologies such as acoustic foam tyres for EVs leading to enhanced in-cabin comfort through noise reduction. The replacement market segment for PV tyres has continued to grow on the back of recent product launches and increased sales of Sport Utility Vehicle (SUV) tyres.

Two Wheelers

The Indian two-wheeler industry demonstrated remarkable structural growth in Financial Year 2025-26, marking its third consecutive year of expansion. This period was characterized by a distinct divergence in product categories. While scooter production scaled to its highest-ever historical levels, motorcycle production continued its steady ascent toward previous peaks, bolstered by a decisive recovery in export volumes. A defining highlight of the year was the mainstreaming of Electric Two-Wheelers (E2Ws), with monthly sales consistently stabilizing near the 1 lakh unit milestone, signaling a permanent shift in urban mobility.

Amidst this dynamic landscape, MRF has fortified its position as the definitive market leader. Your company continues to be the preferred choice of fitment for two-wheeler OEMs across nearly all new launches and segments. This trust extends beyond domestic borders, as MRF tyres are now increasingly factory-fitted on premium models exported to highly regulated, developed markets including Europe, Brazil, and the US. Simultaneously, the brands dominance in the replacement market remains unrivaled, driven by a strong consumer preference for our proven performance and durability.

Recognizing the shift toward high-performance motorcycling, the Company has strategically expanded its product range into the Superbike segment. By developing specialized, high-speed rated radials that meet the grueling demands of heavy-capacity vehicles, MRF has successfully transitioned from a high-volume manufacturer to a cutting-edge technical partner capable of competing on the global stage.

Tractors

The Indian tractor industry reached a historic milestone in 2025-26 with domestic sales crossing one million units for the first time, driven by above-normal monsoon, strong crop yields, and mid-year GST reduction to 5%, which made tractors significantly more affordable. Enhanced minimum support prices (MSP) further supported the sentiment. Leveraging this, your company achieved record sales growth, increasing share of business with tractor manufacturers, while also catering to the high replacement demand as well.

The outlook for 2026-27 is expected to be moderate on the back of India meteorological department predictions of a below normal monsoon with El nino conditions.

While this will be a challenge along with the high base of financial year 2026, the GST reduction effect and ongoing shift towards farm mechanization and high yielding crops will provide a solid foundation for sustained growth. Our deep OEM ties and market presence positions us well to maintain the momentum despite the headwinds.

Tyre Industry grew by an estimated 10% in 2025-26 while tyre exports from India grew by 9%. There was a marginal improvement in operating margins in the year gone by due to easing lower commodity costs. However, commodity prices are at an elevated level now which will impact margins in financial year 2026-27.

Product wise performance

During fiscal 2025-26, your Company achieved a total income of

31,140 crores.

There was an overall increase of 11% in value terms in sale of tyres in financial year 2025-26. All major product segments including commercial vehicles, passenger vehicles, two wheelers and farm segment registered decent growth.

Exports

Following a year of robust growth, the export business witnessed a period of consolidation in the year 2025-26. The exports turnover for the year stood at 2,324 crores as against 2,307 crores in the previous year.

While the first half of the year recorded strong double-digit growth, the momentum in the second half was constrained by several geopolitical and macroeconomic headwinds. Economic challenges in the Philippines, political developments in Bangladesh and election cycles in select African nations temporarily impacted overall demand. Furthermore, the conflict in Iran caused substantial disruptions to the supply chain and exports to the middle east, which has traditionally been a very strong geography for your Company. In addition to these geopolitical challenges, the industry is currently navigating an environment of escalating raw material prices and elevated freight rates driven by the ongoing global crises.

Despite these broader challenges, markets such as Sri Lanka, Brazil and select geographies in Africa & Middle East demonstrated excellent growth. The truck and light truck radial, 3-wheeler and farm tyre categories also recorded commendable growth, reinforcing the high customer preference your Companys products continue to enjoy globally.

In our continuous effort to expand our global footprint, your Company showcased its offerings at the Latin Tyre & Auto Parts Expo 2025 in Panama which drew excellent response from regional customers. Our newly launched products in the truck radial and farm radial categories have shown promising results so far. The new additions in these categories planned in the current year is expected to significantly enhance our business and market presence in Europe and the Americas.

Expecting the global supply chain and economic conditions to stabilize at the earliest, your Company is strategically positioned to resume a strong growth trajectory in the year ahead, driven primarily by targeted expansions in Africa, South East Asia and Europe.

Discussion on Standalone Financial Performance with respect to Operational Performance

( Crores)

	2025 - 2026	2024 - 2025
Revenue from operations	30652	27665
Other Income	488	403
Total Income	31140	28068
Profit before tax	3133	2420
Provision for tax	778	597
Profit after tax	2355	1823

The revenue from operations of the Company for the year ended 31^st March, 2026 stood at 30652 crores against 27665 crores for the previous year ended 31^st March, 2025. During the year ended 31^st March, 2026, the earnings before interest, depreciation and tax (EBIDTA) stood at 5178 crores as against 4359 crores in the previous year ended 31^st March, 2025. After providing for depreciation and interest, the profit before tax for the year ended 31^st March, 2026 is 3133 crores as compared to 2420 crores in the previous year ended 31^st March, 2025. After making provision for income tax, the net profit for the year ended 31^st March, 2026 is 2355 crores as against 1823 crores in the previous year ended 31^st March, 2025.

Key financial Ratios

In accordance with Listing Regulations, there are no significant changes (25% of more) in Debtors Turnover, Inventory Turnover, Interest Coverage Ratio, Current Ratio, Operating profit Margin and Net Profit Margin as compared to previous year. The details of other Key Ratio where there is a change of 25% or more is given below:

Ratio	2025-2026	2024-2025	Change	Explanation
Debt Equity Ratio (%)	0.02%	0.04%	-53%	Reduction is due to repayment of borrowings during the current year

The Return on Net worth during the year 2025-26 increased from 10.53% to 12.20% when compared to the previous year 2024-25. Increase in Return on Net worth is due to increase in profit after tax.

Opportunities and Threats

Despite the adverse external environment, Indian economy showed strong growth in financial year 2025-26 driven by strong domestic factors. The resilience of the economy will likely continue. Domestic demand continues to be strong as evidenced by passenger car sales of April,2026. India concluded trade agreements with a few countries in financial year 2025-26, benefits of which should start accruing going forward.

High commodity prices arising from the conflict in the middle east will impact inflation going forward. Any Government measures to increase fuel prices at least partially to reduce subsidy burden may result in lower disposable income in the hands of people, which may affect demand. Higher fiscal deficit arising from absorbing some of the impact of the higher fuel and fertilizer costs by the Government may curtail Government expenditure which can impact growth in the economy. Worsening of the conflict in the middle east can result in further increases in commodity and transport costs, with possibility of rupee depreciating even more. Consequent imported inflation may force RBI to increase rates, negatively impacting growth in the economy.

Outlook

Strong traction in automobile sales is likely to continue in the current year, which would be beneficial to tyre companies. However, below normal monsoon can moderate tractor sales and dampen rural demand, which will be a negative for tyre companies.

Margins are likely to be impacted on account of higher commodity prices and transport costs. The Company, however, expects to continue its growth based on its strong brand presence and product portfolio.

Internal Control Systems and their Adequacy

Your Company has established internal control systems commensurate with the size and nature of business. It has put in place systems and controls across the Company covering various financial and operational functions. Company through its own Internal Audit Department carries out periodical audits at various locations and functions based on the audit plan as approved by the Audit Committee. Some of the salient features of the Internal control systems are:-

(i) An integrated ERP system connecting all plants, sales offices, head office, etc.

(ii) Systems and procedures are periodically reviewed to keep pace with the growing size and complexity of Companys operations.

(iii) Assets are recorded and system put in place to safeguard against any losses or unauthorized disposal.

(iv) Periodic physical verification of fixed assets and Inventories.

(v) Key observations arising out of the Internal Audit are reviewed at the Audit Committee meeting and follow up action taken.

Risks and Concerns

World economy continues to be affected by the geo political tensions and tariff related uncertainties. These risks will result in global slow down and impact demand both in domestic and export markets. The conflict in the middle east has raised commodity prices, shipping costs and supply chain vulnerabilities. This along with the rupee depreciation can result in higher inflation and translate to higher interest rates and lower Government spending, which can impact the economy negatively. Moreover, forecast of a below normal monsoon will be another negative which will impact agricultural sector, rural demand and consumption. All these could result in margin pressures for the tyre industry. However, strong traction in automobile sales is likely to continue in the current year, which would be beneficial for tyre companies. The risk management framework identifies and assesses the risks and its mitigation. Despite the above concerns, the company expects to continue reporting growth based on strong brand and products.

Human Resources

MRF is a value-driven organization with a rich organizational culture rooted in respect for people and belief in empowerment. The dedication and hard work of our employees have contributed to the Companys continued success and encourages us to foster the growth and development of our Human resources.

During the year, the Company continued to hire talent needed for future growth, and focused on retention and training of its existing workforce to meet future challenges. Measures to increase participation of women in the workforce as part of the companys diversity initiatives were undertaken.

Training programs were designed to meet our specific requirements, with a focus on team-building and collaboration among workmen to strengthen cohesiveness. Leadership training for union leaders and opinion makers continued through the year, in keeping with our commitment to shaping the future of our plants.

Industrial relations remained cordial and harmonious across all manufacturing units, supported by employee engagement initiatives aimed at improving productivity, enhancing work culture and enriching the quality of life of the workforce. The total employee strength as on 31^st March, 2026 stood at 16,283.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, expectations or forecast may be forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic supply and demand conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.

	On behalf of the Board of Directors
	K M MAMMEN
Chennai	Chairman & Managing Director
7th May,2026	DIN: 00020202