MRF Ltd Management Discussions

(Within the limits set by Companys competitive position)

World economy in 2024 continued its trajectory of steady growth and declining inflation. Slowdown in manufacturing was visible in many parts of the world due to weak demand while services continued to show strength. Tighter monetary policies by central banks have resulted in inflation rates trending down across economies and easing towards central bank target levels. The world is now into the first steps of a monetary easing cycle, with central banks initiating policy rate cuts. Geopolitical tensions, ongoing conflicts, tariff related uncertainties and trade policy risks continue to pose significant challenges to global economy. Multilateralism is on the retreat and protectionism is on the rise, leading to slowdown in global trade. World economy grew by 3.3% in calendar year 2024. International Monetary Fund (IMF) estimates global growth at 2.8% in calendar year 2025, pared down by 0.5% from earlier estimates considering trade uncertainties. The tariff war and resultant uncertainties is estimated to impact growth more than inflation.

While Indias limited exposure to the United States (US) reduces tariff risk, there is a risk arising from slowdown in global growth, trade redirection to India amid global oversupply and excess capacity, at least in some sectors. Our service exports are significant and could be affected since they are linked to global growth. Tariffs could erode some of the $45 billion trade surplus with US. India could also benefit as companies seek to diversify out of China, Vietnam etc., in electronics and other products. Also, the reciprocal tariffs, now kept in abeyance for 90 days, on India was lower than Indias Asian competitors, which could give India a cost advantage. On the positive side, it is likely that countries will get into trade deals with US and with each other in order to mitigate the effects of tariffs. Non-Tariff barriers and other distortions could come down which can offer a level playing field to countries, which will promote trade.

Indian Economy

Following a stellar growth in financial year 2023-24 when the economy grew by 9.2%, financial year 2024-25 promised to be a good year with an above normal monsoon and improving rural demand. However, growth in the first half of the year surprised on the downside at 6%, impacted by lower Government capex and tepid urban consumption. Manufacturing, mining and investment which did well in the year before slowed sharply in the second quarter, dragging down 2nd quarter GDP growth to 5.6%. Higher borrowing costs and food inflation reduced discretionary spending of households. Growth in services was steady in the first half of the year. Economy picked up pace in quarter 3 on the back of improved consumer spending, higher Government expenditure and stronger export growth. The full year growth in financial year 2024-25 is now seen at 6.5%, as per the 2nd advance estimate of the Government. Manufacturing is expected to be sharply lower than the previous year while services sector will expand at a slightly lower rate. As part of meeting the aggressive fiscal consolidation plan, Government has curtailed expenditure to the extent of growth in revenues, which has contributed to the lower growth in the economy.

Lower inflation enabled Reserve Bank of India (RBI) to pivot into an interest rate easing cycle. RBI reduced interest rates by 0.5% in 2 installments, besides boosting liquidity in the economy. This should help in credit growth which had slowed down in financial year 2024-25.

In a difficult external environment, Indias overall exports of goods and services increased by 6% to $824.9 billion. Service exports grew by 13.6% led by buoyancy in Global Capability Centers and steady growth in IT/ITES services. Goods exports, on the other hand, rose by a marginal 0.8%. Oil exports fell due to lower oil prices, non-oil exports increased by 6%. High value-added electronic exports continued to grow, particularly smart phones. Among the top 10 segments, Electronics exports is now the fastest growing, with a growth of 32% in financial year 2024-25. Services trade surplus, healthy inward remittance, strong external balances and fiscal discipline underpinned macro economic stability. Government looks set to close the year with better than expected fiscal deficit, on the back of tax buoyancy and savings in expenditure. Budget for financial year 2025-26 gave a boost to consumption recognizing the demand slowdown, particularly urban consumption that was a weak spot last year. Focus on infrastructure spending continued aiming to crowd in private investment. Budget also provided a fiscal consolidation frame work towards macro economic stability, helping RBI move towards a lower interest rate regime. Electric Vehicles got a boost with lower duties inputs for manufacturing batteries. Budget also had measures to help the MSME sector and agriculture related initiatives, which should further bolster the rural sector. Reduction in personal income taxes would be a strong boost for manufacturing, which is into a slowdown. Monsoon has been predicted to be above normal for the 2nd successive year, which augurs well for food inflation and rural demand. A pick up in rural demand, lower inflation, declining interest rates and lower personal income tax outgo will increase demand in the economy and provide a fillip for growth. RBI estimates Indias financial year 2025-26 growth at 6.5% while IMF estimates this at 6.2%, pared down by 0.3% over tariff uncertainties. Supply chain diversification is likely to help manufacturing in India as the world looks to de-risk sourcing.

Market and Industry Overview

Global Car sales grew by about 2.5% in calendar year 2024. While Sales in North America was robust, European Union (EU) and Asia showed a marginal growth. Global battery Electric Vehicles (EV) market showed signs of stagnation, except in China where EV and Hybrids sold record numbers. Global auto companies are facing difficult times, with high transition costs to new technologies, rising protectionism and price competition from China. To add to this, 25% tariffs on Auto imports into US will make automobiles costlier in the US, curtailing demand and inviting retaliation from EU and other countries. Auto sales growth moderated in India in financial year 2024- 25 on a high base as the post pandemic pent up demand tapered off. Demand revival for entry level two wheelers witnessed towards the end of the previous year continued in the current year also. Steady recovery in rural demand and demand for scooters in urban areas powered double digit sales growth in two wheelers. During the year, the government introduced The Prime Ministers E-Drive scheme for the promotion of electric mobility in the country. Apart from the subsidies on the purchase of new vehicles, the scheme also has a sizeable outlay for the promotion of electric vehicle public charging stations also. Auto exports grew much better than the domestic market, growing by 19%, driven by passenger vehicles, two wheelers and commercial vehicles.

Commercial Vehicles

The production of Medium and Heavy Commercial Vehicle (M&HCV) during the year has been more or less flat. The bus segment and trailers for haulage continue to do well. Electric vehicles have till now been predominantly in the bus segment operated by the state transport undertakings. The current indications are that sales in 2025-26 would continue to be sluggish. Recovery may happen in mid 2026-27. The Prime Ministers E-Drive announced this year has a substantial outlay for the procurement of more e-buses by state transport undertakings. The scheme also has an outlay for the promotion of e-trucks. Original Equipment Manufacturers (OEMs) are expected to increase their focus on lower rolling resistance tyres to improve the contribution of tyres to the overall fuel efficiency of the vehicle. The regulatory authority is expected to continue to push towards more stringent norms for Tyres for rolling resistance, wet grip and noise. Vehicle scrappage infrastructure is expected to be further strengthened. Environmental, Social and Governance (ESG) compliance requirements would also be an area of focus in the coming year. Within this market scenario, your company continues to consolidate its position in the OEM and after market segments. We have a strong presence in many of our existing export markets and will also look at opening up new markets.

Passenger Vehicles

In financial 2024-25, Passenger Vehicle production grew by approximately 3% on a high base, due to muted demand. Industry grappled with high channel inventory in the initial months of the year. Though festive season brought some cheer, annual growth was in low single digits. However, your company was able to increase its sales to OEMs in major segments such as Sports Utility Vehicles (SUVs) and EVs at a significantly faster pace, thanks to our collaboration and partnerships with most of Indias large automotive companies. Your company is today an Original Equipment (OE) fitment supplier to many of Indias top selling vehicle models. The replacement market segment for passenger vehicle tyres has grown at a faster pace for your company compared to previous years on the back of new product launches and increased sales of SUV Tyres.

Two Wheelers

Two wheeler production showed a growth for the third consecutive year, with both motorcycle and scooter growing significantly. The average motorcycle production is however still lower than the previous high in 2018-2019 while the average scooter production has touched the highest ever. Domestic sales has been strong. There has also been a recovery in motorcycle exports. Export of scooters continues to be relatively small. E- Scooters continue to gain traction and sales have touched closed to 1 lakh Vehicles per month. Your Company continues to be a preferred choice of fitment for two wheeler OEMs in most of their new launches, across segments. Many OEMs have also increased their fitment of our tyres on their existing models. The strong preference for our tyres in the after market continues. Good inroads have been made into export markets also.

Tractors

After a subdued first half for tractor sales the second half showed positive signs. Tractor Production has shown a growth of 7% in the financial year 2024-25. During the year, your Company has improved its sales to Tractor OEMs. Anticipating the implementation of Tractor/Engine Emission Regulation V (Trem V) emission standards in 26 - 50 HP category, Tractor OEMs have started working towards increasing production and hence the improved demand for tyres. Maintaining its status as the most preferred brand, your company also witnessed good growth in replacement sales. A predicted above normal monsoon by Indian Meteorological Department (IMD), improved reservoir levels and better minimum support price, financial year 2025 -26 offers ideal conditions for the farming activity to prosper.

Tyre industry posted high single digit growth in the financial year 2024-25 in rupee terms, supported by Replacement demand and Exports. Margins suffered on account of high input costs, with natural rubber prices increasing to record levels. However, commodity prices have eased as we step into a new financial year which augurs well for the Tyre industry.

Product wise performance

During fiscal 2024-25, your Company achieved a total income of Rs. 28068 crores. There was an overall increase of 12% in sale of tyres in financial year 2025. All product segments including commercial vehicles, passenger vehicles, two wheelers and farm segment registered good growth. Off the Road (OTR) segment also increased sales over last year.

Exports

After 3 years of relatively stagnant growth, export business had a very strong growth in the year 2024-25, growing in most of the key markets. The Red Sea crisis which impacted the global shipping industry in 2023-24 impacted container availability and rates at the beginning of the year, but improved considerably towards the second half, which helped Exports to grow.

The exports turnover for the year 2024-25 was Rs. 2307 crores as against Rs. 1874 crores in the previous year, a growth of around 23%.Markets in Far East, Middle East and the African region showed excellent growth, in spite of severe price competition from other countries. Your companys products continue to enjoy high customer preference in most of the markets. The Truck Radial, Light Truck Bias, Farm, OTR and 2 & 3 wheeler tyre categories had very good growth in most of the markets. The companys new products for the European market were showcased at the Tire Cologne exhibition in Germany in June 2024 and drew an excellent response from the consumers.

In the year ahead, your Company will strive to maintain its growth trajectory in our existing strong markets and make further inroads into emerging markets such as Europe and North & West Africa.

Discussion on Standalone Financial Performance with respect to Operational Performance

Rs. Crores

Particulars	2024 - 2025	2023 - 2024
Revenue from operations	27665	24674
Other Income	403	312
Total Income	28068	24986
Profit before tax	2420	2739
Provision for tax	597	698
Profit after tax	1823	2041

The revenue from operations of the Company for the year ended 31st March,2025 stood at Rs. 27665 crores against Rs. 24674 crores for the previous year ended 31st March,2024. During the year ended 31st March, 2025, the earnings before interest, depreciation and tax (EBIDTA) stood at Rs. 4359 crores as against Rs. 4480 crores in the previous year ended 31st March,2024. After providing for depreciation and interest, the profit before tax for the year ended 31st March,2025 is Rs. 2420 crores as compared to Rs. 2739 crores in the previous year ended 31st March,2024. After making provision for income tax, the net profit for the year ended 31st March, 2025 is Rs. 1823 crores as against Rs. 2041 crores in the previous year ended 31st March,2024.

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, Debt Equity Ratio and Net Profit Margin as compared to previous year. The details of other Key Ratios where there is a change of 25% or more is given below:

Sr. No. Particulars	2024-25	2023-24	Change	Explanation
1 Operating Profit Margin (%)	8.34%	11.12%	-25%	Decrease due to higher raw material cost
2 Return on Net Worth (%)	10.53%	13.19%	-20.17%	Decrease due to lower profit after tax in 2024-25

Opportunities and Threats

RBI has forecasted Indias growth for financial year 2025-26 at 6.5%. Global agencies have reduced between 0.2% to 0.5% from the forecast, considering trade uncertainties. Tyre industry has significant exports to US (17% of total exports) and is likely to be impacted by the higher tariffs in US. Indias low reliance on external demand is expected to shield the country from trade and tariff uncertainties, on relative terms. A significant portion of our exports is in services which is not expected to be hit by tariffs. Concluding trade deals with various countries, supply chain realignments and moderation in commodity prices would be a positive for Indias growth. Indias service exports and foreign inward remittances will provide a cushion against trade volatilities.

RBI has reduced rates twice since February 2024 and India is into an interest rate easing cycle. This should help in industry is lowering costs and in aiding consumption. RBI has also pumped in liquidity, having changed the monetary policy stance from neutral to accommodative. RBI has also relaxed stricter capital requirement norms introduced in 2023 for personal loans and credit to NBFCs, which should translate to higher credit growth to the economy.

Outlook

Commercial Vehicles growth will continue to be muted in financial year 2025-26 as in the previous year. As per Society of Indian Automobile Manufacturers (SIAM) estimates, passenger vehicles is expected to grow in low single digits. Also, unless entry level vehicle sales pick up, volume growth will be difficult in this segment. Two wheelers should continue to grow based on demand pick up in the rural economy. Considering the good monsoon, tractor sales should continue to grow as in the previous year. Impact on tyre Industry would also be similar as outlined above.

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, ongoing conflicts, tariff related uncertainties and trade policies risks. These risks will result in global slow down and impact demand both in domestic and export markets. Moreover, monsoon has been predicted by IMD to be above normal which augurs well for growth in rural demand and consumption. Tyre industry margin during the year suffered on account of high input costs, with natural rubber prices increasing to record levels. However commodity prices have started easing in the new financial year. Further lower inflation, lower borrowing costs and lower personal income tax outgo should increase demand in the economy, providing a fillip for growth. Despite the above concerns, the Company hopes to continue reporting growth based on its strong brand and products.

Human Resources

MRF is a value driven organization and the company has a rich organizational culture rooted in its core values of respect for people and belief in empowerment.

The core value underlying our corporate philosophy is "trusteeship" and "proprietary interest". In dealing with each other, the values which are at the core of our HR Philosophy - trust, teamwork, mutuality and collaboration, objectivity, self-respect and human dignity are upheld. The management is committed to the development and growth of its people and the core focus is on Human Resources for its continued success. We owe our success and dominance in the market to the dedication and hard work of our employees who have overcome all challenges to meet the daunting challenges of the market and the ever increasing quality expectations, customer taste and preferences of the customers across the length and breadth of the country as well as in overseas market. The year was a very challenging one both for the economy and industries. The geopolitical tension and slowdown of economy, have impacted the business and human life across the world. It was a year of carefully navigating through uncertain times, definitely called for greater preparedness, ensuring that we deliver on all fronts. This was made possible by the team synergy and efforts of each employee who stood up to the challenges. Efforts have been taken for building agile, resilient and adaptive Human Capital System.

We have focused on hiring the best resources available in tune with our growth needs, retaining and developing our existing talent pool to strengthen our human capital for meeting the future challenges. We leverage human capital for competitiveness by nurturing knowledge, entrepreneurship and creativity.

Our human resource development is focussed on our companys mission to have competitive edge in technology & excellence in manufacturing. All our training programs designed and tailor made to meet our specific requirements. We continued imparting teambuilding and collaboration training to our workmen to enhance the team cohesiveness. Leadership training for union leaders and opinion makers also continued through the year, thereby keeping with our commitment of shaping the future of our plants.

The total employee strength as on 31st March,2025 was 17,850.

We maintained cordial and harmonious Industrial relations in all our manufacturing units through our various employee engagement initiatives and focus on improving the work culture, enhancing productivity and enriching the quality of life of the workforce and maintaining our supremacy in the market.

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

Chennai	K M MAMMEN
07th May, 2025	Chairman & Managing Director
	DIN: 00020202