Nelcast Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian automobile industry delivered a strong performance during FY 2025-26, with all major vehicle segments recording their highest-ever annual sales in seven years, as reported by the Society of Indian Automobile Manufacturers. Industry growth was supported by improving demand conditions, structural policy measures, enhanced financing availability and sustained infrastructure investments.

The year witnessed a relatively subdued firsthalf, followed by a strong acceleration in the second half, driven by improved affordability, supportive fiscal measures and easing monetary conditions.

Passenger Vehicle sales grew 7.9% to 46.43 lakh units, while the Two-Wheeler segment recorded 2.17 crore units, registering growth of 10.7%. Three-Wheeler sales rose 12.8% to 8.36 lakh units, reflecting broad-based recovery across segments.

The Commercial Vehicle segment recorded its highest-ever sales of 10.80 lakh units, growing 12.6% over the previous year, supported by increased infrastructure activity, replacement demand, improved freight movement and better financing access. Medium and Heavy Commercial Vehicle demand remained resilient, which is expected to support continued demand for castings and auto components.

Export momentum remained encouraging across segments, supported by steady demand from key international markets such as Africa, the Middle East and Latin America, increasing global acceptance of India-manufactured vehicles and favourable currency dynamics. Commercial Vehicle exports grew 17.4%, while overall export performance strengthened during the year.

Government initiatives supporting infrastructure development, manufacturing competitiveness and cleaner mobility, together with supportive policy reforms and easing financing conditions, continued to provide growth impetus to the sector.

Looking ahead to FY 2026-27, the outlook for the automobile industry remains positive, supported by strong domestic demand fundamentals, and continued infrastructure spending and stable macroeconomic conditions. However, geopolitical developments, volatility in crude oil and commodity prices, exchange rate movements and supply chain disruptions continue to be closely monitored, as these may have implications for costs, supply chains and overall industry sentiment.

OPPORTUNITIES AND THREATS

The Company supplies castings for Commercial Vehicles, Tractors, Off-Highway Vehicles and

Railways. The Company enjoys the confidence of its valued customers for providing quality products.

Therefore, as newer and more advanced castings are developed, The Company has an edge over the competition due to its diverse capabilities. The company has madesignificantinvestments to increase capacity and is poised to take advantage from the growth from both the domestic automotive industry and the global market.

The Company continually reviews its business plan and draws out action plans to leverage on its opportunities and counter any threats. The main threat to which the industry is exposed to is volatility of the market which affects capacity utilization and volatility of commodity prices which impacts the input costs. However, the Company strives to create sustainable profitable growth by continuing to focus on technology and quality while offering wide range of productstodiversifiedsegments and customers, which will give us a competitive edge in the market.

SEGMENT WISE OR PRODUCTWISE PERFORMANCE

The Company deals in only one segment i.e., Iron Castings. Therefore, segment wise performance is not applicable for our Company.

OUTLOOK Global Economy:

The global economy is entering a phase of moderated growth amid persistent geopolitical tensions, trade fragmentation and evolving financial conditions. According to the International Monetary Fund

World Economic Outlook, April 2026, global growth is projected at 3.1% in 2026 and 3.2% in 2027, with downside risks continuing to dominate the outlook. Growth prospects remain uneven across regions, with advanced economies expected to witness relatively subdued momentum, while Emerging and Developing Asia is expected to remain a key driver of global growth. Inflationary pressures, influenced by energy prices, supply-side disruptions and geopolitical developments, continue to warrant a cautious and data-driven monetary policy approach by central banks globally.

Global trade and investment flows continue to be influenced by geopolitical uncertainties, supply chain realignments and changing trade policies. At the same time, investments in digitalization, energy transition and infrastructure are expected to provide medium-term growth support.

While the global outlook remains resilient, risks arising from geopolitical developments, commodity price volatility, elevated interest rates in certain markets, exchange rate movements and disruptions in global shipping routes continue to be closely monitored, as these may have implications for inflation, trade flows and overall economic sentiment.

Notwithstanding these uncertainties, the medium-term global growth outlook remains constructive, supported by gradual easing in inflation, improving financial conditions and continued growth in emerging economies.

Source: International Monetary Fund Indian Economy:

India continued to remain one of the fastest-growing major economies during FY 2025-26, supported by resilient domestic demand, strong public capital expenditure, improving private investment and macroeconomic stability. Economic activity remained supported by sustained infrastructure spending, healthy services growth, improving manufacturing activity and strengthening rural demand.

According to the International Monetary Fund, Indias growth is projected at around 6.2% in FY 2026, reinforcing its position as one of the fastest-growing large economies globally.

Inflationary pressures moderated during the year, supported by easing food inflation and prudent monetary management, while monetary policy easing and improved liquidity conditions supported growth momentum. Indias macroeconomic fundamentals remained supported by healthy foreign exchange reserves, resilient banking system liquidity, improving credit growth and continued policy focus on fiscal consolidation.

Government emphasis on infrastructure development, manufacturing growth, logistics improvement and production-linked incentives continued to support investment-led growth. Public capital expenditure remained a key driver for sectors such as roads, railways, construction and mining, with positive implications for the commercial vehicle and auto component sectors.

External sector indicators also remained broadly stable, supported by manageable current account dynamics, resilient services exports and steady capital flows. India continues to benefit from favourable structural drivers including urbanization, formalization, digital adoption and demographic advantages.

Looking ahead, the outlook for the Indian economy remains positive, supported by domestic consumption, infrastructure investments, improving private sector capex and stable macroeconomic conditions. While risks from geopolitical developments, commodity price volatility and external demand moderation remain, India is expected to sustain healthy growth momentum.

Commercial Vehicle Outlook:

The Indian Commercial Vehicle (CV) industry demonstrated improved momentum during FY 2025-26, supported by recovery in freight activity, infrastructure-led demand, replacement requirements and improving financing conditions. After a relatively muted performance in FY 2024-25, the industry witnessed recovery across segments, supported by increased construction activity, mining demand, rural momentum and Government capital expenditure.

The Medium and Heavy Commercial Vehicle (M&HCV) segment continued to benefit from replacement demand, supported by ageing fleet replacement, improving freight utilization and sustained investments in roads, logistics and infrastructure. Continued Government focus on highways, construction and mining activity is expected to support demand in the CV segment going forward.

Industry estimates indicate continued growth momentum for the CV industry, supported by replacement demand, improved connectivity, higher budgetary allocation towards infrastructure and healthy economic activity. The long-term outlook for the sector remains positive, supported by structural drivers linked to logistics efficiency, industrial activity and infrastructure creation.

For the auto component and foundry industry, these developments are expected to support demand for castings and machined components used in engines, transmission, axle and suspension applications.

At the same time, the industry continues to navigate challenges arising from regulatory changes, evolving emission and safety norms, commodity price volatility and cost pressures. Measures such as mandatory air-conditioned cabins and other regulatory requirements may increase vehicle costs, though these are expected to support long-term modernization of the sector.

Overall, the outlook for the Commercial Vehicle industry remains encouraging, supported by infrastructure-led growth, replacement demand and favourable medium-term fundamentals.

Tractor Sales:

The Indian tractor industry delivered a strong performance during FY 2025-26, achieving record domestic sales exceeding 1 million units for thefirsttime, supported by favourable monsoon conditions, improved farm incomes, strong replacement demand and increased rural and construction activity.

Industry volumes crossed the historic milestone during the year, reflecting broad-based strength in the agricultural equipment sector. Growth was supported by healthy rabi and kharif output, higher minimum support prices for key crops, improved rural liquidity, Government support for agriculture and continued demand from the construction and haulage segments. Increasing mechanization levels and replacement demand continued to support long-term growth drivers for the sector. favourable policy measures and improved affordability, while Thetractorindustryalsobenefited exports remained encouraging, supporting overall industry momentum. For the auto component and foundry sector, continued growth in the tractor segment is expected to support demand for castings and machined components supplied to agricultural equipment manufacturers.

Looking ahead to FY 2026-27, the medium-term outlook for the tractor industry remains positive, supported by structural growth drivers, though volume growth may moderate on a higher base. Industry estimates indicate growth normalization after the strong performance of FY 2025-26, while demand is expected to continue to be supported by rural fundamentals, mechanization trends and replacement demand. The industry, however, continues to monitor risks arising from monsoon variability, commodity price movements, rural income trends and evolving emission regulations, including TREM V norms, which may impact tractor pricing and near-term demand. Nevertheless, the long-term outlook for the sector remains encouraging.

ABOUT NELCAST LIMITED

Incorporated in 1982, Nelcast Limited ("Nelcast" or "the Company") is a leading producer of ductile & grey iron castings in India. Besides a strong position in the domestic market, the Company has a rapidly growing presence spread across North America, Europe and Southeast Asia as well with over 29% of its overall revenues generated from the export markets. The Company caters to a marquee clientele of Original Equipment Manufacturers (OEMs) and Tier-1 customers in Commercial Vehicle, Tractor, Off-Highway Equipment, Railways & Passenger Vehicle segments. Nelcast has an aggregate installed production capacity of 160,000 Metric tonnes per annum. Its factories are located at Ponneri in Tamil Nadu, and at Gudur and Pedapariya in Andhra Pradesh.

STRENGTHS base with strong relationships: 1. Diversified Nelcast has a distinguished customer base of over 50 customers that includes OEMs and Tier 1 companies. It serves as a strategic supplier and partner of first choice to TAFE, Tata Motors, DANA, Ashok Leyland, Escorts,

Automotive Axles Limited, Meritor and American Axles & Manufacturing, among others. The Company is a one-stop shop for its customers for Grey Iron, Ductile Iron and Austempered Ductile Iron ranging from 0.5 kg to 500 kg. Awards received over the past few years for categories like- ‘Best in Class Supplier, ‘Best Delivery Performance, ‘Platinum Award for Best Quality, among others serves as a validation for its efforts to deliver value to its customers.

2. Strategic Location: Nelcasts manufacturing plants are in close proximity (37-140 km) to Chennai, which is a major manufacturing hub for automotive companies. Chennai forms both a key customer base for Nelcast and a reliable source of steel scrap, a crucial raw material for the Company. All 3 plants are within 15-110 km of Indias largest source of Silica Sand near Gudur. Moreover, Chennais International airport with direct flights to Europe, Middle-

East & Southeast/East Asia make it convenient for customers to visit and see the Companys world class facilities first hand. The location also enhances Companys export business given it is close to Krishnapatnam & Chennai seaports that gives Nelcast easy access to reach its customers around the world.

3. Strong Export growth potential: India is being viewed as a key cog in the global automotive supply chain. Sourcing machined castings from India is now becoming an attractive option for global customers. Nelcast is among the few companies in the industry capable of meeting the requirements of top global OEMs & Tier 1 manufacturers. Currently, the Company exports machined castings to reputable corporates in North America, Europe and Southeast Asia. The

Export turnover for the year 2025-26 is 384.91 Crores and contributes about 29% of the total turnover..

4. Strong product mix: Nelcast has a very differentiated product portfolio as it transitioned from manufacturing basic products to specializing in medium to high complexity products that will allow Nelcast to generate high margins. This helps the Company to compete against the local and Chinese suppliers, that mainly compete on low complexity products.

RISKS AND CONCERNS Economy and Market Risk:

External factors such as government policies and rainfall couldhave significantimpact on sales of

Tractors and Commercial Vehicles, which are cyclical in nature. To mitigate the risk of seasonality & cyclicality in the domestic market, the Company has been developing its export segments and products in other segments viz. off-highway, railways etc.

Input Cost Risk:

Our profitability and cost effectiveness may be affected due to change in the prices of raw materials, power, and other input costs. While we are typically able to pass on these costs to our customers with a slight lag. This risk is significant and is carefully monitored.

Currency Risk:

The Companys exposure on foreign currency is primarily through earnings from exports. The company also import some capital goods and raw materials only when prices are favourable. However, this exposure is typically short term. The company does selective hedging of imports and exports to hedge its risks associated with exchange rates. Any substantial long-term liabilities viz. ECBs is fully hedged by the Company.

Interest Rate Risk:

The Company is exposed to interest rate risk pertaining to funds borrowed from Banks. The Company works closely with our banks and using its working capital effectively to minimize the overall interest costs.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal control systems in the organization are looked at as the key to its effective functioning. The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use. The Companys internal controls are supplemented by an extensive programme of internal audit, review by management and documented policies, systems support, guidelines and procedures. The internal control is designed to ensure that financial and other records are reliable for preparing financial . information andother data

The Audit Committee reviews all the reports as prescribed under the regulations and compliance systems and suggests better internal control systems, policies and procedures as and when required.

It also reviews Companys financial reporting processes, disclosure of financial information, related party transactions, etc.

INTERNAL FINANCIAL CONTROL

The Company has an established Internal Financial Control framework including internal controls over financial reporting and operating controls. The framework is reviewed regularly and tested by the internal audit team. The Companys business processes are enabled by the ERP for monitoring and reporting, resulting in financial discipline and accoun tability.

OVERVIEW

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and in compliance with Companies (Indian Accounting Standards) Rules, 2015. The estimates and judgments relating to the financial statements, wherever needed have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year under review, the Company achieved Revenue from Operations of 1328.40 Crores as against 1251.68 Crores in the previous financial year, registering a growth of about 6% primarily driven by improved demand from commercial vehicle and tractor segments. Export turnover for the year 2025-26 stood at 384.91 Crores contributing to about 29% of the total turnover. Profit After Tax made during the year is 48.43 Crores as against 37.29 Crores in the previous year, reflecting a significant improvement driven by higher volumes and better operational during the year increased to 91,305 MT from 83,637 MT in the previous year, registering a growth of approximately 9%. The overall performance of the Company during the year reflectsresilience in operations, improved capacity utilisation and continued focus on profitability and operational discipline.

THE DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Human Resource is a continuous and ever evolving function in our Company. The Company believes that human resources enable the organisation to consistently meet customer requirements and deliver exceptional performance for all stakeholders. The Company continues to maintain its record on cordial industrial relations. The Company believes that human resources are its most valuable assets and is thus committed to the welfare of its employees and their families. The Company continues to invest in people through various initiatives viz. training programmes, upgradation of knowledge etc which enable the work force to meet out the challenges. As on 31st March 2026, the employee strength of the Company was 1334.

HEALTH, SAFETY AND ENVIRONMENT

The Company is fully committed to the ultimate goal of employee safety. Safety management is integrated with the overall Environment, Health and Safety (EHS). The Company has been certified under Integrated Management System (IMS) which consists of Energy Management System (EnMS), Occupational Health & Safety (OHSAS) and Environmental Management System (EMS) to meet the compliances of the standards ISO 50001:2011, ISO (OHSAS) 45001:2018 and ISO 14001:2015 respectively. The Company aims to be a preferred organization for all stakeholders through the scaling performance of Energy, Safety, Health and Environment.

CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be "forward looking statements" and based on certain assumptions/expectations and current scenario and the input available. Actual results might differ substantially or materially to those expressed or implied. Important developments including global or domestic trends, political and economic environment in India or Overseas might affect the Companys operations.