NIBE Ltd Management Discussions

Your directors are pleased to present the Management Discussion and Analysis Report for the year ended on March 31, 2025. Investors are cautioned that these discussions contain certain forward-looking statements that involve risk and uncertainties including those risks which are inherent in the Companys growth and strategy. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report consequent to new information or developments, events or otherwise.

The baseline forecast is for the world economy to continue growing at 3.00 percent during 2026 compared to 2.8 percent in 2025. Advanced economies are expected to grow steadily but slowly, with growth easing from 1.8 percent in 2024 to 1.4 percent in 2025 and 1.6 percent in 2026, due to high interest rates and weak investment. Emerging markets face several headwinds, including a slower recovery in China, weak global trade, and rising geopolitical tensions, leading to a slowdown in growth from 4.3 percent in 2024 to 3.7 percent in 2025 and 3.9 percent in 2026. Global inflation is projected to decline steadily from 6.8 percent in 2023 to 5.9 percent in 2024, and further to 4.3 percent in 2025 with advanced economies expected to return to their inflation targets sooner than emerging and developing economies. The five-year global growth forecast stands at 3.1 percent, marking its lowest level in decades.

https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025

Indias economy is projected to grow between 6.3% and 6.7% in FY26, with the IMF estimating 6.2%, making it the fastest-growing major economy despite global uncertainties. This outlook is supported by strong domestic demand, robust services exports, rising government capital expenditure, and easing inflation, which fell to 3.16% in April 2025, the lowest since July 2019. While risks remain from trade tensions, particularly the suspended 26% US tariff on Indian goods, and cautious private investment, Indias stable macroeconomic fundamentals, resilient currency, and strong forex reserves provide a solid buffer, reinforcing investor confidence and growth momentum.

https://dea.gov.in/monthly-economic-report-table (April, 2025)

Over the past nine years, the government has fundamentally shifted its role in Indias development agenda engaging the private sector as true co partners. The revival of disinvestment and the introduction of a new PSE policy under Aatmanirbhar Bharat have pared down government involvement in public enterprises to only strategic sectors. The Make in India and PLI (Production Linked Incentive) initiatives have attracted over Rs. 1.76/ lakh crore in firm commitments, generated Rs. 16.5/ lakh crore in production, and created over 12/ lakh jobs by March/ 2025/ Strategic sectors including defense, mining, space, and more have been opened to private players, while FDI caps have been liberalized to permit 100% automatic investment in most areas. In defense, the transformation is striking: domestic production soared to Rs. 1.27/ lakh crore in FY/ 2023 24 (a ~17% increase), with exports reaching Rs. 21,083 crore, and the private sector now accounts for over 20% of output/ India aims to reach Rs. 3/ lakh crore in defense production and Rs. 50,000 crore in exports by 2029/ reflecting a robust shift toward industrial self reliance and global competitiveness.

https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2098431

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2139489&utm

The Indian defence sector continues its upward trajectory in FY25 (April/ 2024–March/ 2025), driven by national security imperatives and a strong policy thrust on self-reliance through initiatives such as ‘Make in India and ‘Make for the World. India allocated Rs. 6.21 lakh crore (approx. US$/ 74.9/ billion) for defence in the Interim Budget 2024–25, maintaining its position as the country with the fourth-highest defence expenditure globally. Of this, Rs. 1.72 lakh crore (US$/ 20.7/ billion) was earmarked as capital outlay for modernisation of the armed forces.

In a significant boost to defence innovation, the Union Budget 2025–26 allocated Rs. 26,816.82 crore (US$/ 3.2 billion) to the Defence Research and Development Organisation (DRDO) a 12.4% increase over the previous year. This includes Rs. 14,923.82 crore for capital expenditure and Rs. 4,676.70 crore for revenue expenditure, aimed at accelerating indigenous defence R&D, deep-tech innovation, and private-sector collaboration.

Indias domestic defence production touched a record Rs. 1.46/ trillion (approx. US$/ 18.0/ billion) in FY25, marking a 15% rise from Rs. 1.27 trillion in FY24. Defence exports also achieved a record Rs. 23,622/ crore (US$/ 2.76/ billion), a 12% YoY increase over FY24s ? 21,083 crore. Public sector undertakings saw exports grow 42.9%, while the private sector contributed Rs. 15,233 crore. Over the past decade, exports have surged 34 fold from Rs. 686 crore in FY14 to Rs.23,622 crore in FY25. Today, India exports defence equipment to over 80 countries and is progressing steadily toward its goal of achieving Rs. 50,000 crore (US$/ 6/ billion) in annual defence exports by FY29.

This growth is supported by streamlined licensing, faster export approvals, dedicated defence corridors, increased R&D funding for start-ups, and an expanding innovation ecosystem that is reshaping India into a global defence manufacturing hub.

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2098485

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2117348

The company has strategically has already set-up two plants in Pune and one plant in Bangalore. Plant 1 in Pune is underlining the Companys commitment to delivering high-quality products and services in this sector. Plant 2 is dedicated to the production of heavy fabricated structures, Missile Complex, Small Arms Production with capability of 16 m and 12 m Vertical Machining Centre with 7 micron accuracy. Plant in Bangalore is dedicated on Electronics Manufacturing.

The Company primarily focused on precision weapons, surveillance communication equipment, Protective Vehicles, Defensive/ Deterrence Systems and Components.

During the financial year 2024-2025, Standalone Revenue from operations was at Rs. 48146..72 Lakhs as against Rs.27899.98 Lakhs in financial year 2023-2024 registering a growth of 72.56%. Profit before taxation for financial year 2024-2025 stood at Rs. 3760.98 Lakhs as against 2940.68 Lakhs in financial year 2023-24.

Total Consolidated Revenue from operations for financial year 2024-25 was at Rs. 51224.77 Lakhs and Profit before taxation for FY 2024-25 stood at Rs. 3960.04 Lakhs.

Nibe has also executed ‘Licensing Agreement to use technology of Solar Heated Shelters which has been developed by DRDO. DRDO grants a non-exclusive license for 10 years from date of its execution to utilize the technology for manufacture of Solar Heated Shelters in India and for sale in licensing region.

The Company has a well-devised risk management process aimed at identifying, prioritizing, mitigating and monitoring risks. The key risks impacting its business include economic, foreign exchange, raw material, technology, funding, talent, changes in Government policies and cyber security risks. The Company has undertaken measures to mitigate these risks.

• Challenges on inflation and supply chain persists globally. These macroeconomic conditions remain critical to business growth of the Company.

• Central banks globally are increasing rates to cool down inflation. This may have an adverse impact on the Companys end customers demand and subsequently impact growth.

• Ensuring proper working of all our equipment is a key operational risk. Any shortfall on that front may impact the Companys ability to meet customer requirements on time.

• With rising shortage of skilled labour, retaining workers remains a risk for the Company to mitigate.

• Changing technology paradigm and dynamic customer needs are important to remain relevant and sustain business growth.

• Given the global nature of the Companys business, any disruption of movement of goods to its customers is a key operational risk.

• The government has developed numerous programs to help manufacturers, such as the Production Linked Incentive (PLI) Scheme, which is a cornerstone of the governments endeavor to achieve an Atmanirbhar Bharat.

• The schemes goal is to stimulate domestic defence manufacturing in strategic and emerging areas, improve the cost competitiveness of domestically-made goods, and increase local capacity and economies of scale.

• Increase in defence spending by all major countries and the focus on infrastructure globally is acting as a tailwind for the Companys industrial business.

• Domestic producers are given a preference in the defence sector which will provide new opportunities to the industry.

• Any shift of Government policies may have a meaningful impact on our business.

• Several new companies are entering the market, and existing rivals in adjacent product categories are also increasing their offering.

The Company has a robust internal control system that authorizes, records, and reports transactions to safeguard assets and protect against loss from unauthorized use or disposition. The internal controls ensure the reliability of data and financial information to maintain accountability of assets. These internal controls are supplemented by extensive internal audits, management review, and documented policies, guidelines, and procedures.

The Company believes that human capital is a critical factor of success and hence constantly strives to strengthen its work ethics, work culture and align the workforce towards the common goal. Current workforce of the Company is rightly poised to navigate through the current Volatile, Uncertain, Complex situation and to always maintain industry leading quality standards while maintaining the highest service levels.

The Company continues to focus on upgrading knowledge and skill levels among its employees through various Learning & Development, training activities to enable them to move up the ladder. The Company has well defined HR policies in place which enables it to build a strong performance-oriented culture, belongingness to work and commitment to work.

The statements within this Management Discussion and Analysis report, articulating the Companys objectives, projections, estimates, expectations, or predictions, are considered forward-looking in compliance with applicable laws and regulations. These statements rest upon specific assumptions and anticipations of forthcoming events. However, it is crucial to acknowledge that actual results may substantially deviate from both expressed and implied expectations.

Several pivotal factors have the potential to significantly impact the Companys operations. These encompass fluctuations in finished goods prices, raw material costs and their availability, fluctuations in global and domestic demand-supply dynamics, shifts in exchange rates, alterations in Government regulations and tax structures, as well as economic developments within India and the nations with which the Company maintains business ties.

It is essential to note that the Company disclaims any responsibility concerning the forward-looking statements presented herein, as they may evolve in the future due to subsequent developments, additional information, or unforeseen events.