Omax Autos Ltd Management Discussions

Your directors have the pleasure of presenting the Management Discussion and Analysis Report for the financial year ended on 31st March, 2025.

Globally, the automotive industry has recovered in 2024-25 to surpass the pre- covid pandemic volumes. During the year under review, the Indian economy saw a rebound in key infrastructure segments such as roads, highways, construction, power and mining. The manufacturing sector across the board witnessed a rebound following the increase in consumer spending and market sentiment. Original Equipment Manufacturers (OEMs) and automotive part manufacturers witnessed a significant improvement in their manufacturing capacity utilization. We witnessed the ramp up of new product developments following new Real Drive Emissions (BS6 Phase 2) norms coming in to effect from April 1^st 2023. The new norms effectively ensured vehicles across all segments would need to conform to emission norms in real world on-road running conditions and not only during testing in a laboratory environment. These stricter CO2 emission requirements called for re-designing of vehicles by the original equipment manufacturers. In the first quarter of 2023-24, the market witnessed a dip in volumes as compared to the previous quarter, due to the increase the price of vehicles by approximately 8-10% as well as the time taken by OEMs to establish the new BS6 Phase 2 product range in the market.

The Company continues to operate in sheet metal processing space. The Indian auto-components industry can be broadly classified into the organized and unorganized sectors. The organized sector caters to the OEMs and consists of high-value precision components while the un- organized sector consists of low-valued products and caters mostly to the aftermarket customers.

The auto-component industry by and large depends upon the automotive industry. Its growth is broadly synonymous with the growth of automotive industry. Indian Automotive industry has been one of the largest automotive industries in the world. Most of the major car and truck manufactures are present and manufacture in India; the Indian Auto Component industry has become an attractive supplier base for global markets.

The Indian auto-components industry has experienced healthy growth over the last few years. The auto-components industry accounts for more than 2.3% of Indias GDP and employs about more than 1.5 million people directly and indirectly. The overall industry is putting efforts immensely to become the 3^rd largest in the world by 2025. A stable government framework, increased purchasing power, large domestic market, and an ever increasing development in infrastructure have made India a favorable destination for investment.

In recent years, various global automobile OEMs have made their footprints in India. Their increased presence in the Indian manufacturing landscape has significantly increased the localization of their components in the country. Given the uncertain climate in terms of tariffs between the USA and China, India is in a good position to become the preferred designing and manufacturing hub for global auto OEMs for local sourcing and exports.

Within the automotive segment, CNG and electric buses witnessed significant growth as compared to last year driven by the demand from state transport authorities. One significant example was the Uttar Pradesh state government surge in demand for buses in preparation for the Maha Kumbh festival in Prayagraj where tens of crores of devotees visited.

Contrary to the above, the demand for heavy trucks was fairly muted as compared to last year. However due to the reduction in raw material prices in the last 6 months as well as a reduction in the REPO rate by the RBI, there is a good possibility of revival in the next financial year if these benefits are passed on to the end consumer.

The Company witnessed 3.8% growth in revenue from manufacturing operations from Rs 355.26 crores in 2023-24 to Rs 369.26 crores in 2024-25. The business of the Company with the existing client "Tata Motors" has witnessed single digit growth which has marginally improved the capacity utilization. In the year under question, the company also divested its land asset which was not engaged in its core operations located in Sidhrawali for Rs 19.36 crores and used the proceeds to reduce its finance cost and improve liquidity. The company was also able to put on lease certain built up sheds in the national capital region which were lying vacant to generate rental revenue of Rs 8 crs on an annualized basis.

In the advent of growing concerns over excessive use of fossil fuels and increasing pollution levels, the government has pushed for shifting to electric vehicles. The Government of India has plans to make a major shift to electric vehicles by 2030. Globally, countries have already started shifting to electric vehicles. Hence, the importance of internal combustion engines run by fossil fuels would lose relevance in the long run. With the likes of Tesla and BYD planning to invest in India, the electric vehicle segment would throw a big opportunity for Indian manufactures; India can be a global manufacturing hub for electric vehicles. Manufacturers may look at not only producing EV models for the domestic market but also for exports. Electric vehicles are a sunrise opportunity as India has over 70 per cent two- wheelers and these could be made into electric vehicles. Government has proposed that two- wheelers and three-wheelers sold in the country to be shifted to electric in a phased manner. There is a huge opportunity in this segment.

The global transportation industry, has now made a shifting towards electric, electronic and hybrid cars, which are considered more fuel efficient, safe, environment friendly and reliable mode of transportation. In coming times, this will open up new segments and opportunities for auto-component manufacturers. The industry has to be prepared for this and need to adapt itself to the changes through systematic Research and Development of new products and technologies.

The Union Budget sought to complement macro-economic level growth, focusing on microeconomic level all-inclusive welfare. The faster roll-out of EV charging infra and battery swapping is set to accelerate the adoption of clean mobility in the country.

The allocation of INR 20,000 crore for infrastructure projects and 25,000 kms of additional National Highway network during FY23 was a welcome move. This positively impacted the transportation industry and the auto sector at large. The special focus towards clean technologies and electric vehicles for public transport will positively impact companies manufacturing and supplying technology to electric buses and commercial vehicles.

The battery swapping policy will certainly have a positive impact on electrification of vehicle segments such as City buses, Taxis, 3W as most of these operate in a more or less fixed territory and in cases of buses, one entity, i.e. the transport corporation can own the swapping stations locate within the depots which creates an end to end control viz. over the vehicle as well as the fuel, i.e., the battery which in turn aids in the demand management of batteries. In addition, 2W applications would also benefit from this. This would also need a cloud- powered interconnected network which would also boost connectivity solutions. Given the expected increases prices of battery raw material, steps must also be taken to ensure technology absorption can be brought about in cell level manufacturing.

Vehicles powered by Compressed Natural Gas (CNG) will also have a key role to play in addition to electric battery powered vehicles give the fact that the government has invested significantly in exponentially increasing the number of CNG filling stations across the country. In 2024-25, the gap between CNG and diesel prices narrowed which had significantly increased in 2023-24 following the advent of the Russia-Ukraine war, increasing the price advantage for consumers as compared to purchasing diesel powered vehicles. The demand for intermediate and light commercial vehicles powered by CNG improved due to the above factors.

Following a Supreme Court mandate, all commercial vehicles sold in the country post April 1st 2025 will need to be fitted with air conditioned driver cabins. This has led to OEMs re-designing or modifying some of their existing platforms. This will be an opportunity for the company to collaborate with its customers and introduce new products which can be made using the same infrastructure with only incremental investment.

The cyclic demand for medium and heavy commercial vehicles will post a threat to the supply chain which will need to be agile and flexible to cater to the highs and lows for each quarter. Fuel prices (diesel as well as Compressed Natural Gas) will need to be closely monitored in conjunction with freight rates as these parameters greatly influence the profitability of fleet operators and in turn their ability to raise finance and purchase new vehicles.

The Company operates in a single segment of metal sheet components and parts.

Commercial Vehicles (CV)

The CV industry experienced marginal growth in the last financial year. The growth was driven by revival in key segments of the economy such as construction, mining, highway construction, tourism and reopening of schools.

Railways

Railway business was impacted due to the increase in the raw material prices and the fixed price nature of railway contracts with the production units.

The outlook looks bright as we expect the momentum in the increase in consumer spending and key infrastructure segments to continue. The outcome of the recently concluded Lok Sabha general elections and Interest rates being further reduced from the current level by the RBI will have an impact on this outlook.

Currently, the Indian economy driven largely by domestic demand has remained resilient amidst a global economic slowdown. As major auto OEMs ramp up their investment to compete in the emerging electric vehicle sector, these technological changes in the industry have to face cost pressures also. There will be also cost pressure due to this new technology and it will also impact profit margins. Further, global automobile demand has also been remained subdued due to looming Slowdown in the western part of the world resulting in an adverse impact on export demand. Hence, the outlook for the auto sector will remain positive but with caution to some of these headwinds in the short to medium term.

In the railway sector, we see some interesting developments. The Indian Railway network is growing at a healthy rate. In the next few years, the Indian railway market is expected to be one of the largest markets. Indian Railways is targeting to increase its passenger and freight traffic significantly. The government has also announced a significant investment outlay in railway infrastructure. It would boost the railway sector significantly.

The demand for Vande Bharat trains for improving passenger safety and comfort will go a long way in improving the passenger riding experience.

The Company is an automotive component manufacturer; hence, its business is largely dependent on the health of the automotive sector. The health of automotive sector and auto component sector is dependent on various factors viz. general economy of the country, global economy, disposable income with consumers, interest rate, fuel prices, finance options, regulatory norms, input costs etc. Given the fact that the Indian economy and the automobile sector is experiencing a gradual recovery, its impact would be felt in auto-component industry and on the Company as well.

The Companys customer base is not very broad. The Companys major turnover comes from very few customers. Any significant business risks to these customers can have consequent impact on the Company. The management is putting its best effort to widen its customer base.

The auto industry is driven by technology and the same is undergoing very rapid change. A technological shift may make the existing technology obsolete in a very short period of time. Whoever cannot adapt to the pace of technology, may miss the bus. If it impacts any of the major customers of the Company, it may impact the Company as well.

The Company uses steel and Cast-iron sheets as major raw materials. Prices of these raw materials used in manufacturing have become increasingly volatile in recent years, impacting consumer demand. However, the auto component industry is insulated by the original equipment manufacturers who compensate their suppliers for increase in raw material prices and suppliers pass on the benefit when raw material prices decrease, keeping operating margins intact.

The Company operates in a single segment of metal sheet components and parts. This sector has already been very competitive. A lack of diversification into new business segments may also have an impact on the future prospects of the Company.

The Company currently has a sound product base catering to the demand of the customers. Considering that technologies are changing very fast and new products and technologies are being developed rapidly, the Company will also face the risk of new product development or new technology development. The business of the Company may be hampered if the Company fails to keep pace with the new product or technology requirements of its customers.

For the purposes of effective internal financial control, the Company has adopted various policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

In respect of the adequacy of internal financial controls with reference to the Financial Statements, the Company has, inter alia, established various control systems which have been already reported in the last Annual Report. There have not been any significant changes in such control systems. The control systems are reviewed by the management regularly. The same is also reviewed by the Statutory Auditors and Internal Auditors from time to time. The Company has also adopted various policies and procedures to safeguard the interests of the Company. These policies and procedures are reviewed from time to time. There has also been proper reporting mechanism implemented in the organization for reporting any deviation from the policies and procedures. Compliance audits are also conducted from time to time by external agencies in various areas of operations.

The financial performance of the Company has improved this year as compared to last year through concentrated efforts made to reduce debt, fixed cost burden and ramp up sales. The Company achieved a turnover of Rs. 393.69 crores compared to Rs. 372.94 crores in the previous year. The increase is primarily due to a rebound in the commercial vehicle segment. The Company recorded an increase in EBIDTA margin from operations to 14.39 % in 2024-25 as compared to 11.55 % in the previous year. The company has set up two manufacturing units in Uttar Pradesh for its CV and Railways business. Long Member Plant (LM Plant) has started its operations and New Railway Plant (NR Plant) is fully commissioned and is in the process of executing trial orders. Overall, the operational performance of the Company was satisfactory during 2024-25 and is expected to improve significantly in the next financial year considering the revival being seen in core sectors of the economy related to infrastructure.

The company recognizes the importance of human values and ensures that proper encouragement, both moral and financial, is extended to employees to motivate them. The human resources received commensurate attention during the year considering the growth of the organization and the need arising therefrom.

The Company has initiated many programs on up- skilling/training its manpower. As an ongoing exercise, the Company has continued to look at, identify, create and execute seamlessly, initiatives which enhance productivity and efficiency. The Company continues to invest in people through various initiatives which enable the work force to meet the production requirements and challenges related thereto and to infuse positive enthusiasm towards the organization.