Pavna Industries Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Forward looking statement

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with the Indian Accounting Standards as pronounced by the Institute of Chartered Accountants of India (ICAI) from time to time. The Management of Pavna Industries Limited has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on our financial condition and result of operations should be read together with our audited financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", "Pavna" are to "Pavna Industries Limited".

ECONOMIC OVERVIEW

Global Economic Overview

The global economy showed significant resilience during FY 2025-2026, with activity exceeding initial baseline expectations despite localized geopolitical tensions and trade policy realignments. Global real GDP growth reached 3.4% in calendar 2025, surpassing the IMFs previous forecast, according to updated assessments from the organization. This was made possible by lower-than-expected effective tariffs, favorable financial conditions, and robust investment in technology and artificial intelligence. The overall disinflationary trend continued as global headline inflation decreased from roughly 6.8% in 2023 to about 4.1% in 2025. Although the timing, pace, and policy stance varied by region depending on domestic growth and inflation conditions, this improvement in inflation conditions opened the door for monetary easing across several major economies.

Important regional economies showed remarkable resilience throughout 2025. The United States, for example, maintained robust economic activity and achieved real GDP growth of 2.1% in 2025 thanks to strong domestic demand, private consumption, and investment. China, despite persistent weakness in domestic demand, the countrys real GDP expanded by 5.0% in 2025 thanks to robust exports, especially in high-technology sectors, and policy support. In 2025, emerging markets and developing economies recorded an aggregate growth of about 4.4%, continuing to be a major contributor to global growth.

Global trade growth is predicted to slow down in 2026 before picking up again in 2027, but overall economic activity is anticipated to be robust into FY 2026-2027. Global real GDP is expected to grow by 3.0% in 2026 and 3.4% in 2027, according to IMF projections, while global trade volume is expected to grow by 3.5% in 2026 and 4.3% in 2027. This robust but uneven global environment continues to offer opportunities for international demand, supply-chain diversification, and deeper integration into global manufacturing networks for automotive component suppliers and export- oriented manufacturers.

Sources:

https://www.imf.org/en/Publications/WEO/ issues/2026/04/14/world-economic-outlook- april-2026

https://www.imf.org/en/Publications/WEO

https://www2.deloitte.com/us/en/insights/ economy/global-economic-outlook/weekly- update.html

https://www.ey.com/en us/insights/strategy/ global-economic-outlook

Indian Economic Scenario

During FY 2025-2026 (April 2025-March 2026), Indias economy continued to grow at one of the fastest rates in the world thanks to robust domestic demand, robust investment activity, and increasing macroeconomic stability. Indias real GDP is expected to have increased by 7.6% in FY 202526 compared to 7.1% in FY 2024-25, according to the most recent estimates from the Ministry of Statistics and Program Implementation (MoSPI). The economy continued to perform well thanks in large part to manufacturing, private consumption, and investment.

Several important domestic growth drivers contributed to Indias economic performance during the fiscal year. Domestic consumption continued to be a major growth pillar. In FY 2025-2026, private final consumption expenditure (PFCE) increased by more than 7% thanks to improved real purchasing power, stable employment, lower inflation, and stable rural consumption boosted by robust agricultural performance. With the governments ongoing emphasis on infrastructure connectivity, logistics, and manufacturing capacity, public investment and infrastructure development continued to be significant drivers of economic activity. Additionally, during FY 2025-2026, gross fixed capital formation increased by more than 7%. during FY 2025-2026, headline CPI inflation considerably decreased thanks to favorable agricultural conditions and a reduction in the pressure on food prices. While CPI inflation was 3.4% in March 2026, inflation stayed within the Reserve Bank of Indias flexible inflation-targeting framework.

Growth is anticipated to continue to be robust as India moves into FY 2026-2027. According to recent estimates, Indias real GDP growth will be between 6.4% and 6.6%, with the IMF predicting 6.4% and the RBI 6.6%. While global trade conditions, energy prices, and geopolitical developments continue to be major external risks, growth is anticipated to be supported by ongoing domestic consumption, services activity, investment, and infrastructure development.

For automotive component and engineering companies, Indias resilient domestic demand, expanding manufacturing ecosystem and continued infrastructure investment provide a supportive environment for growth, while global supply-chain diversification creates additional opportunities for export-oriented businesses.

Sources:

• https://www.pib.gov.in/indexd. aspxRs.reg=48&lang=2

• Reserve Bank of India (RBI) Bulletins & Macroeconomic Reports: https://www.rbi. org.in

• https://www.deloitte.com/us/en/insights/ topics/economy/asia - pacific/india- economic-outlook.html

• United Nations In India Growth Assessments: https://india.un.org/en/308156-india-see- 66-growth-2026-amid-global-headwinds- report

INDUSTRY STRUCTURE AND DEVELPOMENT

Global Automobile Industry

The global automotive industry negotiated a challenging macroeconomic environment during FY 2025-2026 (which included the calendar year 2025) that was characterized by consistent volume growth, changing trade dynamics, and a substantial technological shift. The International Organization of Motor Vehicle Manufacturers (OICA) reports that global vehicle production increased to 96.4 million units (+3.9% YoY) in 2025, while total global vehicle sales reached 99.8 million units (a 4.7% YoY growth). Growth was mostly concentrated in emerging and Asia-Pacific markets, offsetting flatter demand in the North American and European corridors.

Globally, the market penetration of electric vehicles (EVs) has reached a record. According to the International Energy Agency (IEA), sales of electric vehicles exceeded 20 million units worldwide in 2025 (a ~20% year-over-year increase), making up 25% (one in four) of all new passenger cars sold worldwide. Rapid adoption occurred in emerging markets in Asia, Latin America, and South Asia as a result of increased local assembly, decreased battery pack costs, and better access to reasonably priced EV models. However, maintaining vehicle affordability and developing charging infrastructure continue to be crucial areas of focus for the longterm mass-market transition.

Product value is constantly being redefined by technological advancements and vehicle software architecture. The global connected vehicle market reached over USD 60+ billion in 2025 thanks to the integration of advanced driver assistance systems (ADAS), over-the-air (OTA) updates, and telemetry solutions. Software-defined vehicle architectures, smart keyless entry systems, and integrated sensor solutions are becoming more and more important to automakers and Tier-1 component suppliers in order to satisfy changing consumer demands regarding digital integration and safety

Throughout FY 2025-2026, supply chains steadily stabilized, but manufacturers continued to control localized risks brought on by changes in tariffs, recalibration of semiconductor supplies, and disruptions to maritime transit routes. As a result, in an effort to increase operational resilience, multinational OEMs are increasingly implementing nearshoring and regional supplier localization strategies.

Looking ahead, the global automotive industry is well-positioned for continued innovation and recovery as FY 2026-2027 approaches. Tier-1 automotive component manufacturers like Pavna Industries are well-positioned to benefit from growing global OEM sourcing partnerships and higher value-add content per vehicle because supply-chain fundamentals are solid and demand is rising across hybrid, electric, and connected platforms.

Sources:

• International Organization of Motor Vehicle Manufacturers (OICA) Industry Statistics: https://oica.net

• International Energy Agency (IEA)-Global EV Outlook: https://www.iea.org/reports/global- ev-outlook-2026/trends-in-electric-cars

• S&P Global Mobility Automotive Forecasts & Insights: https://www.mobilityglobal.com/ en-us/automotive-insights

• Straits Research-Global Connected Car Market Analysis: https://straitsresearch.com/ report/connected-car-market

India Auto Component Industry

Indias automotive industry maintained a robust growth trajectory during FY 2025-2026, propelled by rising global sourcing, accelerating electrification, and strong domestic vehicle production. The Indian auto component industry recorded a turnover of Rs.7.60 lakh crore (USD 85.9 billion) in FY 20252026, indicating a robust 12.7% year-over-year growth, according to the Automotive Component Manufacturers Association of India (ACMA). Exports increased by 5% to USD 24 billion, while supplies to Original Equipment Manufacturers (OEMs) increased by 16.3% to Rs.6.63 lakh crore, highlighting the industrys tenacity and global competitiveness.

According to the Society of Indian Automobile Manufacturers (SIAM), vehicle wholesales in all major segments reached record levels in FY 20252026: Passenger Vehicles (PVs): Record wholesales of 46.43 lakh (4.64 million) units, reflecting a 7.9% YoY growth. SUVs continued to dominate the market, making up more than 65% of all passenger car sales. Sales of two-wheelers (2Ws) saw a robust comeback, rising 10.7% year over year to 2.17 crore (21.7 million) units thanks to new model launches, premiumization, and rising rural incomes. The penetration of electric two-wheelers increased gradually, making up about 7% of the segments total volume. Commercial Vehicles (CVs) & Three- Wheelers (3Ws): Infrastructure development and freight demand drove a 12.6% YoY increase in commercial vehicle sales to 10.80 lakh units. Three- wheelers recorded 8.36 lakh units (+12.8% YoY), supported by last-mile urban logistics and public transit requirements.

For Tier-1 component suppliers such as Pavna Industries, this ongoing domestic expansion and the structural shift toward feature-rich, connected, and electrified vehicles create an extremely favorable operating environment. The content-per-vehicle for specialized electromechanical assemblies is directly increased by the quick growth of utility vehicles and high-end two-wheelers. Increased integration of smart keyless entry modules, multifunction handlebar switches, advanced electronic locking systems, and specialized wire harnesses meets changing consumer demands for digital convenience and security. A balanced, dualengine growth foundation for both legacy and next- generation product portfolios is provided by the concurrent expansion of conventional ICE engine platforms and hybrid powertrains, which sustains a steady, high-volume demand for essential mechanical components like oil pumps, engine components, and high-precision chain tensioners.

Looking ahead into FY 2026-27, the Indian auto component industry is well-positioned for sustained growth, supported by favorable policy frameworks like the Production Linked Incentive (PLI) scheme, deeper global supply-chain integration, and increasing localization of advanced vehicle technologies. Additionally, increasing exports enables Indian Tier-1 suppliers to attain economies of scale, increase realization margins, and integrate into international OEM supply chains. Global growth in high-precision assemblies, locking mechanisms, and specialized automotive components is accelerated by diversification beyond domestic cycles.

Sources:

• Automotive Component Manufacturers Association of India (ACMA) Annual Performance Review: https://www.acma.in

• Society of Indian Automobile Manufacturers (SIAM) Annual Sales Data: https://www.siam. in/statistics.aspx

• India Brand Equity Foundation (IBEF) Auto Components Report: https://www.ibef.org/ industry/autocomponents-india

• Ministry of Heavy Industries / PIB Updates: https://www.pib.gov.in/indexd.

aspxRs.reg=48&lang=2

Government Initiative

The Indian government is still putting forwardthinking policy frameworks into place to boost localized supply chains, speed up domestic manufacturing, and establish India as a global center for clean mobility and advanced automotive technology (AAT). Advanced locking systems, specialized switches, custom wiring harnesses, and precision engine components are just a few of the important product categories where value-added manufacturing is directly encouraged by these policy thrusts.

1. Production Linked Incentive (PLI) Scheme for Automobile and Auto Components: This program, which has a budgetary outlay of Rs.25,938 crore, encourages the production of electric powertrains, smart vehicle electronics, and AAT components locally. The PLI framework boosts localization for smart keyless entry modules, electronic steering/ignition locks, multi-function handlebar switches, and high-voltage wiring harnesses needed for next-generation ICE and EV platforms by giving component manufacturers financial incentives to upgrade technology lines.

2. PM E-DRIVE & FAME Mobility Initiatives: The government announced the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme with an outlay of Rs.10,900 crore, building on the fundamental success of the FAME schemes. The policy increases the addressable market for specialized EV components, such as EV- ready wiring harnesses, specialized battery/ motor switches, and electronic locking assemblies, by offering targeted demand incentives for electric two-wheelers, three- wheelers, and commercial fleets.

3. National Program on Advanced Chemistry Cell (ACC) Battery Storage: This initiative speeds up localized battery assembly and is backed by an investment of Rs.18,100 crore to build 50 GWh of domestic giga-factory capacity. The demand for sensor-integrated locking mechanisms, high-current switches, and customized battery-pack wiring harnesses is directly increased by this localized expansion.

4. Bharat New Car Assessment Program (Bharat NCAP): Indias specialized safety rating system keeps raising the bar for operational, electronic, and structural safety. OEMs are increasing content-per-vehicle by integrating heavy-duty wiring harnesses, multi-point central locking systems, and high-reliability combination switches across vehicle lines in order to meet the strict Bharat NCAP requirements.

5. Sustained ICE & Hybrid Powertrain Standards: As clean mobility picks up speed, increasing engine precision is still required due to changing emission standards (BS-VI Stage II) and fuel-efficiency requirements. This ensures strong structural volume across conventional and hybrid powertrains by creating a long-term, high-volume demand for essential engine parts like oil pumps, fuel- tank locking caps, die-cast engine housings, and high-precision chain tensioners.

6. Economic Scale and Export Competitiveness: In FY 2025-2026, Indias auto component turnover reached Rs.7.60 lakh crore (USD 85.9 billion), with exports growing to USD 24 billion thanks to these government initiatives. Tier- 1 suppliers are able to scale global supply- chain integration for precision switches, locking systems, and engine components thanks to policy support for localized, high- tech manufacturing.

This comprehensive regulatory ecosystem delivers strong, multi-segment tailwinds for Tier-1 suppliers like Pavna Industries—driving higher content- per-vehicle, accelerating product premiumization, and reinforcing steady growth across both legacy engine lines and next-generation electrical/ electronic assemblies.

Sources:

• Ministry of Heavy Industries (MoHI)-PLI & PM E-DRIVE Notifications: https:// heavyindustries.gov.in/hi

• Automotive Component Manufacturers

Association of India (ACMA): https://www. acma.in

• Press Information Bureau (PIB) Govt of India

Releases: https://www.pib.gov.in/indexd.

aspxRs.reg=48&lang=2

• Ministry of Road Transport and Highways

(MoRTH) Guidelines: https://vahan.

parivahan.gov.in

About Pavna Industries Limited

Pavna Industries Limited, formerly known as Pavna Locks Limited, was incorporated in April 19, 1994. The Company is engaged in the business of manufacturing wide range of reliable and high quality automotive parts for reputed OEMs serving different vehicle segments including passenger vehicles, two-wheelers, three-wheelers, heavy and light commercial vehicles, and off-road vehicles. PAVNA is a well-established Company in the South Asian automotive industry, with long history of innovation, technology, manufacturing and market leadership spanning over 50 years.

The Company has its state-of-the-art manufacturing plants located strategically in Aligarh (Uttar Pradesh), Aurangabad (Maharashtra), and Pantnagar (Uttarakhand). These plants are situated in close proximity to the plants of its OEM customers, allowing for greater interaction and timely response to their requirements. It also has diverse range of product portfolio which includes Ignition Switches, Fuel Tank Caps, Latches, Auto Locks, Switches, Oil Pump, Throttle Body, Fuel Cocks, Casting Components, and more. The Company has wide presence in the domestic as well as export markets, exporting to several countries like Italy, Sri Lanka, Indonesia, Sudan, U.S.A. and Bangladesh. Apart from this the Company is also focused on customer centric approach catering to various esteemed Companies in the industry like Bajaj, Kawasaki, Honda, TVS, Mahindra, Escorts, Royal Enfield, Ashok Leyland, Mahindra Wheels, Eicher Motors, Tork Motors, Revolt, Mahindra Electric, etc.

PAVNA is committed to providing its customers with the latest and most innovative products, which is why the Company undertakes extensive research and development activities. The focus is on enhancing product portfolio, improving the quality of products, and upgrading the manufacturing processes. This is achieved through a combination of in-house R&D capabilities, as well as joint ventures and technical collaborations with partners such as Sunworld Moto Industrial Co, an Indo- Taiwan joint venture Company.

The Companys goal is to continuously strive towards technological advancement and innovation, while keeping customers needs at the forefront of everything the Company does.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations of Standalone Financial Statements are as follows:

S. No. Ratio	Measurement Unit	As at 3103-2026	As at 3103-2025	% Change March 2026	Explanations
1 Current Ratio	Times	1.43	3.21	-55.31%	The Current Ratio decreased from 3.21 times to 1.43 times, mainly indicating a reduction in the level of current assets relative to current liabilities. The decline may be attributable to an increase in Short term borrowings & trade paybles during the year. The ratio continues to remain above 1.00, indicating that current assets are sufficient to cover current liabilities.
2 Debt Equity Ratio	Times	0.51	0.15	236.77%	The Debt Equity Ratio increased from 0.15 times to 0.51 times, indicating an increase in reliance on debt financing compared with shareholders funds. The increase is due to additional borrowings during the year.
3 Debt Service coverage Ratio	Times	0.20	0.75	-73.02%	The DSCR decreased from 0.75 times to 0.20 times,The variation may be due to lower operating profitability & an increase in interest and principal repayment obligations during the year.
4 Return on equity ratio	%	1.78%	6.25%	-71.56%	ROE declined from 6.25% to 1.78%, primarily reflecting a significant reduction in profitability available to equity shareholders.
5 Inventory Turnover Ratio	Times	2.30	2.76	-16.76%	NA
6 Trade Receivables turnover Ratio	Times	5.19	5.61	-7.47%	NA
7 Trade Payables turnover Ratio	Times	10.42	9.25	12.64%	NA
8 Net Capital turnover ratio	Times	5.19	2.90	78.95%	Net Capital Turnover Ratio increased significantly from 2.90 times to 5.19 times, indicating improved utilisation of net working capital in generating revenue. The increase may be due to higher revenue coupled with a comparatively lower level of net working capital during the year.
9 Net Profit ratio	%	1.22%	3.00%	-59.45%	Net Profit Ratio declined from 3.00% to 1.22%, indicating a substantial reduction in the net profit generated from revenue.
10 Return on Capital Employed	%	8.39%	14.10%	-40.51%	ROCE declined from 14.10% to 8.39%, primarily due to a significant reduction in operating profitability relative to the capital employed. The decline indicates that the company generated substantially lower operating returns from the capital deployed in the business during the year.
11 Return on Investment	%	12.53%	29.25%	-57.16%	The Return on Investment decreased from 29.25% to 12.53%, primarily due to lower returns generated on investments during the year and resulting in a decline in the overall return on investments.