Porwal Auto Components Ltd Management Discussions

CAVEAT

This Management Discussion and Analysis (MD&A) contains forward-looking statements that reflect the Companys current expectations, assumptions, estimates, and projections. These statements, which may include future plans, objectives, strategies, outlook, and performance, involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied.

The auto component industry is closely linked to trends in the global and domestic automotive markets and is subject to volatility in raw material prices, currency fluctuations, evolving regulatory frameworks, changes in technology, and shifts in consumer demand. Additionally, dependence on Original Equipment Manufacturers (OEMs), supply chain disruptions, geopolitical developments, and rapid advancements in vehicle electrification and automation can significantly impact performance.

While the information presented in this section is based on data available and believed to be reliable, the Company makes no representation or warranty as to its completeness or accuracy. The Company undertakes no obligation to update or revise any forward-looking statements publicly, whether due to new information, future events, or otherwise, except as required by applicable laws.

Investors and stakeholders are advised to exercise due caution and conduct their own independent evaluation and analysis before making any decisions based on this report. This MD&A does not purport to contain all the information that may be relevant to stakeholders.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Indian auto component industry continues to build on its growth trajectory, supported by strong domestic vehicle production and rising global exports. In 2025, India has reaffirmed its position as one of the leading automotive hubs globally, with the auto component sector playing a pivotal role in driving this expansion.

The sectors growth is driven by a resilient automotive market, growing demand from a burgeoning middle class, and an increasing focus on localization and Make in India initiatives. Its contribution to Indias Gross Domestic Product (GDP) remains significant, further highlighting the industrys role as a cornerstone of the manufacturing economy.

As the automotive industry undergoes a period of rapid transformation, driven by technological innovations, changing consumer preferences, and evolving regulatory frameworks, the auto component sector is also adapting to meet emerging demands. While electric vehicles (EVs) are gaining prominence, the demand for components supporting internal combustion engine (ICE) vehicles, especially in commercial and rural segments, remains substantial.

Ongoing investments in technology and innovation are enabling the development of high- performance engine parts, transmission systems, braking components, and safety features, catering to both domestic and global OEMs. The shift towards cleaner, smarter, and more connected vehicles is accelerating demand for precision engineering, electronics, and lightweight materials.

Beyond the automotive space, sectors such as railways and defense are offering new growth opportunities. The modernization of rail infrastructure is increasing the need for components that support efficiency, durability, and safety. Similarly, the defense sectors focus on equipment modernization and indigenization is creating steady demand for specialized, high-quality casting and machining solutions.

Indias auto component industry is broadly segmented into the organised and unorganised sectors. The organised sector, comprising large and mid-sized companies, caters to OEMs with advanced, high-value components and systems. The unorganised sector primarily serves the aftermarket, focusing on low-cost, standardized parts.

The ongoing globalization of the automotive value chain continues to open up new avenues for Indian component manufacturers. With the industry shifting toward electric, electronic, and hybrid mobility, companies must embrace systematic R&D, automation, digital transformation, and quality enhancement to remain competitive on a global scale.

Looking ahead, the next decade is expected to bring new verticals and business models, creating expansive opportunities for companies that are agile, innovation-focused, and capable of scaling efficiently. The Indian auto component industry is well-positioned to capitalize on this momentum, playing a strategic role in the evolution of mobility in India and across the world.

FAVOURABLE POLICY MEASURES AIDING GROWTH

1. Production Linked Incentive Scheme(PLI):

This scheme encourages companies to invest in expanding their manufacturing capabilities, enhancing production efficiency, and developing new technologies. It also helps reduce the dependency on imports and supports the growth of domestic supply chains. The Union Cabinets PLI Scheme for the automotive sector, with an allocation of $3.5 billion, provides financial incentives of up to 18% to bolster domestic manufacturing of advanced automotive technology products and attract investment in the automotive value chain. This scheme is effective from April 01, 2022, for a period of five years.

2. Automotive Mission Plan 2016-26 (AMP 2026):

This plan includes goals for increasing production capabilities, enhancing research and development (R&D) efforts, and expanding exports. For auto components companies, this translates into opportunities for growth through increased demand for locally manufactured parts and a stronger focus on technological innovation.

AMP 2026 aims to propel the Indian Automotive industry to be the engine of the "Make in India” programme as it is amongst the foremost drivers of the Manufacturing sector. Indian Automotive sector is likely to contribute in excess of 12% of the countrys GDP and compromise more than 40% of its manufacturing sector. The Automotive industry has achieved the target of incremental employment creation of 25 million jobs and shall generate an additional 65 million jobs in the future.

3. National Automotive Testing and research and development (R&D) Infrastructure Project (NATRiP):

NATRIP aims to enhance the testing and R&D infrastructure for automotive components and vehicles in India. By providing state-of-the-art facilities for testing and development, this initiative supports innovation and quality assurance for auto components companies. Funded entirely by the Government of India, with a total cost of Rs. 3727.30 Crore, NATRiP is designed to enhance global automotive excellence and support low- cost manufacturing and product development.

4. Skilling and Training Programs:

Government initiatives aimed at enhancing the skills of the workforce, such as vocational training and skill development programs, benefit the auto components sector by providing a skilled labour pool. Well-trained professionals contribute to higher productivity and innovation within the industry.

5. Government Incentives for R&D and Innovation:

The Indian government offers various incentives for research and development activities, including tax benefits and grants. These incentives are designed to encourage companies to invest in innovative technologies and develop advanced automotive components. By taking advantage of these incentives, companies can drive technological advancements and maintain a competitive edge in the market.

COMPANYS OVERVIEW:

The global automotive components manufacturing industry is poised for continued growth, driven by increasing demand for high-quality, durable parts, particularly in iron casting and other foundry-based processes. As the automotive, railway, and defense sectors expand their infrastructure and modernization efforts, the need for precision-engineered castings has never been greater. Cast components, especially those manufactured through advanced techniques such as Lost Foam Casting, are essential in delivering the strength, durability, and performance required by these industries. Globally, manufacturers are focusing on improving production efficiency and component quality to meet the rising demand for complex, high-performance parts that meet stringent industry standards.

In India, the manufacturing sector is undergoing a significant transformation, supported by government initiatives like the Production Linked Incentive (PLI) Scheme. This scheme has unlocked new opportunities in key sectors such as automotive, railways, and defense, where there is an increasing demand for high-quality, cost-effective components. With the Indian automotive industry set to nearly triple vehicle sales by 2026, the need for reliable automotive parts—many of which rely on iron casting and other foundry-based processes—will surge. Similarly, the railway modernization and defense sector growth create significant demand for specialized castings used in critical infrastructure projects and high-performance military applications.

For our company, which specializes in iron casting and Lost Foam Casting, the future holds tremendous promise. Our investment in advanced casting technologies such as Lost Foam Casting positions us at the forefront of innovation in the manufacturing of high-precision components. This technology enhances our ability to produce complex parts with superior dimensional accuracy, surface finish, and reduced machining requirements, which are essential for meeting the high standards demanded by the automotive, railway, and defense sectors.

As part of our long-term sustainability strategy, the company has also invested in solar power generation for captive use, reinforcing our commitment to clean energy and cost optimization. This initiative not only supports our environmental goals but also enhances our energy selfreliance and operational stability. We see strong potential in further expanding this capability in the future, aligning with broader industry trends toward greener, more sustainable manufacturing practices.

Looking ahead to 2026 and beyond, our strategic priorities include expanding our global market presence by increasing exports of high-quality cast components. By focusing on testing castings for international markets, we aim to diversify our customer base and secure long-term contracts with international OEMs (Original Equipment Manufacturers) and Tier-1 suppliers. Our continuous investment in state-of-the-art manufacturing processes ensures that we remain competitive by improving operational efficiency, reducing costs, and maintaining the highest product quality standards.

Additionally, the modernization of Indias railways and the continued growth of the defense sector present significant opportunities for the company to increase its participation in infrastructure and defense projects. Our expertise in manufacturing high-performance, precision castings positions us as a trusted partner for these critical sectors, which require components that meet rigorous performance and durability standards.

In conclusion, as we look towards 2026 and beyond, our company is well-positioned to benefit from the growing demand for high-quality, precision-cast components in the automotive, railway, and defense sectors. Through our continued focus on advanced casting technologies, market expansion, and operational excellence, we are confident in our ability to drive long-term growth and value for our stakeholders.

OPPORTUNITIES AND THREATS:

OPPORTUNITIES:

As India continues to forge ahead on its path to “Atmanirbharta” (self-reliance), the manufacturing sector is positioned to play a central role in realizing this vision. The Production Linked Incentive (PLI) Scheme introduced by the government is a game-changer for the automobile and auto components industries, as well as other critical sectors like railways and defense. This scheme supports both direct investments in advanced technology, green vehicles and auto components all of which present significant opportunities for our business.

The Indian automotive industry is already a major player on the global stage, leading in multiple segments, and it is expected to nearly triple vehicle sales by 2026. This growth creates powerful tailwinds for the auto components sector, which is poised to not only double its contribution to Indias manufacturing GDP but also achieve a four-fold increase in industry size and a six-fold rise in exports by 2026. This rapidly evolving market presents an exciting opportunity for our company to expand and diversify, leveraging our core strengths and capabilities.

Our focus on the automotive components industry, which supplies critical parts for both the domestic and international automotive markets, places us in a prime position to capitalize on these growth opportunities. We are committed to expanding into global markets, where the demand for high-quality, precision-engineered auto parts continues to rise. By enhancing our testing castings for export, we plan to broaden our customer base and strengthen our presence in international markets.

The governments emphasis on modernization across key sectors presents additional opportunities for growth. The railway sector, with its ongoing modernization and infrastructure expansion programs, offers a significant avenue for securing new contracts and engaging in major infrastructure projects. Our expertise in manufacturing high-performance components for railways positions us to capitalize on these developments, ensuring our participation in the growth of this critical sector.

Moreover, the defense sectors expansion, driven by increasing budgets and modernization initiatives, aligns directly with our manufacturing capabilities. Our experience in producing high-quality, durable components for military applications positions us as a reliable partner in this rapidly growing segment.

We are also making strategic investments in advanced manufacturing technologies, such as Lost Foam Casting, to improve production efficiency, reduce costs, and elevate product quality. These technological advancements not only enable us to stay ahead of the competition but also help us meet the rising demand for high-precision parts in both the automotive and railway industries.

Our Company is uniquely positioned to benefit from the growth of Indias automotive, railway, and defense sectors. By continuing to invest in innovation, expanding our global footprint, and focusing on cutting-edge technologies, we are confident in our ability to seize these opportunities and contribute significantly to Indias manufacturing future. We have undertaken a series of strategic actions to drive growth and expansion:

1. Technological Advancements:

• Advanced Manufacturing Technologies: Implementing automation, robotics, and Al-driven manufacturing processes can improve efficiency, reduce costs, and enhance product quality.

• Smart Components: Developing and supplying smart auto components with integrated sensors and IoT capabilities can address the growing demand for connected and autonomous vehicles.

2. Expansion into Global Markets:

• Export Opportunities: Leveraging Indias position as a global hub for auto component sourcing, companies can explore new markets and increase exports to regions such as ASEAN, Europe, Japan, and Korea.

• Strategic Partnerships: Forming alliances or joint ventures with international automotive companies can facilitate entry into global markets and expand the customer base.

3. Focus on Sustainability:

• Green Technologies: Investing in eco-friendly technologies and materials, such as recyclable components and energy-efficient production processes, aligns with global trends towards sustainability and can attract environmentally-conscious clients.

• Regulatory Compliance: Adhering to stringent environmental regulations and standards can enhance the companys reputation and competitiveness in the global market.

4. New Customer Acquisition:

• Developing relationships with new customers across various sectors—such as automotive, railway, and defense—can drive growth. Identifying and engaging potential clients, particularly those looking for high-quality, reliable components, will be crucial to expanding our market reach and increasing our revenue streams.

5. Investment in R&D:

• Expanding our research and development efforts allows us to explore new materials, casting techniques, and product applications. Investing in R&D will enable us to develop advanced components that meet emerging industry needs and maintain our competitive edge.

In summary, the Company is poised to capitalize on diverse opportunities, from expanding into global markets and enhancing technological capabilities to engaging in new customer acquisition and strategic partnerships. By focusing on these areas and leveraging our strengths, we can drive growth, enhance our competitive position, and achieve long-term success.

THREATS:

The Automotive Components Manufacturing Industry in the financial year 2024-25 continues to undergo significant disruption and transformation. The increasing convergence of technology firms with traditional auto manufacturers is reshaping the industry landscape, expanding the definition of what constitutes a conventional automotive company. This integration of cutting- edge technologies—such as electric mobility, autonomous driving, and connectivity—is not only changing product portfolios but also altering industry dynamics, presenting both challenges and growth opportunities.

The Cuto Components Industry faces several key challenges that impact its operations, profitability, and growth prospects. Your Company faces several critical threats that could impact its operations and growth.

1. Dependence on the automotive industry: The auto components industry is highly dependent on the health and growth of the automotive industry. Any downturn or slowdown in the automotive sector can have a significant impact on the demand for auto components, leading to reduced sales and profitability.

2. Global competition: The auto components industry is highly competitive, with numerous players operating at both domestic and international levels. Global competition can lead to pricing pressures, reduced profit margins, and the need for continuous innovation and cost optimization.

3. Technological Advancements: Rapid advancements in technology, such as electric vehicles, autonomous driving, and connectivity, are transforming the automotive industry. Auto components manufacturers need to invest in research and development to keep up with these technological changes. Failure to adapt to new technologies can result in obsolescence and loss of market share.

4. Supply Chain Disruptions: The Auto Components Industry relies on a complex global supply chain. Any disruptions, such as natural disasters, political instability, or trade disputes, can lead to supply shortages, increased costs, and production delays.

5. Regulatory Compliance: Auto components manufacturers need to comply with various regulations and standards related to safety, emissions, and quality. Non-compliance can result in penalties, recalls, damage to reputation, and legal liabilities.

s=MsoNormal style=margin-bottom:6.0pt;text-align:justify;mso-pagination: none;tab-stops:50.15pt>6. Shift towards electric vehicles: The increasing adoption of electric vehicles poses a risk to traditional auto component manufacturers who primarily produce parts for internal combustion engines. They need to adapt their product offerings and manufacturing processes to cater to the growing demand for electric vehicle components.

7. Environmental Concerns: The auto components industry is under scrutiny for its environmental impact, particularly regarding emissions and waste generation. Companies need to invest in sustainable practices, such as recycling and reducing carbon footprint, to mitigate environmental risks and meet consumer expectations.

8. Intellectual Property Theft: Auto components manufacturers invest significant resources in research and development to create innovative products. However, there is a risk of intellectual property theft by competitors or unauthorized entities, which can lead to lost competitive advantage and revenue.

9. Volatile Raw Material Prices: Fluctuations in raw material prices, such as steel, aluminium, and rubber, can significantly impact the profitability of Auto Components manufacturers. Companies need to manage their procurement strategies, including hedging and supplier relationships, to mitigate price volatility risks.

10. Changing Consumer Preferences: Consumer preferences and buying patterns are constantly evolving, driven by factors such as changing demographics, economic conditions, and technological advancements. Auto components manufacturers need to anticipate and adapt to these changing preferences to stay relevant and competitive in the market.

In summary, the Company faces several threats today and in the future, ranging from raw material volatility and supply chain disruptions to competitive pressures and technological advancements. Addressing these threats requires proactive strategies, including diversification, technological investment, and robust risk management practices, to ensure long-term stability and success.

OUTLOOK:

The Global Automotive components manufacturing industry is poised for continued growth, driven by increasing demand for high-quality, durable parts, particularly in iron casting and other foundry-based processes. As the automotive, railway, and defense sectors expand their infrastructure and modernization efforts, the need for precision-engineered castings has never been greater. Cast components, especially those manufactured through advanced techniques such as Lost Foam Casting, are essential in delivering the strength, durability, and performance required by these industries. Globally, manufacturers are focusing on improving production efficiency and component quality to meet the rising demand for complex, high-performance parts that meet stringent industry standards.

In India, the manufacturing sector is undergoing a significant transformation, supported by government initiatives like the Production Linked Incentive (PLI) Scheme. This scheme has unlocked new opportunities in key sectors such as automotive, railways, and defense, where there is an increasing demand for high-quality, cost-effective components. With the Indian automotive industry set to nearly triple vehicle sales by 2026, the need for reliable automotive

parts—many of which rely on iron casting and other foundry-based processes—will surge. Similarly, the railway modernization and defense sector growth create significant demand for specialized castings used in critical infrastructure projects and high-performance military applications.

For our company, which specializes in iron casting and Lost Foam Casting, the future holds tremendous promise. Our investment in advanced casting technologies such as Lost Foam Casting positions us at the forefront of innovation in the manufacturing of high-precision components. This technology enhances our ability to produce complex parts with superior dimensional accuracy, surface finish, and reduced machining requirements, which are essential for meeting the high standards demanded by the automotive, railway, and defense sectors.

In addition to our core manufacturing capabilities, the company has also made significant strides in sustainability through our involvement in solar power generation for captive use. By installing solar plants at our manufacturing facilities, we are reducing our reliance on conventional energy sources and lowering our overall carbon footprint. This not only supports our commitment to environmental sustainability but also provides us with a cost-effective, reliable energy source to power our operations. In the years to come, we see solar energy playing a pivotal role in our operational strategy, driving further cost efficiencies and supporting the companys long-term sustainability goals.

Looking ahead to 2026 and beyond, our strategic priorities include expanding our global market presence by increasing exports of high-quality cast components. By focusing on testing castings for international markets, we aim to diversify our customer base and secure long-term contracts with international OEMs (Original Equipment Manufacturers) and Tier-1 suppliers. Our continuous investment in state-of-the-art manufacturing processes ensures that we remain competitive by improving operational efficiency, reducing costs, and maintaining the highest product quality standards.

Additionally, the modernization of Indias railways and the continued growth of the defense sector present significant opportunities for the company to increase its participation in infrastructure and defense projects. Our expertise in manufacturing high-performance, precision castings positions us as a trusted partner for these critical sectors, which require components that meet rigorous performance and durability standards.

In conclusion, as we look towards 2026 and beyond, our company is well-positioned to benefit from the growing demand for high-quality, precision-cast components in the automotive, railway, and defense sectors. Through our continued focus on advanced casting technologies, market expansion, and operational excellence, we are confident in our ability to drive long-term growth and value for our stakeholders.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a proper and adequate internal control system to ensure that all the assets of the Company are safeguarded and protected against any loss. It ensures that all transactions are authorised, recorded and reported correctly and all the transactions are properly authorized and recorded. It monitors compliance to internal processes and provide timely and reliable information to management.

The Chief Internal Auditor reports directly to the Chairman of the Board. The Internal Audit function develops an audit plan for the Company, which covers, inter alia, corporate, core business operations, as well as support functions. The Audit Committee reviews the annual internal audit plan.

Significant audit observations are presented to the Audit Committee, together with the status of the management actions and the progress of the implementation of the recommendations.

The Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations. During the year, the Company has taken steps to review and document the adequacy and operating effectiveness of internal controls. Nonetheless, your Company recognises that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audits and review processes ensure that such systems are reinforced on an ongoing basis.

Your Companys Management has carried out the evaluation of design and operative effectiveness of these controls and noted no significant deficiencies/material weaknesses that might impact financial statements as at the Balance Sheet date.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

During the year under review the Company has reported a turnover of Rs. 14044.67 Lacs against the turnover of Rs. 14,638.52 Lacs in the previous year, reflecting a decrease of approximately Rs. 593.85 Lacs (approx). The overall expenses of the Company have decreased from Rs. 13617.25 Lacs to Rs. 13469.4 Lacs. The Company has incurred a net profit of Rs. 16.09 Lacs as compared to profit of Rs 385.43 Lacs in the previous year. Your Company is trying their best to uplift the profit in the coming period.

Material development in human resources/industrial relations front, including number of people employed

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The human resource plays a vital role in the growth and success of an organization. The Company has maintained cordial and harmonious relations with employees across various locations. The Company has built a competent team to handle challenging assignments. As on 31^st March, 2025, there were 451 permanent employees on the roll of the Company. Our Company shares good industrial relations which improves the morale of the employees. Employees work with great zeal with the feeling in mind that the interest of employer and employees is one and the same i.e. to increase production. Every worker feels that he is a co-owner of the gains of industry. Complete unity of thought and action is placed in organization. Keeping employee wellbeing foremost, we have embraced the post-pandemic way of life and work. It has increased the place of workers in the society. During the year, the Company has taken several initiatives to further strengthen its human resource base to meet its current & future growth plans. The Company strives to enhance the technical, work related and general skills of employees on a continuous basis. There was unity of purpose among the employees to continuously strive for all round improvements in work practices & productivity Industrial relations were cordial throughout the year at all locations.

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 are as follows:

DISCLOSURE OF ACCOUNTING TREATMENT

Your Companys financial statements for the year ended 31^st March, 2025 are the financial statements prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016, as applicable. During the Financial Year, there was no change in the Accounting Treatment in preparation of Financial Statements.