Premier Explosives Ltd Management Discussions

Global Economy

The global economy faces a complex landscape marked by recovery persistence, uncertainties, and evolving risks. According to the International Monetary Funds January 2025 World Economic Outlook, global GDP growth is projected at 3.3% in both 2025 and 2026 slightly below the historical average of 3.7%. The inflation is expected to ease from 4.2% in 2025 to 3.5% in 2026, as central banks move off peak tightening and input price pressures moderate. Advanced economies, including the U.S., Germany, and Japan, continue to perform relatively well, driven by consumer resilience and easing supply constraints. However, emerging markets are contending with tighter capital flows, elevated debt levels, and currency volatility. Adding to the risk profile, the IMF flagged a likely downgrading of global growth to 2.8% in 2025 due to escalating trade protectionism particularly U.S. tariffs if policy tensions remain unresolved. Energy prices, sensitive to geopolitical developments such as unrest in the Middle East, also pose upside inflation risks. On the upside, global disinflation continues, with annual inflation trending down partly due to stabilizing commodity prices. Digital transformation and AI integration are projected to boost productivity and innovation, though they also raise concerns about data regulation and labour displacement. Emerging economies are also experiencing divergent recoveries. While large economies like India and Indonesia are maintaining strong growth momentum, others remain vulnerable to external debt stress and sluggish export demand. Additionally, central banks in Latin America and parts of Asia are cautiously transitioning from tightening to neutral stances, reflecting improved inflation outlooks. Global financial conditions remain tight, and a sudden shift in risk sentiment could spark capital outflows, particularly in low-income economies with limited fiscal buffers.

Sustaining global economic stability will depend on coordinated policy balancing inflation control, trade normalization, and strategic investment in digital and green infrastructure. Navigating this transitional phase efficiently will be key to moving from recovery toward durable and inclusive growth. For companies operating in strategic and export-oriented sectors like Premier Explosives Limited, global macroeconomic trends will play a critical role in shaping demand patterns, operational stability, and long-term competitiveness.

Indias economy has emerged as a bright spot on the global economic map, maintaining robust momentum even amid global uncertainties. The International Monetary Fund (IMF) projected Indias GDP growth at 6.5% to 7.0% in FY 2024–25, moderating slightly to 6.5% in FY 2025–26, making India the fastest-growing major economy in the world. This growth is supported by strong domestic demand, resilient private consumption, rising investments, and structural reforms focused on improving logistics and manufacturing competitiveness. In FY 2023–24, core sectors demonstrated strong performance. Construction and manufacturing grew by 10.7% and 8.5%, respectively, contributing significantly to Gross Value Added (GVA) growth. The credit ecosystem has remained supportive, with credit to

MSMEs growing by 14.1% YoY and lending to NBFCs and the services sector rising by 20.2%, according to the Reserve Bank of India (RBI). These figures reflect the strengthening of financial inclusion and the rise of formal credit in rural and semi-urban sectors.

The repo rate has been maintained at 6.5% by the RBI, indicating a cautious monetary stance aimed at controlling inflation while supporting growth. Retail inflation (CPI) has trended downwards and is expected to remain within the central banks tolerance band of 2–6%, converging toward the 4% target in the medium term.

Despite the optimistic outlook, risks persist in the form of high food prices, global commodity volatility, trade disruptions, and financial contagion from other emerging markets Indias economy continues to demonstrate strength, agility, and long-term potential in a rapidly evolving global landscape. With strong fundamentals, supportive policies, and a focus on infrastructure, innovation, and inclusion, India is well-positioned to sustain its growth trajectory. While external risks remain, the countrys robust macroeconomic framework and reform-driven momentum provide confidence in its ability to navigate challenges and emerge as a key global economic leader.

The global defence sector is undergoing a profound transformation, driven by escalating geopolitical tensions, evolving threat perceptions, and accelerated technological advancements. According to the Stockholm International Peace Research Institute (SIPRI), global military expenditure reached an all-time high of USD 2,718 billion in 2024, registering a 9.4% year-on-year increase the steepest rise since 1988. This accounts for approximately 2.5% of global GDP, reflecting the heightened emphasis that governments around the world are placing on national security and strategic preparedness.

The surge in defence spending is not geographically isolated; all regions recorded increases. In Europe, military budgets rose sharply in response to the ongoing Russia and Ukraine war. European NATO members, in particular, ramped up investments to meet alliance defence spending commitments. Russias defence budget increased by 24% to USD 149 billion, marking its highest-ever allocation. Ukraine, facing direct conflict, allocated nearly USD 65 billion, making it one of the top defence spenders globally.

The aerospace segment, which includes both defence and commercial aviation, is recovering steadily post-COVID. Commercial aerospace is witnessing renewed aircraft demand amid rising air travel, while defence aerospace continues to see robust procurement of fighter jets, missiles, drones, and space surveillance assets. Nations are increasingly integrating air and space capabilities into their broader security architecture accelerating demand for reliable propulsion systems, countermeasures, high-energy materials, and solid-state technologies.

In the Asia-Pacific, regional flashpoints such as the South China Sea, Taiwan Strait, and Indo-Pacific maritime zones continue to influence strategic behaviour. Chinas military expenditure stood at USD 314 billion, up by 6%, making it the second-largest defence spender globally. India, maintaining its strategic posture, recorded an increase of 4.2% in military spending, reaching approximately USD 83.6 billion, retaining its rank as the fourth-largest global spender.

The United States remains the dominant force, with defence spending touching USD 997 billion, representing 37% of global military expenditure. U.S. investment spans across conventional forces, space defence, cyber capabilities, and nuclear modernization setting a trend that many allied nations are following.

Emerging threats are reshaping priorities. Governments are increasingly directing funds toward cybersecurity, artificial intelligence (AI), space warfare, unmanned aerial systems (UAS), and precision-guided munitions. These evolving priorities are redefining the defence-industrial base, creating demand for high-tech suppliers, agile innovation, and resilient supply chains.

Another defining trend is the increased role of private sector players. With many countries adopting policies to indigenise defence manufacturing and diversify procurement channels, private companies with specialised capabilities like Premier Explosives Limited are emerging as integral partners to government-led defence modernisation initiatives. From high-energy materials to pyrotechnic systems and solid propellants, firms that bring indigenous R&D, export readiness, and compliance with global standards are finding wider acceptance.

India continues to reinforce its position as one of the worlds largest and fastest-growing defence markets. As per the Union Budget 2024–25, the country allocated 6.21 lakh crore (approximately USD 74 billion) towards defence spending, a 4.72% increase over the previous years budget estimates. This represents 1.89% of Indias projected GDP, underscoring the governments unwavering commitment to bolstering national security and building indigenous capability. Indias strategic priorities are shaped by a complex threat environment, including persistent border tensions with China, the unresolved security dynamic with Pakistan, and evolving regional maritime concerns. Against this backdrop, India is focusing on modernising its armed forces through investments in missile systems, drones, naval platforms, electronic warfare, and space-based surveillance systems. Programmes such as Akash, Astra, Agni, BrahMos, LRSAM, and MRSAM highlight the sophistication and scale of Indias defence ambitions areas where Premier Explosives Limited (PEL) plays a vital role. A defining pillar of the sectors transformation is the "Atmanirbhar Bharat" (Self-Reliant India) initiative. With the Ministry of Defence (MOD) placing over 500 items on a positive indigenisation list, the government has created a strong policy push for domestic manufacturing. Additionally, reforms in procurement processes, defence offset obligations, and the Strategic Partnership model have created space for private sector participation. PEL, with its capabilities in solid propellants, energetic materials, and countermeasures, is well-positioned to benefit from this policy direction.

Another milestone is Indias surge in defence exports is a record high of Rs 23,622 crore (approx. US$ 2.76 Billion) in the Financial Year (FY) 2024-25. A growth of Rs 2,539 crore or 12.04% has been registered in the just-concluded FY over the defence exports figures of FY 2023-24, which were Rs 21,083 crore. Indian firms are now exporting missiles, weapon simulators, radars, and ammunition to Southeast Asia, the Middle East, and Eastern Europe. The private sector contributed nearly 60% of these exports, with Premier Explosives among the emerging exporters of critical inputs such as propellants and flares. Indias commitment to self-reliance is also visible in the establishment of GOCO (Government-Owned Company-Operated) models for running critical defence production units. PEL operates facilities for ISROs SHAR Centre and DRDOs Solid Fuel Complex, reinforcing its role as a dependable partner in national defence infrastructure. Looking ahead, increased capital outlay, policy certainty, and growing operational collaborations with friendly foreign nations position India for long-term strategic autonomy in defence. The countrys young engineering talent, advanced R&D ecosystem, and proactive regulatory reforms further strengthen this trajectory.

Indias emphasis on indigenisation, deterrence capability, and defence preparedness has intensified. This evolving security landscape drives demand for precision weapon systems, advanced explosives, and missile-grade propellants all areas where Premier Explosives Limited (PEL) has proven capabilities. Indias focus on reducing dependency on imports and preparing for dual-front readiness reinforces the strategic importance of domestic defence suppliers like PEL.

The global commercial explosives industry plays a critical role in enabling large-scale mining, infrastructure, and construction projects. In India, the sector is deeply intertwined with the countrys economic growth, particularly in coal mining, limestone extraction, road construction, tunnelling, and infrastructure modernisation. As India ramps up its energy and infrastructure capacity, demand for safe, reliable, and cost-effective explosives is expected to continue growing.

In South Asian region, India stands as a prominent player and largest shareholder in industrial explosives. The coal mining and quarry sectors across the country are experiencing high demand and hence, more exploration activities are being on the way to boost the market. India is one of the fastest growing countries and industrialization in the country is at a high pace which demands high power supplies and manufacturing raw materials, also India is the second largest producer of coal worldwide, and owing to that reason mining Industry is growing upwards in the country and hence enhancing the demand for industrial explosives. The industrial explosives market in India is estimated to grow with a healthy CAGR of_7.4%_over the forecast period and provide significant opportunities in the global explosives market. With improvement in the performance of construction and infrastructure sector, market to witness a higher growth outlook in the country. Policies Launched in Favor of industrial explosives, coupled with high growth in the mining sector, have created a conducive environment for the growth of the explosive industry in the country. The country also has the presence of many prominent manufacturers. In South Asian region, India stands as a prominent player and largest shareholder in industrial explosives. The coal mining and quarry sectors across the country are experiencing high demand and hence, more exploration activities are being on the way to boost the market. PEL caters to both domestic and international markets, exporting commercial explosives to countries including Israel, Jordan, Greece, Thailand, and Indonesia. This export strength not only diversifies revenue but also reflects the companys adherence to stringent global standards of quality and safety. While the explosives industry remains exposed to raw material volatility and regulatory oversight, the long-term outlook remains positive due to rising mineral demand, government-backed infrastructure spending, and ongoing emphasis on energy security.

In FY25, Premier Explosives Limited recorded a strong 53.6% growth in revenue from operations, reaching 4,174.5 million. However, expenses rose by 68.5%, compressing operating margins to 13.9% from 21.5% the previous year. Operating profit remained steady at 580 million, while profit after tax rose slightly by 1.5% to 285.5 million, supported by a 25.8% drop in tax expenses. Despite a 47.7% fall in other income, the company has maintained profitability and posted a modest EPS growth of 1.9%, reflecting operational resilience amid cost pressures. PEL remains focused on margin optimisation and sustained growth through its defence-led portfolio.

In FY25, Premier Explosives reported a stronger ROCE of 14.7% and maintained a healthy ROE of 12%. However, EBITDA margin declined to 13.9% due to rising input costs and the debt-to-equity ratio from 0.30 to 0.18.

Building on the momentum of rising defence demand and execution strength, Premier Explosives Limited delivered a sharp increase in revenue during FY25. Operating revenue surged by 53.6% to 4,174.5 million, up from 2,717.2 million in FY24, driven by robust defence orders. Despite a decline in other income, total revenue increased 52.14% year-over-year.

Premier Explosives Limiteds total assets rose to 5,305.4 million from 4,446.5 million in FY24, reflecting a year-on-year growth of over 19.3%. This increase was primarily driven by a substantial rise in current assets, which expanded from 2,346.3 million to 3,192.2 million, indicating higher receivables, inventory, and operational cash to support a growing order book. Net fixed assets remained steady at 1,905.9 million, suggesting stable infrastructure utilisation, while capital work-in-progress slightly declined to 28.5 million, pointing to near completion of ongoing projects. Other non-current assets also rose modestly to 165.9 million million, reflecting advances and security deposits. The overall asset expansion underlines PELs preparedness to scale up production and execution capacity in line with its long-term growth strategy.

As your company entered a phase of heightened operational scale and order execution in FY25, its financial structure evolved to support this momentum. The companys total liabilities stood at 5,305.4 million at the end of March 2025, up from 4,446.5 million in the previous year, reflecting increased business activity and the need for greater working capital. A significant part of this increase came from current liabilities, which rose to 2,531.5 million from 1,883.3 million, suggesting higher trade obligations and short-term financing to manage order fulfilment and raw material procurement. In contrast, non-current liabilities decreased modestly to 316.5 million from 360.6 million, indicating lower reliance on long-term debt or repayment of earlier borrowings. This shift in the liability mix aligns with the companys project-driven business model and its ability to fund near-term expansion while maintaining prudent financial leverage.

PELs Defence & Space services segment continued to dominate in FY25, contributing approximately 3,380 million to the total revenue an impressive year-on-year growth of over 82%. The successful execution of high-value contracts for missile propellants, ignition systems, and countermeasures drove the surge. Strong institutional demand from DRDO, BDL, and ISRO, combined with growing exports to Southeast Asia and Europe, further bolstered the segment. The companys consistent focus on indigenisation and strategic materials has reinforced its standing as a dependable partner in Indias national security framework.

The Commercial Explosives showed revenue of 802 million in FY25 as against 866 million in FY24. While demand from the mining and infrastructure sectors remained stable, global raw material inflation and logistics constraints limited volume growth. However, strategic market expansion initiatives and product innovations, such as safer NHN-based detonators, offer potential for sustainable revival in both domestic and export markets.

PEL closed FY25 with an order book of 7,500 million, representing nearly 1.8 times the years revenue. Around 81% of the backlog is attributable to defence and aerospace contracts, ensuring continued high-margin execution. Major orders include supplies for Akash, Astra, BrahMos, and chaff/flare systems for Indian defence forces. With most of these scheduled for delivery over the next 12 months, PEL enters FY26 with solid revenue visibility and operational momentum across its key verticals.