Saint-Gobain Sekurit India Ltd Management Discussions

GENERAL REVIEW

Saint-Gobain Sekurit India Limited ("SGSIL") is a subsidiary of Compagnie de Saint-Gobain ("Saint-Gobain"), a transnational group with its headquarters in Paris and with sales of Euros 46.60 billion in 2024. Saint-Gobains businesses fall into two broad areas: regional construction or building related businesses and global businesses providing High Performance Solutions. SGSILs business is part of Mobility within the High-Performance Solutions. SGSIL is in the business of processing of glasses to manufacture windshields for the automobile industry.

This operating and financial review presents the Managements perspective on the Companys financial and operational performance for the financial year ended March 31,2025. It should be read in conjunction with the Companys financial statements, accompanying schedules and notes, and other disclosures included in this Annual Report. The financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS"), in compliance with the provisions of the Companies Act, 2013, and guidelines issued by the Securities and Exchange Board of India ("SEBI").

BUSINESS ENVIRONMENT AND OUTLOOK

Indias automotive sector demonstrated considerable resilience during FY 2024-25, as total vehicle sales experienced year-on-year growth. The commercial vehicle segment encountered challenges, witnessing a decline in volumes attributable to delays in new infrastructure projects amid the general election period during the first nine months of the fiscal year. Notably, the final quarter indicated a recovery, with improving volumes. The 3-wheeler segment maintained its trajectory of revival in both domestic and export markets, reporting higher volumes compared to the previous year, and further advancing its shift towards electric vehicles.

The regulatory landscape continued to evolve with the enforcement of stricter emission norms and enhanced safety standards. Concurrently, technological advancements such as increased vehicle connectivity, autonomous features, and greater digitalization are reshaping the automotive industry. Various new regulatory initiatives are being proposed by relevant authorities. The introduction of air-conditioned cabins in commercial vehicles represents a significant regulatory measure, which may indirectly necessitate enhancements in glazing technologies.

Demand- and supply-side incentives remain active, supporting the accelerated adoption of electric vehicles. With the implementation of the PM E-drive initiative, substantial investments are expected in the development of nationwide charging infrastructure, acting as a catalyst for improved EV adoption across India.

AUTOMOTIVE SEGMENT

The automotive glasses are broadly classified as laminated and tempered.

Products and Plants

Automotive glass refers to specialized glass components installed in vehicles, typically categorized as either laminated or tempered glass. In line with statutory regulations and safety standards, all windshields are required to be laminated, while backlites and sidelites are manufactured using tempered glass for enhanced durability and passenger safety.

The Companys manufacturing facility located at Chakan, Pune, is dedicated to the production of laminated automotive glass. The plant adheres to stringent quality, environmental, and occupational health and safety standards, and is certified under ISO 14001:2015 (Environmental Management), ISO 45001:2018 (Occupational Health and Safety), and IATF 16949:2016 (Automotive Quality Management System).

Industry

The automotive glass industry primarily caters to two key market segments: Original Equipment Manufacturers (OEMs) and the Replacement Market. Within the OEM segment, the market is further classified into passenger vehicles, commercial vehicles, and 3-wheelers. In the 3-wheeler category, apart from the Company, there exists one dominant competitor and two smaller players serving the OEM segment. The Replacement Market, by contrast, is more fragmented and features a larger number of smaller domestic players along with imported products.

Key Characteristics of the Business:

• The industry presents a high entry barrier due to the substantial capital investment required for setting up advanced manufacturing and quality assurance infrastructure. ^•

• The business is directly affected by the performance and demand cycles of the automobile industry, making it responsive to sectoral trends.

• Success in this segment depends on four main factors: product quality, cost efficiency, reliable supply for both OEMs and the aftermarket, and effective customer relationships.

• OEM contracts usually involve specific performance and compliance requirements, such as just-in-time delivery, adherence to technical specifications, and meeting quality certifications.

Your Company maintains a strategic focus on increasing its presence in the OEM segment, with particular attention to the 3-wheeler, truck, Light Commercial Vehicle (LCV) bus, and aftermarket categories. Planned initiatives include leveraging growth in the commercial vehicles market, expanding into the New Electric 3-wheeler OEM segment, and targeting expansion in the small commercial vehicle sector. The strategy to address opportunities in the bus body and LCV segments, which contributed to the previous financial year, will be further accelerated.

The introduction of air-conditioned cabins is expected to facilitate value-added glazing supplies to customers, aiming to improve driver comfort in trucks.

The aftermarket glass replacement business is projected to grow steadily, focusing on new reference introductions and improved service levels within the Truck and Bus Segments. Distribution network expansion and reach will continue to be our priorities for accelerating growth.

Development and Outlook

The outlook for the Company remains positive. Indias automotive market shows potential both in domestic and exports. Various government initiatives-including the Automotive Mission Plan 2026, scrappage policy, and production-linked incentive scheme-are anticipated to support automotive market growth.

Key drivers for the automotive market include:

a) Government investment in road infrastructure and development projects, increasing demand for commercial vehicles.

b) Growth of e-commerce and logistics sectors, contributing to higher demand for trucks and commercial vehicles.

c) Urbanization, which increases needs for public transport, last-mile delivery, and other urban-related commercial vehicle uses.

d) Policies and initiatives supporting fleet modernization, encouraging the acquisition of more efficient vehicles.

Risks and Concerns Financial Risks

The Company is exposed to foreign exchange fluctuations arising from volatility in global financial markets, which may affect its financial performance. Additionally, any adverse changes in the assumptions used for assessing the carrying value of certain assets could lead to asset impairment.

To mitigate these risks, the Company focuses on maximizing operational cash flows and ensures close alignment between business planning, cash flow forecasting, and liquidity management. SGSIL follows a disciplined and conservative financial management approach, grounded in prudent policies that prioritize long-term stability.

The Companys foreign currency exposures related to imports and exports are systematically hedged, minimizing potential adverse impacts. SGSIL also operates a well-structured and robust treasury function, with a strong emphasis on security and risk management.

Regulatory Risks

Non-compliance to increasing stringent regulatory environmental norms may result in liabilities and damage to reputation. The key mitigation strategies are focus on compliances.

(i) Contingent Liabilities: Details of Contingent Liabilities are in the Notes forming part of the financial statements.

(ii) Statutory Compliance: SGSIL ensures statutory compliance with all applicable laws and is committed to the timely payment of all statutory dues.

Operational Risks

The Company is exposed to volatility in raw material and energy prices, which can significantly impact production costs. In addition, any disruption or constraint in the raw material supply chain may adversely affect manufacturing operations. Similarly, the failure of critical IT systems or servers that support the Companys production facilities could interrupt business continuity.

To mitigate these risks, the Company focuses on strengthening in-house capabilities, drawing on past experience and technical expertise. It also emphasizes diversifying its supplier base, including establishing alternate sourcing arrangements across different geographies, to enhance supply chain resilience.

Market Related Risks

Your Company recognizes the potential risks posed by substitute materials or technological changes in manufacturing processes and evolving regulations, which could influence product demand and potentially lead to a reduction in market share.

To address these challenges, the Company is focused on innovating and developing value-added products that meet evolving customer needs, alongside offering enhanced services and solutions that differentiate our offerings in the market. Strengthening contractual agreements and ensuring robust risk management frameworks are also key components of our proactive mitigation strategy, positioning the Company to maintain its competitive edge and safeguard its financial stability.

People Risks

Labor disputes or social unrest in regions where the Company operates could disrupt operations and impact financial performance. Additionally, the loss of key senior management members or challenges in attracting and retaining top talent could influence the Companys long-term growth and prospects.

To mitigate these risks, the Company is committed to fostering strong relationships with key stakeholders, ensuring effective conflict resolution mechanisms are in place. A comprehensive succession planning framework has been established for senior management to ensure business continuity and leadership stability. Furthermore, the Company continues to strengthen its peoplecentric policies aimed at attracting, retaining, and developing top talent.

In an increasingly complex global environment, the Company is also vigilant about emerging risks such as those related to the use of hazardous materials, pollution, and the security of electronic data. These risks could expose the Company to potential legal and social liabilities. To address these concerns, the Company has implemented rigorous risk monitoring processes and takes proactive steps to mitigate these risks wherever necessary.

In line with its commitment to sustainability, the Company remains focused on advancing initiatives that promote energy efficiency, support the transition to green energy, conserve water resources, and reduce non-recovered waste, ensuring responsible environmental stewardship in all aspects of its operations.

OPPORTUNITIES

The Indian automotive market presents opportunities through higher volumes and demand for high specification components. Various segments in which the Company operates offer potential for growth.

• OEM Segments: The industry is experiencing ongoing growth, with new opportunities identified in commercial and 3-wheeler segments.

• Aftermarket: There is increasing aftermarket potential due to higher new vehicle sales, an expanded distribution network, and development of new references. The Company is positioned to benefit from these conditions.

• Bus Segment: Marketing efforts focused on safety awareness and new business from bus body manufacturers are creating additional opportunities.

• Added Value Products: Regulatory changes are enabling opportunities for products that provide advancements in safety, comfort, weight reduction, sustainability, and durability.

The digitalisation of the auto industry, including connected vehicles and digital sales channels, is creating avenues for automakers to enhance customer experience and introduce new products and services.

HUMAN RESOURCES AND CUSTOMER CENTRICITY

Your Company remains steadfast in nurturing a Trust, Empowerment, and Collaboration (TEC) - driven work culture - one that inspires innovation, drives high performance, and supports the holistic growth of every employee.

Recognized by our customers as a partner of choice for delivering cutting-edge, sustainable solutions, we continue to attract top talent and ensure seamless integration through structured onboarding programs that reinforce cultural alignment and performance readiness.

Our talent management framework is designed to be transparent, merit-based, and future-focused, encompassing comprehensive learning and development initiatives, performance evaluation, and career progression pathways. To strengthen organizational agility and effectiveness, the Company promotes a continuous learning culture, encouraging participation in both structured training programs and mandatory e-learning modules that build skills aligned with evolving business needs.

Your Company is dedicated to establishing and maintaining a positive work environment that is free from any kind of discrimination or harassment. The Company firmly believes that all employees have the right to be treated with dignity and respect, and it maintains a zero-tolerance policy towards any violations of its Code of Conduct, particularly with regards to sexual harassment. To address any such issues, the Company has a strong Internal Complaints Committee ("ICC") in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. The Company did not receive any complaint related to sexual harassment during the year. Employees are provided periodic awareness sessions on POSH and biases at the workplace. The Companys philosophy focuses on building a fairer, more inclusive work environment.

Your Company remains committed to building a future-ready workforce by continuously investing in training and capability development, particularly in areas such as Environment, Health & Safety ("EHS") and World Class Manufacturing ("WCM") practices. These initiatives are designed not only to strengthen operational excellence but also to empower employees to reach their highest potential in a safe and inclusive work environment.

Your Companys philosophy is a culture of innovation, collaboration, and value creation. By proactively designing and delivering customer-centric, forward-looking solutions, the Company aims to consistently generate value for OEMs, end-users, and other stakeholders. The focus remains on seamless execution, underpinned by quality, efficiency, and a deep commitment to sustainability and employee well-being.

This human-centric approach is further reinforced by a strong sense of togetherness, the celebration of diverse perspectives, and a continuous emphasis on personal and professional growth across all levels of the organization.

OVERALL PERFORMANCE

The automotive industry experienced moderate growth during the 2024-25 period compared to preceding years. The passenger vehicle sector expanded by 6%. The commercial vehicle sector faced challenges, with overall volumes declining. Light Commercial Vehicles saw a slight decrease of 1%, while Medium & Heavy Commercial Vehicle (M&HCV) volumes dropped by 6%, primarily due to delays in both ongoing and new infrastructure projects during the general election year. Conversely, the 3-wheeler industry maintained its growth trajectory, with an 8% increase in volumes.

The Company made strategic investments in advanced windshield preprocessing lines, transitioning to automated processes that improved product quality and plant safety. The overall yield and productivity in 2024 increased through focused projects. Many new parts were launched for OEMs and the replacement market. Sustainability efforts advanced through reduced water and energy use per unit, increased use of green energy and recycled packaging, and higher recycling of cullets. The Company also achieved recognition in external competitions, winning 15 awards, and progressed further on its World Class Manufacturing journey.

The high inflationary impact from raw glass costs, the rupee depreciation against the dollar, high-cost imports, cost increases by almost all raw material suppliers were partly offset with price increase. As a result, the revenue from operations for FY 2024-25 was Rs20,841.38/- Lakhs higher by 4% over the previous years revenue from operations of Rs20,069.97/- Lakhs. The profit after tax for FY 2024-25 was Rs3,598.22/- Lakhs, higher by 15% over the previous years profit after tax of Rs3,123.34/-.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONG WITH DETAILED EXPLANATION

The termination of the bill discounting agreement led to a reduction in total borrowings, resulting in a 243% increase in the debt service coverage ratio and a 111% increase in the interest coverage ratio for the financial year ended March 31,2025.

The decline in the Creditor turnover ratio by 33% for the financial year ended March 31,2025, is primarily due to a decrease in purchases of stock during the year, along with an increase in trade payables resulting from extended trade payable days as of the year-end.

INTERNAL CONTROL SYSTEMS

The Company has established an effective system of internal controls, with documented policies and procedures that encompass all financial and operational aspects. These controls are designed to reasonably ensure the reliability of financial reporting, monitor operations, and protect assets from unauthorized use or losses while ensuring compliance with regulations. The Company has continued its efforts to align all its processes and controls with Saint-Gobain Groups best practices.

The internal control systems feature:

a) An audit committee comprised mostly of independent directors that regularly reviews audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards, and reasons for changes in accounting policies and practices, if any.

b) A well-established, independent, multi-disciplinary Internal Audit team that operates in accordance with governance best practices. It reviews and reports to the Audit Committee on compliance with internal controls, the efficiency and effectiveness of operations, and key process risks.

The Board assumes responsibility for the overall risk management process across the organization. The Risk Management Committee reviews business risk areas, encompassing operational, financial, strategic, regulatory, and other risks.

SEGMENTAL FINANCIALS

Your Company recognizes Automotive Glass as a single segment.

CAUTIONARY STATEMENT

The Management Discussion and Analysis contains some forward looking statements based upon the information and data available with the Company, assumptions with regard to global economic conditions, relevant government policies etc. The Company cannot guarantee the accuracy of such assumptions and impact on the performance of the Company in the future. Hence it is cautioned that the actual results may differ from those expressed or implied in this report.