Salzer Electronics Ltd Management Discussions

In compliance with Regulation 34(3) read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report for the year ended March 31,2025, is presented below:

(A) Industry Structure and Developments

Global Economy:

In FY 2024-25, the global economy witnessed a mixed recovery amid persistent inflation, elevated interest r a t e s , a n d c o n t i n u e d g e o p o l i t i c a l instability—particularly due to the prolonged conflict in Europe and tensions in East Asia. As per the International Monetary Fund (IMF), global GDP grew by 3.1%, down slightly from 3.4% the previous year. Developed markets such as the US and Eurozone slowed due to monetary tightening, while emerging markets, particularly in Asia, remained resilient.

Investment patterns shifted globally toward sustainable energy, industrial automation, and digital infrastructure. According to BloombergNEF, renewable energy investments exceeded USD 1.8 trillion, with robust allocations to solar, wind, and energy storage. The global automation and industrial IoT sector also grew over 10% YoY, spurred by demand for energy-efficient, smart manufacturing systems.

Amid supply chain realignments, companies pursued the "China + 1" strategy, favoring manufacturing destinations like India, Vietnam, and Mexico. This shift has opened up significant opportunities for Indian exporters, including Salzer Electronics, which is strongly positioned in intelligent electrical components and industrial automation.

Indian Economy:

India remained one of the fastest-growing major economies, with GDP growth estimated at 6.5% in FY 2024-25. Growth was broad-based, led by

• Increased public capital expenditure of Rs.11.1 lakh crore under NIP and Gati Shakti (a 16.9% YoY increase),

• Continued momentum under PLI schemes across 14 strategic sectors,

• Declining inflation, with average CPI at 5.2%, down from 6.7% two years ago,

• Strong private consumption and increased credit availability.

Structural reforms, demographic advantages, and digital adoption continue to strengthen Indias economic fundamentals. The IMF projects Indias GDP to grow by 6.6% in FY 2025-26, sustaining long-term growth momentum.

Electrical Equipment Industry in India:

Valued at over1.75 lakh crore (~USD 21 billion), Indias electrical equipment industry is pivotal to infrastructure and industrial development. The sector spans transmission and distribution (T&D), switchgear, wires and cables, transformers, and smart meters.

Key growth drivers in FY 2024-25 include:

1. Urban and Rural Electrification: Government schemes like Saubhagya and Smart Cities Mission boosted demand for cabling and distribution equipment.

2. Smart Metering Initiatives: Under RDSS, 250 million smart meters are targeted by 2027; 80 million meters have already been tendered as of Q4 Fy25.

3. Industrial Capex Revival: Private investments in cement, pharma, and data centers spurred demand for control panels and LV switchgear.

4. Export Momentum: Electrical machinery exports grew 13.8% YoY, with rising demand from GCC, ASEAN, North America, and Africa.

5. Renewables and Grid Modernization: Indias renewable energy capacity crossed 179 GW, targeting 500 GW by 2030, driving need for intelligent switchgear and distribution systems.

6. Railways and Metro Projects: Over 7,000 km of railway lines were electrified during the year, supporting demand for Salzers low-voltage products.

Outlook:

The sector is projected to grow at a CAGR of 8-10% over the next five years, supported by infrastructure investments, clean energy transition, and favorable industrial policies like Make in India and PLI schemes.

(B) Opportunities and Threats

Salzer Electronics is well-positioned to capitalize on strong export growth, driven by global supply chain diversification and rising international demand. Indias focus on infrastructure, smart cities, and digital transformation offers substantial domestic opportunities. The large-scale rollout of smart meters under the RDSS scheme and increasing adoption of energy conservation projects through ESCO models further strengthen future prospects.

However, the Company faces challenges such as raw material price volatility, intensifying competition from global and local players, evolving regulatory frameworks, and the risk of technology obsolescence. Continuous innovation and agile operations remain key to mitigating these threats.

C. Segment performance

A. Industrial Switchgear Business - Strategic Pillar of Salzers Growth

Overview of Salzers Industrial Switchgear Portfolio

Salzer Electronics Limited has emerged as one of Indias most trusted and technologically progressive players in the low-voltage industrial switchgear segment. The Industrial Switchgear Division constitutes the largest and most mature vertical within Salzers diversified electrical engineering portfolio. The division delivers mission-critical components used for the control, switching, protection, and distribution of electrical energy in industrial and commercial environments.

Salzers offerings encompass a wide range of modular, custom-built, and standard switchgear products, including:

• Rotary switches

• Load break switches (AC/DC)

• Cam switches

• Isolators

• Terminal blocks

• Modular enclosures

• Toroidal transformers

• Control and signal devices

• Conduit and wire accessories

• Wire harnesses and control assemblies

These products cater to the needs of OEMs, electrical panel builders, power utilities, transport systems (like railways and metros), green energy installations, and industrial automation platforms, with demand spread across infrastructure, manufacturing, smart buildings, and data center segments.

Salzers switchgear systems are designed with global safety standards in mind—complying with IEC, UL, CE, RoHS norms—and have found wide acceptance in both domestic and export markets due to their compact design, high current-carrying capacity, superior insulation, and long operational life.

FY 2024-25 Performance - A Year of Expansion and Strengthening

In FY 2024-25, Salzers Industrial Switchgear segment recorded revenue of 798.17 crore, a 28 % growth over 620.00 crore in the previous year. This segment contributed 57% to the Companys standalone revenue, reinforcing its strategic centrality. EBITDA margins were healthy at 11.84%, underscoring efficient cost structures and consistent product demand.

Over the last five years (FY20-FY25), the segment has clocked a Compounded Annual Growth Rate (CAGR) of 26%, driven by both domestic and international demand. This strong growth reflects the Companys execution

capabilities, technology leadership, and diversified client base.

India - A Fertile Ground for Switchgear Demand

The Indian economy is experiencing growth momentum, fueled by infrastructure development, rising capital expenditure, and manufacturing acceleration supported by the PLI scheme These macro trends directly translate into strong demand for electrical distribution and control products-key areas addressed by Salzers switchgear portfolio.

Some major domestic growth enablers include:

• Infrastructure & Electrification Boom: With massive public expenditure under Gati Shakti, Smart Cities, and Saubhagya schemes, the demand for LV switchgear in urban and semi-urban networks has grown significantly.

• Industrial Capex Revival: Capital expenditure across sectors like steel, cement, chemicals, and food processing is fuelling automation and electrification needs.

• RE Expansion & Grid Modernization: Indias renewable energy capacity targets have spurred demand for compact, intelligent switchgear components in solar, wind, and hybrid installations.

• Railway Electrification & Urban Transport: Salzer products are increasingly being deployed in railway electrification and metro networks due to their compact design and high reliability.

• Digital Infrastructure: Data centres and 5G rollouts require scalable, energy-efficient switchgear systems.

Salzer has established strong relationships with EPC contractors, electrical consultants, and OEMs across India, providing customized solutions at scale and positioning itself as a go-to partner for mission-critical low-voltage needs.

Global Context - Exports Driving Diversification

Salzers Industrial Switchgear Division has increasingly gained traction in international markets, especially in regions demanding cost-effective, compact, and high- performance components.

In FY 2024-25, exports from the switchgear segment rose sharply, with key markets including Middle East, North America, ASEAN and Australia

Salzers global success stems from:

• Adherence to international certifications (UL, CE, RoHS, REACH)

• Strategic product localization and customization

• Strong product engineering and backward integration

• Competitive cost structures vs. European and Japanese counterparts

The recent incorporation of Salzer Electronics Arabia Ltd. in Saudi Arabia will further accelerate Salzers presence in GCC countries by enabling local production, better pricing, and regulatory alignment.

Innovation, OEM Partnerships, and Differentiation

Salzers consistent performance is underpinned by a strong R&D culture. The Company invests in:

• Design-led manufacturing for rotary switches and control systems

• Development of intelligent switchgear with IoT capability and digital metering

• Miniaturization and modularity for space- constrained control panels

• Integration with energy efficiency and automation platforms for smart grids

Competitive Landscape

The Indian low-voltage switchgear market is competitive, with players like L&T, Schneider Electric, Siemens, ABB, and Hager dominating the high-end space. Salzer competes in the mid-market segment, differentiating itself through:

• Custom-engineered solutions

• Speed of delivery and flexible manufacturing

• Robust after-sales service

• Cost competitiveness with international-grade quality

The Company continues to defend and expand its market share by staying agile, investing in customer-centric innovation, and strengthening its brand presence.

Outlook-Growth Drivers and Strategic Priorities

The Indian industrial switchgear market is projected to grow at 10-12% CAGR through 2030, aligned with Indias energy transition, grid modernization, and manufacturing expansion goals.

Salzer aims to leverage this through:

a. Capacity Expansion: Investing in automation and additional lines at its plants to meet domestic and export demand.

b. Smart Integration: Incorporating control intelligence, remote access, and communication protocols in next-gen switchgear.

c. Export Push: Expanding into new markets across Africa, Eastern Europe, and LATAM, while capturing CCG opportunities through the Saudi Arabian subsidiary.

d. OEM Diversification: Partnering with leading automation and EV ecosystem players for advanced control gear and

e. ESG-Compliant Products: Increasing focus on RoHS, recyclable materials, and energy-efficient designs.

With a strong legacy, wide market reach, robust product pipeline, and operational efficiency, Salzers Industrial Switchgear Division is poised to remain the engine of growth for the Company.

B. Wires and Cables Segment - A Strong, Scalable Growth Engine

The Wires and Cables Division remains a crucial component of the Companys comprehensive electrical solutions portfolio. Operating within the domestic market, this segment offers a wide variety of products including multi-core flexible cables, power cables, instrumentation cables, and LAN/CCTV cables. These offerings are extensively utilized in industrial, residential, infrastructure, and commercial sectors.

Salzers cables are known for their superior insulation, fire resistance, current-handling capacity, and operational durability, making them ideal for critical environments where safety and reliability are nonnegotiable. All products are manufactured in compliance with relevant Indian and international standards (IS 694, IS 1554, RoHS), ensuring quality and regulatory alignment.

In FY 2024-25, the segment reported revenue of 511.53 crore, marking a 14% growth over the previous year. This division accounted for 37% of the Companys standalone revenue, reinforcing its position as the second-largest contributor after Industrial Switchgear. Over the past five years (FY20-FY25), this segment achieved a 14% CAGR, reflecting sustained demand from infrastructure, OEMs, and industrial sectors.

The growth was driven by:

• Continued expansion in housing and commercial real estate

• Demand from smart infrastructure and urban electrification projects

• Consistent orders from OEM customers, especially in automation and control system verticals

• Rising demand from Indias growing data center ecosystem, which requires high-performance, fire- retardant, and energy-efficient cabling solutions

• Steady traction in infrastructure and industrial automation

Salzer has successfully built strong relationships with various OEMs, EPC contractors, and electrical consultants, ensuring recurring business and brand recall.

The Indian wires and cables industry is poised for sustained double-digit growth, supported by a

combination of structural demand drivers and policy interventions. With the power sector undergoing modernization, and infrastructure and manufacturing capex gaining momentum, the demand for high-quality, certified cables is set to remain robust.

Over the next five years, the industry is expected to grow at a CAGR of 10-12%, driven by:

• Continued urban and rural electrification

• Large-scale investments in renewables and smart grids

• Growth in residential, commercial, and data centre infrastructure

• Increasing regulatory focus on fire safety and energy efficiency and

• Adoption of automation, EVs, and digitized power systems across sectors

Organized players with strong R&D, certification, and customization capabilities are likely to gain market share from unorganized competitors. The emphasis on Make in India and local sourcing in government procurement also augurs well for domestic manufacturers.

Salzers future in this segment is clearly aligned with these macro trends. With quality-driven manufacturing, technical differentiation, and strong OEM partnerships, Salzer is well-positioned to meet the rising demand for customized and high-performance cabling solutions.

On the global front, Salzer is laying the groundwork to enter select international markets, with a long-term goal of establishing itself as a reliable export partner for niche cable solutions. Steps are being taken to obtain product certifications and build alliances that will support this expansion.

Backed by capacity augmentation, product innovation, and a clear customer-first approach, Salzers Wires and Cables Division is expected to be a strategic contributor to revenue and profitability, while reinforcing the Companys vision to be a complete and competitive electrical solutions provider.

C. Building Products Segment - Niche Focus with Export Ambitions

The Indian building products market, particularly in electrical fittings and modular components, remains highly fragmented and competitive, dominated by both organized brands and a large base of unorganized players. While the segment is buoyed by continued growth in real estate, urban housing, and smart homes, price sensitivity and margin pressure persist due to commoditization and regional competition. Demand for aesthetically designed, safe, and durable fittings continues to rise, especially in Tier I and II cities.

In FYQ 2024-25, Salzers Building Products division recorded revenue of 76.22 crore, a 15% growth over the previous year, contributing 6% to the Companys standalone revenue. Despite limited scale, the Company

continues to leverage its design capabilities and focus on quality differentiation to retain its niche.

Looking ahead, Salzer has initiated strategic repositioning of this vertical, with focused efforts to enhance competitiveness and explore export opportunities. A key milestone was the receipt of its first international order from Australia, paving the way for future overseas expansion. The Company aims to scale this vertical through improved product aesthetics, expanded SKUs, and alignment with global safety norms- transforming the segment into a credible long-term growth engine.

D. Energy Management Services - Strategic Reentry with BBMP Project

Indias push for energy efficiency, particularly in urban infrastructure, has led to growing opportunities in Energy Management Services (EMS), especially in street lighting, municipal infrastructure, and public utilities. With cities under pressure to reduce power consumption and carbon footprint, Performance-Based Contracting (PBC) and ESCO models are gaining wider adoption.

Salzer marked its strategic re-entry into the EMS segment by securing a prestigious Rs.192 crore order from Bruhat Bengaluru Mahanagara Palike (BBMP) for the design, supply, installation, and maintenance of smart LED street lighting under a long-term concession model. The project is being executed through a Special Purpose Vehicle (SPV) in collaboration with its consortium partner Schnell Energy Equipments Private Limited

This initiative positions Salzer to re-establish its credentials in high-potential municipal and smart infrastructure projects. The project not only brings recurring revenue visibility over a multi-year period but also reinforces the Companys presence in smart city initiatives and ESG-aligned public infrastructure.

Looking forward, Salzer aims to leverage this success to pursue similar projects across other municipal bodies and smart cities, expanding its footprint in the EMS space while contributing to Indias national energy conservation goals.

E. Smart Energy Business - Aligned with National Priorities, Positioned for Scalable Growth

Indias power distribution sector is undergoing a significant digital transformation, driven by the Governments ambitious Revamped Distribution Sector Scheme (RDSS), which targets the installation of 250 million smart energy meters by 2026. This mission aims to enhance billing efficiency, reduce AT&C losses, and enable real-time energy monitoring through advanced metering infrastructure (AMI). Supported by an outlay of over 3 lakh crore, RDSS is a cornerstone of Indias energy reform.

I n alignmen t with th is national priorit y, Salzer Electronics made its strategic entry into the Smart

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Energy Meter business by establishing a dedicated facility with a capacity to manufacture 4 million meters annually, backed by a capital investment of 35 crore. In FYQ 2024-25, Salzer achieved initial revenue of Rs.16 crore from this vertical, marking a strong start in a highly regulated and competitive segment.

During the year, Salzer secured a significant order from a large Advanced Metering Infrastructure Service Provider (AMISP) and is in active discussions for further opportunities across multiple state discoms and private utilities. The Companys focus on technical compliance, in-house R&D, and backward integration positions it to meet stringent specifications under RDSS and future AMI tenders.

Looking ahead, Salzer anticipates strong traction in this segment, driven by its established manufacturing capability, timely execution, and deep domain understanding. With increasing adoption of digital grid infrastructure, the Smart Energy Business is poised to emerge as a key long-term growth driver for the Company.

(D) Outlook

Salzer Electronics enters FY 2025-26 with a strong foundation and an optimistic outlook, underpinned by strategic investments and favorable market tailwinds. The Company is poised to accelerate its growth trajectory by expanding manufacturing capacity and enhancing automation across its facilities to meet rising demand from both domestic and international markets.

One of the core focus areas will be integration of smart technologies into its product ecosystem. With the industry shifting toward intelligent, IoT-enabled electrical systems, Salzer is actively developing advanced solutions—such as smart meters, digital switchgear, and connected energy management devices—that align with Indias national priorities and global energy transition trends.

Salzers export strategy continues to gain momentum, targeting untapped markets in Africa, Eastern Europe, and Latin America. The Company aims to deepen its international presence by leveraging its competitive cost structures, globally certified products, and a track record of reliable delivery

The recent establishment of Salzer Electronics Arabia Ltd., a subsidiary in Saudi Arabia, marks a significant step in capturing opportunities across the Gulf Cooperation Council (GCC) region. Local production capabilities will enhance price competitiveness, reduce lead times, and ensure compliance with regional standards.

Furthermore, Salzer remains committed to ESG-aligned growth, with continued focus on reducing its carbon footprint, improving energy efficiency, and embracing digital transformation across operations.

With a robust product pipeline, diversified customer base, and operational resilience, Salzer is strategically positioned to capture value across evolving energy, infrastructure, and industrial landscapes, both in India and globally

(E) Risk Factors and Mitigation Measures

Salzer Electronics recognizes key risks that could impact its growth, and has developed strategies to manage them:

1. Working Capital & Liquidity Risk: High receivables and inventory levels could affect liquidity. Mitigation: Focus on reducing working capital days, improve credit monitoring, and digitize inventory management.

2. Raw Material Price Volatility: Price fluctuations in raw materials could affect margins. Mitigation: Long-term supplier contracts, dynamic pricing models, and alternative sourcing options.

3. Technology & Innovation Risk: Rapid technological changes could make products outdated. Mitigation: Invest in R&D, monitor global trends, and develop scalable product platforms.

4. Regulatory & Compliance Risk: Changing regulations may impact operations. Mitigation: Stay compliant with industry standards and engage in proactive legal monitoring.

5. Dependency on Key Customers: High concentration in certain sectors could reduce revenue stability Mitigation: Diversify customer base and expand into new sectors.

Other risks like geopolitical, supply chain disruptions, and tariff changes are also actively managed.

(F) Internal Control Systems and Their Adequacy

Salzer has a robust internal control framework across financial, operational, and compliance areas. The internal audit system is designed to provide assurance on effectiveness of controls, risk management, and governance processes. The Audit Committee reviews control effectiveness and risk mitigation periodically.

(G) Human Resources and People Development

As of March 31,2025, Salzer Electronics has over 924 individuals on permanent role, with a remarkable 48% of the workforce comprising women, reflecting the Companys strong commitment to diversity and inclusion. The Company views its human capital as a key driver of its sustainable growth and has made significant investments in nurturing a skilled, motivated, and empowered workforce.

During the year, Salzer conducted structured training programs, including technical skill-building, safety awareness, and leadership development, aimed at enhancing employee capabilities across all levels. Special focus was placed on gender diversity initiatives, encouraging the inclusion of women in production and technical roles traditionally dominated by men. industrial relations remained peaceful, with transparent communication channels, regular engagement with employee representatives, and strict adherence to labour laws. The Company also prioritized employee welfare, providing access to healthcare, hygiene, and safety infrastructure across its units.

Salzer continues to foster a performance-oriented, inclusive, and resilient work culture that supports long-term organizational success.

(H) Financial Performance vis-a-vis Operational Performance

Particulars (Standalone)	FY 2024-25	FY 2023-24	% Change
Financial Assets	Rs 1,382.92 Cr	Rs 1,137.35 Cr	22 %
Financial Liabilities	Rs 124.94 Cr	Rs 110.20 Cr	13.40 %
Net exposure	Rs 62.26 Cr	Rs 43.15 Cr	44.30 %

Growth was driven by Industrial Switchgear and export sales, supported by one-time gains and operating leverage, despite margin moderation in a competitive market.

(I) Significant Changes in Key Financial Ratios (>25%)

Ratio	FY 2024-25	FY 2023-24	% Change
Debtors Turnover Ratio (Days)	84	85	-1.18 %
inventory Turnover Ratio (Days)	86	89	-3.37 %
interest Coverage Ratio	3.02	2.76	9.42 %
Current Ratio	1.43	1.46	-2.05 %
Debt-Equity Ratio	0.78	0.66	18.18 %
Operating Profit Margin (%)	9.03 %	9.70 %	-6.91 %
Net Profit Margin (%)	4.50 %	3.80 %	18.42 %
Return on Net Worth (%)	11.74 %	9.27%	26.70 %

CAUTIONARY NOTE

This document includes forward-looking statements about anticipated events and the companys projected financial and operational outcomes. These statements are based on certain assumptions and are inherently subject to risks and uncertainties. There is a considerable likelihood that these assumptions, forecasts, and forward-looking statements may not be accurate. Readers are advised not to place excessive reliance on such statements, as various factors could cause actual outcomes and events to differ significantly from those anticipated.