Sar Auto Products Ltd Management Discussions

Pursuant to Regulation 34(2)(e) of SEBI LODR Regulations 2015, a Management Discussion and Analysis report is given below: -

OVERALL REVIEW OF PERFORMANCE OF COMPANY:

The Company engage in manufacturing and selling of Auto components, especially Gears for Transmission, Differential & Engine. Our Company manufactures Auto components comprising of automobile gears like Spur Gear, Helical Gear, Straight Bevel Gear, Sprockets along with Transmission Spline Shafts, Couplings and Power Take-off clutches which are used for Transmission, Engine and Differential gear boxes. Our Company is one of the leading manufacturers of quality assured gears, gear boxes and other transmission components in Rajkot, Gujarat-India, since last 20+ years.

All parts are manufactured and tested as per the German Specification (DIN standard) and majority of the parts are self-certified by our OEM customers and are directly used at their assembly line.

We are having certificate in compliance with the requirements of the Standard ISO 9001: 2015 audited by QRO (Quality Research Organization) for following scope of activities:

Manufacturer & Supplier of Machined items like Synchronizer Parts (Rings, Cones, Sleeves, Hubs), Transmission gears and Housings for Automative, Agricultural and Engineering Applications. The said certificate is valid upto 31st October, 2026.

Company carries out statistical process control studies for better process capabilities and we emphasize more on the defect prevention, rather than defect detection.

Our in-house standard room is fully equipped to calibrate the monitoring and measuring devices used in the manufacturing processes. We have our in-house chemical and metallurgical laboratory to cater to all our needs in the chemical & metallurgical analysis.

Our range of testing machines include computerized Gear helix & Profile tester and Gear roll tester (Maag & Mahr) besides Helix measuring and hob testing machine, Material hardness testers (BHN & HRC) & other standard measuring instruments.

OUR PRODUCTS - VARIOUS TYPES OF PARTS

During the year 2024-25 total 115747 Nos of units produced and the Company has revenue from operation of Rs. 1396.79 Lacs in comparison to previous year of Rs. 2003.58 Lacs. The overall Review highlighted below:

Particulars	Year: 2024-2025 (In Rs. In Lacs except EPS)	Year: 2023-2024 (In Rs. In Lacs except EPS)
Export Sales	-	2.06
Domestic Sales	1389.49	1994.01
Other Operating revenue	7.30	7.51
Total Sales	1396.79	2003.58
Other Income	108.05	83.56
Earnings Per Share	0.88	2.45

Due to external factors, war tensions amongst other countries of the world, in the year 2024-25, Exports sales has been nil and Turnover of the Company has also decreased. Management is hopeful to continue this profitable position and strives to achieve better performance in next period. Management efforts and hard work and continuous analyzing and searching and grabbing of opportunities, Company was able to maintain and increase the profitability of the Company. Of course, Government policies has also played a vital role in making the industry structure of the Company stronger and thereby Economic of whole Country.

INDUSTRY STRUCTURE, OUTLOOK AND DEVELOPMENTS:

WORLD ECONOMY OUTLOOK

The global economy grew by 3.3% in 2023, with the IMF projecting a growth rate of 3.2% for 2024 and 3.3% for 2025.

Growth was uneven across regions, with advanced economies (AEs) recording stable expansion while emerging markets and developing economies (EMDEs) reporting mixed trends.

Global manufacturing weakened, particularly in Europe and parts of Asia, due to supply-chain disruptions and reduced external demand.

Source: Economic Survey 2024-25 - IBEF.org

Global GDP growth is projected to slow from 3.3% in 2024 to 2.9% this year and next year (based on the assumption that tariff rates as of mid-May are sustained)- Source OECD Economic outlook .

INDIAN ECONOMY INDIAN ECONOMY OVERVIEW

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

Indias real GDP growth is estimated at 6.4 per cent in FY25 (as per first advance estimates of national income), which equates nearly to its decadal average. Real gross value added (GVA) is also estimated to grow by 6.4 per cent FY25. The real GDP growth in FY26 is expected to grow between 6.3 and 6.8 per cent, keeping in mind the upsides and downsides to growth.

The industrial sector expected to grow by 6.2 per cent in FY-25 (first advance estimates), driven by robust growth in electricity and construction. In FY24, the Indian automobile domestic sales grew by 12.5 per cent.

(source: pib.gov.in- Press release)

AUTO COMPONENTS & AUTOMOBILE INDUSTRY IN INDIA IN THE YEAR 2024-25 AUTO COMPONENTS INDUSTRY:

The automotive components industry experienced a 11% YoY growth, reaching Rs. 3.32 lakh crore (US$ 38.4 billion) in the first half of FY25.

India has become the fastest-growing economy in the world in recent years. This fast growth, coupled with rising incomes, a boost in infrastructure spending and increased manufacturing incentives, has accelerated the automobile industry. The two-wheeler segment dominated the automobile industry because of the Indian middle class, with automobile sales standing at 23.85 million units in FY24.

Significant demand for automobiles also led to the emergence of more original equipment and auto components manufacturers. As a result, India developed expertise in automobiles and auto components, which helped boost international demand for Indian automobiles and auto components. Hence, the Indian automobile industry has a considerable impact on the auto component industry.

The auto components industry accounted for 2.3% of Indias GDP and provided direct employment to more than 1.5 million people. By 2026, the automobile component sector will contribute 5-7% of Indias GDP. The Automotive Mission Plan (2016-26) projects to provide direct incremental employment to 3.2 million by 2026.

The industry is a leader in exports and provides jobs to over 3.7 crore people. In FY24, the export value of auto components/parts was estimated at US$ 21.2 billion. North America, which accounts for 33% of total exports, increased by 5%, while Europe and Asia, which account for 32% and 24% of total exports, increased by 12% and growth for Asia remained flat, respectively. The key export items included drive transmission and steering, engine components, body/chassis, suspension and braking etc.

MARKET SIZE OF AUTO COMPONENTS

Indias auto components industrys market share has significantly expanded, led by increasing demand for automobiles by the growing middle class and exports globally. Due to the Oz670 growth in demand for Indian auto components, several Indian and international players have entered the industry. Indias auto component industry is broadly classified into organised and unorganised sectors. While the unorganised sector consists of low-valued items and mostly serves the aftermarket category, the organised sector serves OEMs and includes high-value precision instruments.

In FY25 (April-December), domestic sales of two-wheelers, passenger vehicles, commercial vehicles, three-wheelers, and amounted to 31,39,288, 6,83,471, 5,62,652 and 1,50,39,570 units, respectively.

FOLLOWING ARE THE ADVANTAGES OF AUTOCOMPONENTS INDUSTRY IN INDIA:

> ROBUST DEMAND:

Growing working population and expanding middle class are expected to remain key demand drivers. India is witnessing robust demand for auto components amid ongoing shift in global supply chain. With plans to reduce auto components import dependence, domestic players are expected to witness a demand surge

> EXPORT OPPORTUNITIES:

India is emerging as a global hub for auto component sourcing and the industry exports over 25% of its production annually. Auto component exports are expected to grow and reach US$ 80 billion in FY26. By FY28, the Indian auto industry aims to invest Rs. 58,000 crore (US$ 7 billion) to boost localization of advanced components like electric motors and automatic transmissions, reducing imports and leveraging China Plus One trend.

> POLICY SUPPORT:

100% FDI is allowed under the automatic route for auto components sector. The Bharat New Car Assessment Program (BNCAP) will not only strengthen the value chain of the auto component sector, but it will also drive the manufacturing of cutting-edge components, encourage innovation, and foster global excellence.

> COMPETITIVE ADVANTAGE:

A cost-effective manufacturing base keeps costs lower by 10-25% relative to operations in Europe and Latin America. India is the 2nd largest steel producer globally, thus has a cost advantage. India is emerging as a global auto component sourcing hub due to its proximity to key automotive markets such as ASEAN, Europe, Japan and Korea.

AUTOMOBILE INDUSTRY:

The Indian automobile industry has historically been a good indicator of how well the economy is doing, as the automobile sector plays a key role in both macroeconomic expansion and technological advancement. The two-wheelers segment dominates the market in terms of volume, owing to a growing middle class and a huge percentage of Indias population being young. Moreover, the growing interest of companies in exploring the rural markets further aided the growth of the sector. The rising logistics and passenger transportation industries are driving up demand for commercial vehicles. Future market growth is anticipated to be fueled by new trends including the electrification of vehicles, particularly three-wheelers and small passenger automobiles. India is also a prominent auto exporter and has strong export growth expectations for the near future. In addition, several initiatives by the Government of India such as the Automotive Mission Plan 2026, scrappage policy, and production-linked incentive scheme in the Indian market are expected to make India one of the global leaders in the two-wheeler and four-wheeler market.

MARKET SIZE

India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck

manufacturer in the world. Indias automobile sector is split into four segments, i.e., two-wheelers, three-wheelers, passenger vehicles, and commercial vehicles, each having a few market leaders. Two-wheelers and passenger vehicles dominate the domestic demand Two-wheelers and passenger cars accounted for 75.04% and 21.38% of market shares, respectively, in FY25*. In FY25 (April-September), the total production of passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles was 1,56,22,388 units

FOLLOWING ARE THE ADVANTAGES OF AUTOMOBILE INDUSTRY IN INDIA

> GROWING DEMAND:

Rising middle-class income and a huge youth population will result in strong demand. In December 2024, the total production of passenger vehicles*, three- wheelers, two-wheelers, and quadricycles was 19,21,268 units.

> OPPORTUNITIES:

India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles

> RISING INVESTMENT:

The automobile sector received a cumulative equity FDI inflow of about Rs. 3,22,015 crore (US$ 36.21 billion) between April 2000 - September 2024.

> POLICY SUPPORT:

The Automotive Mission Plan 2016-26 is a mutual initiative by the Government of India and the Indian automotive industry to lay down the roadmap for the development of the industry.

Disclaimer: This information has been collected through sources mentioned above

Company is focusing on the Industry structure prevalent in Indian Economy and Global Economy and Company is planning its road map of business activity accordingly.

Future Plan of Company : We are on the threshold of manufacturing the following products: -- Assembly of Gear boxes for automobiles and machine tools.

- With the best of technical expertise, financial acumen, marketing experience and managerial skills at hand, we actively seek new clients in India and abroad.

- We welcome foreign collaborations in technical knowhow, with buyback arrangements, for manufacture of Gear boxes, Geared motors, Ground Gears and other similar components.

SEGMENT/PRODUCT WISE PERFORMANCE:

The Company is working in single segment namely the manufacturing Segment includes manufacturing of gears, gear boxes and other transmission components. Further In this segment company has earned revenue of Rs. 1389.49 (Rs. in Lacs) in comparison to previous year of Rs. 1996.07 (Rs. in Lacs) and other operating revenue of Rs. 7.30 Lacs in comparison to previous year of Rs. 7.51 Lacs.

OPPORTUNITIES, THREATS, RISK AND CONCERN:

OPPORTUNITIES

The Company is carrying on the business of manufacturing of auto components such as automobile gears like Spur, Helical, Straight Bevel, Sprockets along with Transmission Spline Shaft, Couplings and Power Takeoff Clutches which are used for Transmission, Engine and Differential gear boxes.

Our Company believes that Company have a greater advantage of being located in Rajkot (Gujarat) as it is a hub for engineering industries, enabling to offer the customers more range of products and services in a faster and at the most competent way. With, many OEM approved raw material suppliers and heat treatment service providers stationed here, we have a competitive advantage in providing the services, in the most efficient and effective way to delight our valued customers. As Rajkot being popular for its skilled labour availability & labour friendly environment, we hold the reputation of being the most reliable, at any point of time. Our gears are used in automobiles, machine tool industries and printing machineries. We are ready and equipped to manufacture any type of gear for anyone, anywhere in the world!

In todays parlance Auto component industry has growth potential as the population is increasing, demand of vehicle in all segment is increasing, in furtherance after the spread of Covid-19 pandemic and its post effect, people feel safe for using personal vehicles instead of public transport and this factor also boost up the demand and further, life style, needs of society also gives boost to the business opportunities. In aforesaid points given various advantages of auto parts components Industry and Automobile Industry which are opportunities for our Company. Further Government of India is also taking various initiative steps for the development of Auto Industry. The Theme of “ATMANIRBHAR” & “MAKE IN INDIA” of Indian Government will also be one of the path of Opportunity for the Company.

THREATS, RISK AND CONCERN

Your Company regularly monitors the various risks associated with its business. The Company is identifying, minimizing and mitigating the risks and the same are reviewed periodically. There are various Risk factors such as Changes in Government Policies and Regulations, Tense situations amongst the Country, Fluctuation in Foreign Exchange Rates, Prices of Raw materials, Competition, Volatile in Automobile Industry, Manpower. The Company is trying to overcome/minimize it by taking certain steps, which are in hand of Company.

The Companys risk management is done in close co-ordination with the board of directors and focuses on actively securing the Companys short, medium and long-term cash flows by minimizing the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns. The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

Besides this, Companies Internal Risk, Credit Risk, Liquidity Risk, Maturities of Financial Liabilities, Interest rate risk and the details of the same has been given in Notes Forming Part of Financial Statements.

Company is watching and analyzing the trend of market situation and accordingly will take various steps to mitigate the risks of the business.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company is committed to maintaining high standards of internal controls designed to provide accuracy of information, efficiency of operations, and security of assets. The Company has adequate internal controls commensurate with the size and nature of its operations to ensure orderly and efficient conduct of business.

These controls ensure the safeguarding of assets, prevention and detection of fraud and error, Irregularities. These controls ensure the accuracy and completeness of the accounting records, timely preparation of reliable financial information and adherence to Companies policies, procedures and legal obligations. The audit committee of the Board of Directors meets periodically to review the performance as reported by the auditors.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE :

The Company has the Net turnover of Rs. 1396.79/- (Rs. in Lacs) in the financial year 2024-25 in comparison to previous year of Rs. 2003.58/- (Rs. in Lacs). In this year, Company has earned Profit of Rs. 42.33 lacs as compared to last years profit of Rs. 114.18 lacs. There are various challenges in the year 2024-25 internal as well as external, company has tried to maintain and increase the profitability situation in coming years. Details of the performance are disclosed in the financial statement.

HUMAN RESOURCE AND DEVELOPMENT:

There has been no material development on the Human Resource/ Industrial Relations Front during the year. The Company always has adopted positive approach towards human relation development. Industrial relations remained cordial throughout the year and there was no incidence of strike, lock-out, etc. There were no Complaints from any of the employees of the Company. The Company is taking all precautions measures that are required to be followed for prevention and safeguard of the Human Assets.

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:

Details of Changes in Key Financial Ratios along with reasons for variance is given as below :

Sr. No. Key Financial ratio	March 2025	March 2024	Variance	Reason for variance
1 Debtor Turnover ratio	9.44	8.25	15%	-
2 Inventory Turnover Ratio	7.49	14.11	-47%	On Account of decrease in revenue from operation
3 Debt Service Coverage Ratio	4.21	12.57	-67%	On Account of Lower Profit after T ax
4 Current Ratio	1.13	1.28	-12%	--
5 Debt Equity Ratio	1.05	0.94	12%	--
6 Operating Profit Margin(%)	6.15%	8.08%	-1.93	--
7 Net Profit Margin (%)	0.05%	0.08%	-31%	On account of Decrease in Revenue from Operation

Further more details on financial ratio is given in the Annexure E forming part of Notes to Financial Statements and the same is forming part of this Annual Report.

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF:

The Networth of the Company as on 31st March, 2025 is Rs. 17,30,92,000 in comparison to previous year of Rs. 16,81,65,157 Change in net worth is due to increase in retained earnings.

DISCLOSURE OF ACCOUNTING TREATMENT

The Companys financial statements comply in all material aspects with Indian Accounting Standard (IND AS) notified under section 133 of the Companies Act, 2013, Companies (Indian Accounting Standard) Rules, 2015 as amended by Companies (Indian Accounting Standards) (Amendment) Rules, 2016 and other relevant provisions of the Act as applicable. Company has not followed different treatment than prescribed in the accounting standard and as such no explanation is required to be given.

CAUTIONARY STATEMENT:

Management Discussion and Analysis Report are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. Actual results could differ materially from those expressed or implied.

The Company assumes no responsibility to publicly to amend, modify or revise any of these statements on the basis of any subsequent developments, information or events.

Place: Rajkot	For and on Behalf of
Date: 7th August, 2025	Sar Auto Products Limited
	Rameshkumar D. Virani
	Chairman and Managing Director
	DIN: 00313236