Sealmatic India Ltd Management Discussions

Mechanical seals prevent the leakage of liquids or gasses through the clearance between the stuffing box and the shaft and these include cartridge seals, balanced and unbalanced seals, pusher and non-pusher seals and host of other modern and conventional mechanical seals.

The Company is a well-established player in the mechanical seal industry catering to the ever-evolving needs of the customers. A future-focused Company which believes in innovation, the Companys bespoke quality and manufacturing excellence makes it a preferred choice of a growing and ever-evolving customer base. The Company designs and manufactures mechanical seals and associated products mainly for the oil & gas, refinery, petrochemical, power, marine, chemical, pharmaceutical, pulp & paper, mining and for many more industrial applications. It provides the most complete selection of engineered mechanical seals and sealing support systems and its products are globally recognized as one of the most trusted products in the process industry in over 63 countries.

With a wide range of products and services, the Company has solutions for every sealing requirement such as API 682 mechanical seals, highly engineered mechanical seals, standard cartridge seals, metal bellows seals, split seals, gas-lubricated seals and many other custom-built sealing solutions.

Despite the rising interest rates and external headwinds, the domestic and export demand remains resilient. The inflation is expected to anchor down to the pre-pandemic levels by the end of 2025. The broad-based recovery in manufacturing is expected to be driven by the robust export and domestic demand. Government focus on infrastructure and the capital investments by private sector are expected to drive growth in the medium term. The improving investment outlook backed by Production-Linked Incentive (PLI) schemes for various sectors is expected to draw-in private investment in the manufacturing sector. Despite the effect of global slowdown on exports of merchandise and services, the service sector is expected to maintain a healthy growth rate.

The demand for mechanical seals is witnessing an upward trend, which is mainly due to growing manufacturing as well as the investments in various infrastructure projects globally and the growth of the industrial sectors across the world, which can be attributed to the increase in supportive investment, more particularly the capex spending in India and foreign investment policies throughout the globe. Furthermore, the rising employment of mechanical seals in the core sector industry will contribute to the expansion of the market for mechanical seals. According to various surveys, the global mechanical seals market is projected to grow by about USD 1.37 billion with a CAGR of 5.27% by 2027 whereas the global mechanical seals market stands at USD 4.15 billion as of date.

The focus of Indian government on infrastructure and capital expenditure is expected to crowd-in private investment thus benefitting the capital goods industry.

Indian mechanical seals industry is one of the fastest growing markets in the world. Government focus on irrigation projects, drinking water supply, sanitation, infrastructure, core sector such as refineries, power projects and urban housing is expected to drive the demand for mechanical seals in the various core industrial sectors. A series of capacity expansion drives and greenfield projects in the refinery, petrochemical, steel, cement and other allied industries will help the mechanical seals market.

With the growth in manufacturing, process industries and various infrastructure projects the Indian market for mechanical seals is expected to grow at a sustained pace over the medium- and long-term. The technological innovations in this sector are contributing towards a drive for a greener and sustainable manufacturing.

The buoyant activity in the industrial and manufacturing sectors will increase the demand for mechanical seals. At the same time the growth in aftermarket sales is expected to be one of the key factor for stimulating demand for mechanical seals. As the primary function of a mechanical seal is to prevent leakage of liquid or gas, it is one of the critical components in various types of pumps, compressors and agitators, amongst others. High-pressure or high-temperature fluids if leaked to the environment can cause various damages and hence even a small leakage or damage will make it necessary to replace mechanical seals. The majority of mechanical seals replacements involve like for like replacements, which means that the end-users which uses mechanical seals will continue to employ and replace mechanical seals at a periodic interval of 12 to 18 months during the life time of the equipment, which generally is 25 years. As most of the mechanical seals have a relatively short lifespan and as such their frequent replacement is required.

Mechanical seals are manufactured by using steel and alloys, silicon carbide, tungsten carbide, carbon amongst other exotic materials. Therefore, the fluctuating price of steel and other related material will have an impact on the sales of the final product. As the substantial revenue is earned through exports, the uncertain geographical and political instability can also have an impact on the revenue of the Company. We have put in place sound mitigation strategies for threats arising out of commodity prices and exports slowdown. We are allocating necessary resources and investing adequately to ramp our capacities to cater to the increasing order intake.

During the year under review, Mechanical seals worth Rs. 10,096.96 lakhs (Previous Year - Rs. 7101.68 lakhs) were sold. Out of the above export accounted for Rs. 6175.36 lakhs (Previous Year Rs. 4325.57 lakhs)

As growth in global and in Indian economy is expected to increase and due to the impetus especially of the Indian Government on infrastructural investment, the Company expects a healthy growth in the Indian market for mechanical seals. The Export growth is expected to be slower due to the global slowdown but on the positive side the trade restrictions because of Russia-Ukrain war has created a huge surge in demand for mechanical seals from Russia and other CIS countries. The impact of a global slowdown on domestic consumption in India though limited, can affect the capex projects in private sector to some extent.

Risks to the outlook are primarily to the downside. With the ever-evolving political situation, high inflation globally and rising interest rates, the global growth is likely to be affected. The increased competition in domestic market due to the possible slowdown in exports is expected to lead to aggressive price competition, impacting the bottom lines. The withdrawal of cheaper liquidity may also lead to a slow-down in the capex cycle in the industry and may hurt the demand for mechanical seals.

Internal Control Systems are in place:

• To safeguard the Companys assets from loss or damage.

• To keep constant check on cost structure.

• To provideadequate financial and accounting controls and implement accounting standards.

The system is improved and modified continuously to meet with changes in business condition,statutory and accounting requirements.

During the year under review internal controls were adequately supported by periodic review by the management and thereafter will be reviewed by the Internal Auditor.

The following statements cover the financial performance review.

(Rs In lakhs)

Income earned

(Rs. In Lakhs)

Year 2024-25 has proven to be a year of resilience setting multiple records, pivotal moments and achievements. By keeping the SILs core sustainability principles like Environmental Protection, Social Commitments and Governance Culture (ESG) at center of operations, we have attained new heights in business. We have adopted appropriate employee engagement and Health and Safety measures. We have also implemented measures like restructuring of departments, investment in expansion of plants & infrastructure, employee friendly policies, Diversity & Inclusion, Employee Engagement activities, Communication Meetings with all employees, state of art offices and enhanced Health & Safety. By focusing our business around core strengths, we have become significantly more profitable, better balanced and more cost-efficient. With the execution of our HR strategy, we have been able to support our employees through the challenging conditions and embarked the high quadrant in the employee engagement survey. This execution of strategy includes continued efforts to raise awareness and facilitating open dialogues through several initiatives. We steered our efforts on Skill and Knowledge Enhancement, Process Improvisation, Retention of Employees, Leadership Development, Performance Management and Employee Engagement. We could maintain the attrition rate below industry standards due to a pleasant work environment, prioritization of growth of employees, offering competitive compensation and benefits, Development of Infrastructure, Communication Mechanisms, Succession Planning and Reward and Recognition. Healthy and co-operative employee relations at all plants ensured support to the business growth as a result of these collaborative and collective efforts, we are well-equipped to deliversustainable growth and have established Sealmatic as a strong brand in the market.

The Company had 359 employees (346 Male and 13 Female) on its roll as on 31^st March, 2025.

1. During the year under review, the payment towards interest was Rs. 38.55 lakhs as against Rs. 33.33 lakhs during the Previous year 2023-24, (increase by about 15.66%). Whereas the profit before tax increased by Rs. 772.77 from Rs. 1353.73 lakhs as on 31^st March, 2024 to Rs.2126.51 lakhs as on 31^st March, 2025 (increase 57.08%).

The Return on Net worth as on 31^st March, 2025 was 15.50% whereas the same was 11.23% as on 31^st March, 2024. The Increase to the tune of 61.46 % in the Return on Net worth.

Disclosure of Accounting Treatment

The financial statements are prepared as per the Accounting Standards applicable to the Company.

Disclosures with respect to demat suspense account/unclaimed suspense account.

No shares are in the demat suspense account or unclaimed suspense account as on 31.03.2025.

This document contains statements about expected future events and financials of the SIPL, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements may not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the Management Discussion and Analysis Section of this Annual Report.