Simmonds Marshall Ltd Management Discussions

BUSINESS OVERVIEW:

The main business of the Company is manufacturing and sale of Industrial Fasteners.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

India remained one of the fastest-growing major economies during FY 2025-26, with real GDP growth for the year estimated at 7.7%, well ahead of earlier offcial projections, supported by robust domestic consumption, sustained government capital expenditure, GST 2.0 reforms and successive repo rate cuts by the Reserve Bank of India. For FY 2026-27, growth is expected to moderate to a range of around 6.4% to 6.8%, as per estimates from the RBI, IMF and other institutions, reflecting the fading of some cyclical tailwinds and continuing global uncertainties, including elevated crude oil prices arising from tensions in West Asia.

In the automotive sector, which is a key consumer of fasteners, India recorded its highest-ever annual sales across all vehicle categories in FY 2025-26 - the first industry-wide sales record since FY19. The passenger vehicle (PV) segment closed the year with record sales of 4.64 million units, a growth of about 7.9%, aided by a strong second half following the GST 2.0 rate reduction effective September 2025, multiple repo rate cuts and revised income tax slabs that improved a_ordability and consumer sentiment. The two-wheeler segment expanded by around 10.7% to 21.71 million units, commercial vehicles grew by about 12.6% to 1.08 million units, and three-wheelers grew by about 12.8% to 0.84 million units - together marking the industrys first all-category record year in seven years. Vehicle exports across categories also surged by about 24%, strengthening Indias position as a global automotive manufacturing and export base. The penetration of electric vehicles (EVs) in both the passenger and two-wheeler segments continues to rise, supported by government incentives and expanding charging infrastructure.

The continued emphasis on infrastructure development, including the expansion of highways and expressways, is enhancing logistics efficiency, which indirectly benefits the fastener industry. However, challenges such as volatility in commodity and raw material prices - accentuated by elevated crude oil prices and geopolitical tensions in West Asia - environmental compliance pressures, and the need to adopt advanced manufacturing technologies persist.

We remain focused on leveraging these industry developments, prioritizing capacity enhancement, technological upgradation, and cost optimization to strengthen its market position. We continue to invest in R&D to develop innovative, high-strength, and lightweight fasteners, aligning with evolving customer needs, including for the EV and renewable energy sectors.

OPPORTUNITY, THREATS, RISKS & CONCERN

Indiaseconomicgrowthcontinuestobeunderpinnedbystrongdomesticconsumption,afavorabledemographic profile, and a supportive policy environment, providing significant opportunities for the automotive and industrial fastener segments. The governments initiatives to promote EV adoption, increased infrastructure spending, GST rationalization and policies favoring manufacturing localization present avenues for growth. The Reserve Bank of Indias accommodative monetary stance during the year, coupled with government fiscal measures, is expected to continue supporting investment and consumption in the near term. However, elevated and volatile crude oil prices and a generally firmer USD/INR trajectory warrant close monitoring, given their bearing on input costs and export competitiveness.

However, the industry faces risks including:

• Commodity Price Volatility: Fluctuations in steel, alloy and crude-oil-linked input prices can impact input costs and margins.

• Supply Chain Disruptions: Geopolitical tensions - particularly the ongoing West Asia conflict - trade policy shifts, and global uncertainties may affect raw material availability and freight costs.

• Regulatory Changes: Evolving environmental and safety norms require agility in adapting products and processes.

• Weather-Related Risks: Extreme weather conditions or monsoon variability can impact rural demand, indirectly affecting auto demand.

• Exchange Rate Volatility: While the rupee has shown resilience, global financial uncertainties may lead to volatility.

We aim to proactively manage these risks through strategic sourcing, operational efficiencies, and maintaining a balanced product mix catering to both domestic and export markets. We continue to monitor macroeconomic developments to remain agile in our pricing and procurement strategies while ensuring operational resilience.

OUTLOOK - GLOBAL AND DOMESTIC:

Global economic growth is expected to remain resilient, though geopolitical tensions, elevated crude oil prices and trade policy uncertainties continue to pose headwinds. Advanced economies are expected to see modest growth, while emerging markets, including India, will continue to drive global growth momentum.

Domestically, Indias outlook for FY 2026-27 remains among the strongest of major economies, with growth estimates in the range of 6.4% to 6.8%, moderating from FY 2025-26s robust pace as cyclical tailwinds fade. Continued government focus on infrastructure investment, MSME support and manufacturing localization, along with the full-year impact of GST 2.0 reforms, is expected to sustain industrial and consumption demand. Retail inflation remains within the Reserve Bank of Indias tolerance band, providing a conducive environment for growth without compromising fiscal prudence.

The automotive sector, a significant consumer of fasteners, closed FY 2025-26 on its strongest footing in seven years and is expected to sustain steady demand into FY 2026-27, supported by:

• Continued growth in PV and SUV sales: Including higher EV penetration

• Sustained growth in the commercial vehicle segment: Driven by infrastructure investments and e-commerce logistics demand

• Continued expansion in the two-wheeler and three-wheeler segments: Aided by rural income growth, GST relief and improving credit availability These trends present opportunities for the fastener industry to scale up and innovate with advanced, lightweight, and high-strength fasteners required for modern vehicle designs, including EV platforms. We remain committed to capitalizing on these opportunities by expanding our manufacturing capabilities, enhancing our export focus, and investing in technology and sustainability initiatives to align with customer and regulatory expectations. By maintaining our focus on quality, innovation, and customer service, we are well-positioned to achieve sustainable growth and deliver long-term value to our stakeholders in the evolving market environment.

WAY FORWARD:

As we move into FY 2026-27, we will continue to focus on strengthening our position in the domestic and international fastener markets by leveraging technological advancements, expanding capacity, and enhancing operational efficiencies. Our commitment to quality, cost competitiveness, and customer-centricity will guide our initiatives, while our focus on sustainability will drive investments in clean energy, waste reduction, and environmentally friendly product innovations. By aligning our strategies with industry shifts such as the EV transition, GST-led demand normalization and infrastructure-led growth, we are confident in our ability to navigate challenges - including commodity price and geopolitical volatility - and create enduring value for all stakeholders.

EXPORTS:

During the year total export stood at Rs. 2143.34 Lakhs as against of Rs. 2056.48 lakhs in the previous year. The Company expects consistent improvement in export performance in the coming years.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Internal Control Systems are designed to ensure the reliability of financial and other records and accountability of executive action to the managements authorization. The internal control systems are reviewed by the top management and by the audit committee of the board and proper follow up action is ensured wherever required. Regular audit committee meetings are held where statutory auditors as well as internal auditors participate and internal audit reports are discussed and reviewed.

FINANCIAL AND OPERATIONAL PERFORMANCE:

During the year under review, the Company has achieved the total revenue from operations of Rs. 22,284.05 Lakhs as against Rs. 19,315.58 Lakhs in the previous year and has earned profit after tax of Rs. 1638.17 Lakhs as against profit after tax of Rs. 895.75 Lakhs in the previous year.

Details of significant changes in key financial ratios:

* There has been no significant change in key financial ratios ^ Increase in profit has resulted in improvement in the ratio # Repayment of debt obligations during the year % Increase in working capital

@ Increase in revenue and operations resulted in improvement in ratio

- Declined due to an increase in working capital, which led to higher capital employed without corresponding growth in revenue

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

* Increase in profit has resulted in improvement in the ratio

HUMAN RESOURCES, INDUSTRIAL RELATIONS, LEARNING AND DEVELOPMENT:

The Company believes that Human Resources are its key assets. The total number of employees of the Company is three hundred and eighty. The Companys HR policy focuses on developing the skill and competencies of all the employees, facilitating team work and total employee involvement, providing a happy work environment to the employees and support to their families and remaining a socially responsible Company contributing to the society.

Learning is given the utmost importance in the Company. Training programs focus on improving employees current skills and competencies as well as developing them for their future roles as part of their career development. The Company ensures overall development of every employee and all inputs are provided to reach the expert level of their skill and competency.

In the Company, HR processes are aligned to make employees feel that they are a part of the Company family. The Company creates the platform for employees to voice their opinion and make suggestions to improve the working environment. The Company maintains regular communication with employees to make them feel connected with the Company and perform their jobs most effectively.

The Company focuses on inculcating the habit of continuous improvement and motivating employees to participate in improvement activities for the organisation. The Company continues to maintain its record of industrial harmony.

HEALTH, SAFETY AND ENVIRONMENT:

The Company strives to manufacture products with zero pollution and zero accidents, by continuously improving its environmental and occupational health and safety management systems. The Company accords paramount importance to the health and safety of its employees. The factory has obtained certification for conformance to ISO 45001-2018 (Occupational Health and Safety Management System), ISO 14001-2015 (Environmental Management System), ISO 9001-2015 (Quality Management System) and IATF 16949-2016.

CAUTIONARY STATEMENT:

Statement in the Management Discussion and Analysis describing the Companys objectives, expectations, estimates or predictions may be "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could influence the Companys operations include a downtrend in the automobile industry - global or domestic or both, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, foreign currency fluctuations and interest costs.