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 continues to remain one of the fastest-growing major economies, with GDP growth estimated at 6.5% in FY 2024-25 and projected to continue at similar levels in FY 2025-26, supported by robust domestic consumption, increasing government capital expenditure and improving rural demand due to favorable monsoons. The Manufacturing PMI has remained strong, indicating sustained industrial activity despite global challenges. In the automotive sector, which is a key consumer of fasteners, India continues to be the worlds largest two-wheeler manufacturer, third in heavy truck production, and fourth in passenger vehicle manufacturing. The passenger vehicle (PV) segment recorded its highest-ever sales of 4.3 million units in FY 2024-25, with a notable increase in SUV sales and record-high exports. The penetration of electric vehicles (EVs) in both the passenger and two-wheeler segments continues to rise, supported by government incentives under the PM E-DRIVE Scheme and policies to expand charging infrastructure.

The commercial vehicle (CV) segment witnessed a slight degrowth in FY 2024-25 but is expected to recover, supported by infrastructure investments and replacement demand for older vehicles. The two-wheeler segment grew by 9.1% during FY 2024-25, aided by improved connectivity in rural and semi-urban areas, while the tractor segment is poised for a recovery with favorable monsoon conditions and pre-buying ahead of the implementation of Bharat Stage TREM V emission norms.

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 raw material prices, 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

Indias economic growth is underpinned by strong domestic consumption, a favorable demographic 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, and policies favouring manufacturing localization present avenues for growth.

The potential moderation of interest rates by the Reserve Bank of India, coupled with stable crude oil prices and USD/INR exchange rates, is expected to support investment and consumption. Inclusion in the Global Bond Index could lead to foreign investment inflows, stabilizing currency volatility and supporting export competitiveness. However, the industry faces risks including:

• Commodity Price Volatility: Fluctuations in steel and alloy prices can impact input costs and margins.

• Supply Chain Disruptions: Geopolitical tensions, trade policy shifts, and global uncertainties may affect raw material availability.

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

• Weather-Related Risks: Extreme weather conditions or monsoon failures 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 projected to remain steady at around 3.2% in CY 2025, despite elevated inflationary pressures and geopolitical uncertainties. Advanced economies are expected to see modest growth, while emerging markets, including India, will continue to drive global growth momentum.

Domestically, Indias outlook remains robust, driven by sustained consumer demand, infrastructure investments, and a stable policy environment. The governments Interim Budget for FY 2025-26, focusing on agriculture, MSMEs, investments, and exports, along with significant allocations for infrastructure projects, is expected to support industrial growth. Retail inflation has moderated, providing a conducive environment for growth without compromising fiscal prudence.

The automotive sector, a significant consumer of fasteners, is projected to witness steady demand, supported by:

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

• Recovery in the CV segment: o Driven by infrastructure investments and e-commerce logistics demand

• Expansion in the two-wheeler and tractor segments due to improving rural incomes.

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 2025-26, we will continue to focus on strengthening its 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 and infrastructure-led growth, we are confident in our ability to navigate challenges and create enduring value for all stakeholders.

EXPORTS:

During the year total export stood at Rs. 2056.48 Lakhs as against of Rs. 1611.91 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. 19,315.58 Lakhs as against Rs. 17,684.56 Lakhs in the previous year and has earned profit after tax of Rs. 895.75 Lakhs as against profit after tax of Rs. 341.86 Lakhs in the previous year.

Details of significant changes in key financial ratios:

Sr. No Key Ratios	2024-25	2023-24	Remarks
1 Debtors Turnover (times)	7.51	7.76	*
2 Inventory Turnover (times)	2.99	2.81	*
3 Debt Service Coverage (times)	1.80	1.35	@
4 Current Ratio (times)	1.32	1.19	*
5 Debt Equity Ratio (times)	1.07	1.33	*
6 Net Capital Turnover (times)	8.62	14.42	-
7 Net Profit Margin (%)	4.64	1.93	^
8 Return on Capital Employed (%)	19.50	15.02	@
9 Operating Profit Margin (%)	12.99	11.05	*

* There has been no significant change in key financial ratios ^ Increase in profit has resulted in improvement in the ratio

@ 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:

Particulars	2024-25	2023-24
Return on Net worth*	22.43%	10.01%

* 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.