Simplex Castings Ltd Management Discussions

Simplex Castings Limited (SCL) is premier manufacturing organisation in India with global business presence. SCL possess well equipped manufacturing facilities such as Cast Iron Foundry, and Heavy Engineering & Fabrication Plant. Each plant is associated with modern machining facilities and a central machine shop with several machine tools including large number of CNCs, EPC Division to take up Turn-Key Projects, Design wing with modern computer setup and aided tools. SCL is complete one stop shop for all engineering components manufacturing needs, castings, forging, fabrication, machining, assembly, equipment building, in-house testing, EPC division and Designing facility. SCL Units are situated in Bhilai, & Rajnandgaon, state of Chhattisgarh, the central part of India, most mineral rich & densely industrialized province in India. SCL is catering to various industrial sectors like Steel, Railways,

Power, Mining, Cement, Sugar, Chemicals, Earthmovers,

Machines Tools, Ship Building, Oil & Gas and Defense. Your Company believes in developing new products in line with changing technology and requirement of customer. Simplex has been pioneer in its filed for several landmark activities:

Pioneer to Export steel plant equipments to Russia.

Pioneer to Enter into tech tie-up with Tyazhprom Export Russia for Turnkey Projects in India.

Pioneer to bring advance Japanese Technology for

Sinter Plant in India for SAIL - Bhilai Steel Plant for complete Sinter Plant -III, executed on Turnkey basis in consortium with Mitsui / Kawasaki & Hitachi Zosen of Japan.

Pioneer to install on turnkey basis, Mini Blast Furnace of 350 Cubs. Mt for Southern Iron Steel Company at

Salem (India) with Chinese Technology.

Pioneer to Design, engineering and supply of equipment for hot rolling stackle mill, executed for

Salem Steel Plant as per SMS / Germanys design.

Pioneer in manufacturing undercarriage (bogie) for

Railway Locomotives.

Pioneer in manufacturing Sucker rod pumping units for

Oil & Gas, for ONGC, India

ECONOMY OVERVIEW GLOBAL ECONOMY

In calendar year 2024, the global economy demonstrated considerable resilience, achieving a growth rate of 3.3% according to the International Monetary Funds (IMF) World Economic Outlook. This growth occurred despiteofuneven implications for progress across different regions and sectors. Headline inflation eased to 5.8%, moving closer to central bank targets and triggering the initial round of interest rate cuts in several major economies.

Labour markets remained relatively robust, with unemployment rates hovering near historic lows, although there were signs of slight softening. Strong nominal wage increases, coupled with declining inflationary pressures, led to an improvement in real household incomes.

Nevertheless, private consumption stayed muted, reflecting cautious consumer sentiment and persistent uncertainty.

Geopolitical tensions, especially in Eastern Europe and the Middle East-intensified, contributing to global instability. These developments disrupted trade, investment flows, and financial markets, continuing to weigh on business confidence and long-term investment planning.

India continues to be a bright spot in the global economy, demonstrating resilience amidst persistent geopolitical tensions, tightening global financial conditions, and rising trade uncertainties. According to the International Monetary

Fund (IMF), India is projected to remain the fastest-growing major economy with GDP growth expected at 6.2% in 2025 and 6.3% in 2026. The World Bank projects growth to slighltly moderate from 6.5% in FY 2024-25 to 6.3% in FY 2025-26, as gains from earlier monetary easing and regulatory reforms are tempered by global headwinds and policy uncertainty.

This growth continues to be supported by strong domestic demand, a resilient services sector, and relatively limited dependence on exports, which buffers the economy from external shocks. After a period of high inflation, slowing wage growth, and elevated interest rates, some of these pressures are showing signs of easing. The Union Budget introduced measures aimed at reviving consumption and is expected to support recovery. The Reserve Bank of Indias shift to an accommodative monetary policy stance, signaled by an interest rate cut in early April 2025, aims to further support growth amid global headwinds. Indias consistent performance amid global turbulence reflects the strength of its macroeconomic fundamentals and reinforces its role as a key driver of global growth.

OUTLOOK GLOBAL

The global economy is at a critical juncture, with significant internal and external imbalances and vulnerabilities. Major policy shifts are underway, generating a new wave of the uncertainties with potentially significant functioning of the global economy. The global economic outlook for 2025 is characterized by slower growth, with the US trade policy playing a significant the landscape. The average US duties remain historically elevated, continuing to exert a drag on global trade and activity. This uncertainty surrounding US trade policy is expected to contribute to slower global growth, with advanced economies projected to grow by only 1.2%. The ongoing war situations in Russia and Ukraine and escalating war situation in middle east countries can present significant finances and raising inflation. Disruption of trade routes can lead to higher shipping and insurance costs and volatility in financial markets which may lead to investors shift towards safe-haven assets. The emerging geopolitical landscape presents a cautious and complex picture of the global economy for the year 2025. Escalating trade tensions and policy uncertainty and escalating war situations are major drivers for the economic outlook. The divergent and swiftly changing policy positions and deteriorating sentiment could lead to tighter global financial conditions.

Demographic shifts threaten fiscal sustainability, while the recent cost-of-living crisis may reignite social unrest.

The financial market landscape is marked by increased uncertainty and market volatility, against the backdrop of stretched valuations within many segments of financial markets. Global growth is projected to decline, following a period of steady but underwhelming performance. As per the IMF report of April 2025, the global growth is expected to decline to 2.8% in 2025 and 3% in 2026, down from 3.3% in both 2024 and 2023. Advanced economies are projected to grow at 1.4% in 2025, with the US slowing to 1.8% and the Europe at 0.8% and emerging market and developing economies are expected to slow down to 3.7% in 2025 and 3.9% in 2026.

INDIA

Indias growth outlook for FY 2025-26 is likely to be supported by resilient domestic drivers, even though the overhang of global headwinds remains. Consumption will be buoyed by personal income tax cuts, easing food inflation, positive monsoon outlook and the RBIs rate cuts. The Union Budget announced cuts in personal income tax amounting to 1 trillion. The Indian Meteorological Department (IMD) has forecast monsoon rainfall to be above normal in 2025, which bodes well for continued rural recovery. Consumer confidence has shown an uptrend, and the RBIs policy easing and liquidity support will aid consumption demand. Central government capex is budgeted at 11.2 trillion for FY 2025-26, versus the revised estimate of 10.2 trillion for FY 2024-25. Rising trends in capacity utilisation in the manufacturing sector, along with strong balance sheets of banks and corporates, are expected to support private capex, though the impact of global trade frictions on confidencelevels needs to be watched. While the US tariffs scenario could take some time to solidify, early indications suggest that the realignment of global supply chains could benefit India in the medium term. Lower international oil prices are expected to bolster Indias macroeconomic fundamentals, along with the continued fiscal consolidation and adequate forex reserves. The RBI has projected Indias consumer inflation to soften further to 4% in FY 2025-26.

With some likely softening of external demand, the IMF expects Indias economy to grow at 6.2% (this forecast was based on original April tariff announcements by the US), whereas the RBI has projected growth to be steady at 6.5% during FY 2025-26. These projections reflect a potentially modest dent to Indias growth performance due to the global slowdown, even as the domestic growth impulses remain supportive.

Global Market

World finished steel demand and crude steel production declined marginally by 2% and 1%, respectively, in 2024.

In the last five years, global steel demand has moved sideways. However, these global numbers hide wide variations across different markets. China, which accounts for nearly half of the worlds steel industry, recorded a 5% decline in consumption in 2024, mainly due to the structural challenges that its real estate industry is witnessing. India has been a key driver of global steel demand growth in recent years. Developed economies, including the US, the EU, Japan and Korea recorded a contraction last year, while demand increased in ASEAN, GCC, Turkey and

Vietnam. Broadly, similar geographical divergences were observed in terms of crude steel production as well in 2024. World crude steel production stood at 1,885 MnT in 2024. The US administration has removed exemptions on its

25% tariff on steel imports (under section 232 for national security reasons) and brought derivative products under the coverage of tariffs. Tariff on steel products in the US is currently on par for most exporters, other than China, though a subsequent trade deal with the UK could possibly exempt the countrys steel exports from the duty. Countries like Japan and Korea have lost their erstwhile preferential access to the US steel market (though one needs to watch out for the outcomes of US bilateral trade talks for a clearer picture), which could lead to trade diversions. From an India perspective, the direct impact of the tariff action is likely to be negligible on steel exports, but there could be indirect effects of trade diversions and of increased tariffs on exports of steel-intensive manufacturing sectors, besides the negative macro impulse of tariffs on global steel demand. worldsteel Associations estimates suggest that

Chinas steel demand could marginally decline in 2025 at a lower pace than last year. While the downturn in Chinas housing market is likely to continue, the pace of decline is likely to be contained amid various targeted measures by the Chinese government. Chinas fiscal and monetary policy stance is likely to be supportive, which would support demand from other sectors, particularly infrastructure. lower interest

Robust growth in steel demand is expected in India, Turkey and MENA in 2025, while the trade-related concerns could weigh on the steel demand outlook in ASEAN and Latin

America. The outlook for steel demand in Japan and Korea is clouded by constraints on domestic demand, including high costs, low affordability and labour scarcity, besides the weak external environment. In the US and Europe, easing of financial conditions and a weak base could support bottoming out of demand, though the trade-related developments need to be watched. At a global level, steel demand is likely to be broadly flat to slightly improving, depending on the ongoing progress of trade negotiations.

Indian Market

CRISIL (March 2025 forecast) has projected Indias steel consumption growth to remain robust at 9-10% in FY 2025-

26 with flat steel products (projected growth of 12-14%) leading the demand growth, in comparison to long steel products (projected growth of 5.5-7.5%). The following sectoral factors will have a bearing on Indias near-term steel consumption outlook:

The trend of rising public capex on infrastructure is expected to continue. The central government has budgeted a capex of H 11.2 trillion in FY 2025-26. Long-term interest-free loans for capex purposes to state governments would boost their capex spending. Modernisation of railways and development of high-speed highway corridor projects are thrust areas in the development of transport infrastructure.

Residential real estate launches are expected to accelerate in FY 2025-26, with reduced inventory of units. Commercial real estate is witnessing strong traction, helped by the rapid growth of Global Capability Centres and Data Centres.

The public housing programme has received a renewed thrust with the extension of the PM Aawas

Yojana (PMAY) with a target of building 2 crore additional houses over five years. Guidelines under the extended phase of PMAY were finalised last year, and the schemes implementation is expected to gather momentum in FY 2025-26.

Private capex is being supported by the governments production-linked incentive schemes, improving trend in capacity utilisation, strong balance sheets and easing monetary policy. While global trade concerns create some overhang over business confidence, realignment of global supply chains is supportive in the medium term.

The demand outlook for consumer durables is broadly positive, with recovery in rural consumption, improving trend witnessed in consumer confidence, rates and easing of food inflation.

Auto industry growth is expected to be steady amid the launch of new models (especially EVs), increased infrastructure activity, replacement demand and government incentives for e-buses. Auto exports have robust medium-term prospects, though the near-term trade-related concerns may need to be watched.

The imperative for defence preparedness, government policy thrust on indigenisation of Indias defence procurement and expected increase in defence spending globally are likely to support growth in defence-related manufacturing and exports.

While Indias domestic steel demand growth scenario continues to be robust, trade-related developments need to be watched. Import of finished steel (including semis) was elevated at 10.5 MnT in FY 2024-25, whereas exports slowed amid rising protectionist measures in other countries.

Accordingly, India was a net importer of steel for the second consecutive year in FY 2024-25, with the magnitude of net imports being the highest in several years, barring the exception of FY 2015-16. The provisional safeguard duty, enforced with effect from 21 April 2025 for 200 days, is expected to act, to some extent, as a speed bump for the import of steel into India, though any possible trade diversions arising out of the removal of exemptions for steel import duty by the US, the production demand imbalance in China and the trade remedial measures by other jurisdictions (especially against China) need to be watched carefully.

In order to increase the availability of iron ore in line with the National Steel Policy, more than 120 mines have been auctioned in India since 2016. The government is also trying to improve the domestic availability of coking coal by setting up coking coal washeries. The Indian steel industry is estimated to have added more than 50 MTPA capacity in the last five years. The momentum of investments is expected to continue into the coming years, for capacity building to meet additional demand, for value addition and for decarbonisation. The government has created a green steel taxonomy, which has been an important step to catalyse the industrys decarbonisation efforts. Broadly, the outlook for the Indian steel industry for FY 2025-26 is one of cautious optimism, with resilient domestic demand drivers and monitorable global dynamics.

OPPORTUNITIES & THREATS

The thrust on infrastructure development, road construction, coal production, power generation, housing policies is driving the demand for castings from the foundry industry. Besides, the Governments focus on manufacturing in India and other policies will also drive demand for castings. The Company is in a position to grab the opportunity in the years to come and confident to improvise the growth of turnover and profitability. The Company has necessary and well equipped production facilities to reap the benefits of the growth opportunities.

OPERATIONAL AND FINANCIAL PERFORMANCE

Our Company revenue from operations rose by 40.73 % at Rs 17188.36 Lacs compared to Rs 12213.05 Lacs in

FY 2023-24. The Profit Before Tax (PBT) and Profit After Tax (PAT) for the year 2024-25 are Rs 1984.63 Lacs and

Rs 1513.11 Lacs respectively, as against Rs 311.04 Lacs and Rs 239.20 Lacs respectively during the previous year ended 31st March, 2024.

With the improvement of economic conditions in these markets, we anticipate further increase in sales volume and profitability in the near future.

KEY FINANCIAL RATIOS:

The Company has identified following ratios as key financial ratios for Operations:

Reasons for variation over 25%: a. Debt equity ratio has significantly decreased in current year on account of increase in Shareholders equity. b. Debt Service Coverage ratio has significantlyincreased in current year on account of proportionate increase in profit in current year compared to earlier year. c. Return on Equity ratio has significantly increased in current year on account of proportionate increase in profits in current year as compared to earlier year. d. Inventory Turnover Ratio has significantly increased in current year on account of proportionate increase in revenue from operations in current year compared to earlier year. e. Trade Receivable Turnover Ratio has significantly decreased in current year on account of increase in average receivables. f. Trade payable ratio has increased in current year on account increase in purchases and decrease in trade payables. g. Net Capital Turnover Ratio has decreased in current year due to increase in average working capital. h. Net Profit ratio has significantly increased in current year on account of proportionate increase in profit in current year compared to earlier year. i. Return on Capital employed has significantly increased in current year on account of proportionate increase in profit in current year compared to earlier year.

LONG-TERM AND MEDIUM-TERM STRATEGY

The Company has strategies for business development to cop up with the dynamic situation evolving everyday globally. Your Company is subject to all the positive & negative effects of the change in the global scenario. Your Company works on long term and medium term strategies to deal with the challenges:

a. Long-term Strategy: a) Widening of customer base b) Entry into new industry segments c) Development of new casting products for existing customers

b. Medium-term Strategy: a) Improvement in product quality b) Control & minimising rejections c) Cost reduction

RISK CONCERN

Business risks exist for any enterprise having national and international exposure. Your Company also faces some such audit findings covering operational, financial risks, the key ones being - a longer than anticipated delay in economic revival, unfavorable exchange rate fluctuations, emergence of inflationary conditions, Competition in

Indian and Global market and any unexpected changes in regulatory framework.

The Company is well aware of these risks and challenges and has put in place mechanisms to ensure that they are managed and mitigated with adequate timely actions.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate internal audit and control systems. Internal auditors comprising of professional firms of Chartered Accountants have been entrusted the job to conduct regular internal audits at all units/ locations and report to the management the lapses, if any. Both internal auditors and statutory auditors independently evaluate the adequacy of internal control system. Based on the audit observations and suggestions, follow up, remedial measures are being taken including review and increase in the scope of coverage, if necessary. The Audit Committee of Directors, in its periodical meetings, review the adequacy of internal control systems and procedures and suggest areas of improvements.

The internal control system ensures compliance with all applicable laws and regulations, facilitates in optimum utilization of resources and protect the Companys assets and investors interests. The Company has a clearly defined organizational structure, decision rights, manuals and operating procedures for its business units to ensure orderly and efficient conduct of its business.

The Company has a whistle blower policy so that Directors and Senior personal can report their genuine concern. The Audit Committee of the Board on Quarterly basis reviews significant and other areas and provides guidance on further strengthening the internal controls framework.

HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS

Human resource is considered as key to the future growth strategy of the Company and looks upon to focus its efforts to further align human resource policies, processes and initiatives to meet its business needs. In order to focus on keeping employees abreast of technological and technical developments, the Company provides opportunity for training and learning. Industrial relations at all the units and locations are cordial. As on March 2025, the company had 287 employees on its rolls.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement.

Important factors that would influence the Companys operations include cost of raw materials, tax laws, interest and power cost and economic developments and such other factors within the country and the international economic and financial developments.