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 of350 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

Building on a Strong Foundation for Sustainable Growth

FY2025-26 was a defining year for Simplex Castings Limited as the Company strengthened its position in Indias engineering and heavy manufacturing sector. Against the backdrop of robust infrastructure spending, increased industrial investments, and growing demand for indigenous engineering solutions, the Company continued to enhance its operational capabilities, expand its customer base, and improve financial performance.

During the year, Simplex Castings remained focused on operational excellence, customer centric execution, prudent financial management, and expanding its presence across high growth sectors. The Companys consistent emphasis on quality, engineering expertise, and disciplined execution enabled it to capitalize on emerging opportunities while maintaining a resilient business model.

ECONOMY OVERVIEW GLOBAL ECONOMY

Over the past few years, the world has faced several challenges across multiple fronts. While the Russia-Ukraine conflict continued to simmer, tariff barriers between major economies kept the business environment volatile, creating uncertainty across sectors. The global economy, however, showed resilience and grew by 3.4% in 2025, maintaining the momentum from the previous year. Policy support in key economies, including rate cuts by central banks amid easing inflationary headwinds and the lower-than-anticipated impact of US tariffs, supported growth. The business environment remained volatile as changing tariff rates and shifting announcements caused frontloading of trade in different phases. Another key support to growth came from a spurt in tech sector investments, particularly in the US, which spurred trade in related products.

World trade volume (of goods and services) grew by 5.1% in 2025, picking up pace from 3.5% in the previous year. Capital inflow into the technology sector helped the US economy grow by 2.1% in 2025, though the momentum slowed towards the end of the year because of a 43-day government shutdown.

Increased fiscal spending and easy monetary policy helped the Euro Area record accelerated growth of 1.4%. China recorded 5% growth, sticking to its target for the year despite sustained weakness in the property market, thanks to resilient exports and government measures to boost consumption.

When US-bound shipments reduced, China diversified exports to other regions, leading to robust 5.5% growth in its merchandise exports.

INDIAN ECONOMY

The Indian economy defied global trends and recorded strong growth of 7.7% in FY 2025-26, surpassing the 7.1% expansion in the previous year, according to the advance estimates of the National Statistical Organisation.

Private consumption and capital formation both recorded improved performance. Consumption was supported by a favourable policy framework, with personal income tax concessions for the middle class and rationalisation of GST rates, the latter particularly helping the economy in the second half of the year.

The imposition of steep US tariffs affected merchandise exports, which recorded a minor increase during the year. Services exports, however, recorded robust growth. Although the current account deficit widened to some extent, it remained at a comfortable level.

Capital expenditure by the central and state governments expanded in FY 2025-26, maintaining the momentum of public capex for infrastructure sectors. Fiscal consolidation continued, with the Centres fiscal deficit narrowing to an estimated 4.4% of GDP, supported by tighter control over non-capex spending.

OUTLOOK

GLOBAL

A growing crisis in the Middle East escalated significantly by February 2026, clouding the world economic outlook, threatening to derail the growth momentum of the previous two years. In this backdrop, the IMFs April 2026 World Economic Outlook, Global Economy in the Shadow of War, forecast that the global growth would slow down to 3.1% in 2026 from 3.4% a year back. The reference scenario assumes that the conflict turns out to be short-lived and that average crude oil price for the year settles into low 80s (dollar a barrel). If this assumption does not play out and the conflict or its after-effects drag on longer, then there is a substantial downside risk to the growth projections. The IMF forecasts for 2026 indicate a more pronounced slowdown in Emerging Markets and Developing Economies than in the Advanced Economies. The conflict has impacted the world economy through various channels. The supply shock, particularly impacting the trade flows and production of oil, gas and derivative products, has been severe, causing spikes in energy prices and logistics costs, as well as many secondary quantity and price effects for various commodities down the value chain, including fertilisers, metal products, and packaging materials.

These effects are likely to reverse in a gradual manner, after the end of military operations, with likely continuation of some geopolitical risk premium into market prices and the lingering effect of physical damages suffered by energy facilities and certain industries in the region during the war. The supply shock has stalled the process of wind-down of inflationary pressures caused by the previous supply chain disruption following the pandemic and then the Ukraine war. The IMF has projected global headline inflation to increase from 4.1% in 2025 to 4.4% in 2026. Inflationary risks during the crisis caused bond yields to harden and monetary policy expectations to turn cautious. While the US Fed was previously expected to continue lowering its policy rate (having cut the policy rate by 75 basis points in 2025), those expectations have been diluted after the war began.

INDIA

The Indian economy continued on a strong footing with robust growth momentum and low inflation until the Middle East crisis flared up. The strong fundamentals helped the economy navigate through the effects of the crisis, related to supply chain disruptions and export challenges. The government has undertaken several policy measures to absorb some of the pricing effects and support exporters. The crisis is likely to hit the growth momentum, increase inflationary risks and widen the current account deficit.

The RBI has projected the economic growth to slow down to 6.9% in FY 2026-27 after three straight years of over 7% growth. While there is significant uncertainty with regard to the intensity and duration of the after-effects of the crisis, current projections indicate inflation rising above 4% and current account deficit widening to about 1.5% of the GDP. These shifts are directionally adverse, but the projected levels are still short of the levels that have caused macroeconomic instability in the past, and thus underscore the advantage of strong fundamentals at the outset of the crisis. The Indian Meteorological Department (IMD), in its preliminary assessment, has forecast below-normal monsoon rainfall in 2026 because of El- Nino effects. This poses some risks to the outlook for agriculture and rural economy, after a robust trend in rural indicators in recent quarters. Notwithstanding the near-term headwinds, Indias medium-term growth prospects continue to be encouraging. Recent economic reforms, including labour codes and GST rationalisation, bolster the competitiveness of Indian industries. The momentum of public capex continues, with the government budgeting 11.5% growth in capex to TI2.2 trillion in FY 2026-27. The backdrop for private capex continues to be favourable, with healthy balance sheets, pick-up in credit growth and improving capacity utilisation levels.

Economic & Industry Environment

The global economy continued to witness moderate growth during FY2025-26 amid geopolitical uncertainties, inflationary pressures, and evolving trade dynamics. Despite these challenges, industrial manufacturing, infrastructure investments, and energy transition projects continued to support demand for engineering products across major economies.

India remained one of the fastest-growing large economies, supported by strong government capital expenditure, manufacturing-led growth, rising private investments, and policy initiatives such as Make in India, Atmanirbhar Bharat, PM Gati Shakti, and the National Infrastructure Pipeline. Continued investments in railways, defence, steel, mining, energy, and industrial infrastructure created a favourable environment for engineering and capital goods companies.

The engineering sector also benefited from increasing localization of manufacturing, higher infrastructure spending, modernization of industrial facilities, and the growing preference for reliable domestic suppliers capable of delivering complex engineering solutions.

Business Performance Review

During FY2025-26, the Company delivered a healthy operational and financial performance driven by improved execution, strong customer relationships, and continued demand across its core business segments.

The Company achieved Revenue from Operations of ^202.90 crore, reflecting healthy growth over the previous year. Profitability also improved, with EBITDA increasing to ^39.82 crore, while Profit After Tax stood at ^21.26 crore, demonstrating the Companys ability to convert revenue growth into sustainable earnings.

The year also witnessed healthy order inflows from leading industrial customers across steel, heavy engineering, and infrastructure sectors. Continued execution of high-value projects and disciplined cost management supported overall business performance while strengthening the Companys market position.

Operational Highlights

Operational excellence remained a key focus area throughout the year.

The Company continued to improve manufacturing efficiency through better production planning, process optimization, resource utilization, and effective project execution. Strong coordination across engineering, manufacturing, procurement, and quality functions enabled timely execution of customer orders while maintaining high quality standards.

A major milestone during the year was the receipt of Research Designs and Standards Organisation (RDSO) approval, enabling the Company to manufacture and supply railway wagon bogie and cast steel components. This achievement represents a strategic expansion into Indias rapidly growing railway manufacturing sector and significantly enhances the Companys long-term growth opportunities.

The Company also secured important business from reputed organizations including Thyssenkrupp, SMS India, BHEL, while further strengthening its long-standing association with SAIL. These order wins reinforce customer confidence in the Companys engineering capabilities, product quality, and execution excellence.

During the year, the Company also strengthened its working capital management through the adoption of the TReDS platform, enabling faster realization of receivables and improving liquidity while supporting efficient capital utilization.

Financial Review

Our Company revenue from operations rose by 18.04 % at Rs. 202.90 Cr in FY 2025-26 compared to Rs. 171.88 Cr in FY 2024-25. The Profit Before Tax (PBT) and Profit After Tax (PAT) for the year 2025-26 are Rs. 29.28 Cr and Rs. 21.26 Cr respectively, as against Rs. 19.85 Cr and Rs. 15.13 Cr respectively during the previous year ended 31st March, 2025.

The Companys financial performance reflects the strength of its diversified business model and disciplined operational execution.

Revenue growth during the year was supported by healthy demand across core industries, improved project execution, and a diversified customer portfolio. Better operating leverage, efficient cost management, and disciplined production planning contributed to higher profitability.

The Company continued to maintain a prudent financial approach by focusing on efficient working capital management, timely receivable collections, and optimized utilization of financial resources. Improved liquidity and better cash flow management further strengthened the Companys financial position and enhanced its ability to support future growth initiatives.

Management remains committed to maintaining financial discipline while investing selectively in technology, manufacturing capabilities, and business development opportunities that create long-term shareholder value.

KEY FINANCIAL RATIOS:

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

Particulars	Year ended on 31-03-2026	Year ended on 31-03-2025	% of variance
Current ratio	1.97	1.40	40%
Debt- Equity Ratio	0.44	1.36	-68%
Debt Service Coverage ratio	4.68	3.40	38%
Return on Equity ratio	0.06	0.01	369%
Inventory Turnover ratio	3.13	2.96	6%
Trade Receivable Turnover Ratio	4.50	4.57	-2%
Trade Payable Turnover Ratio	9.05	5.97	52%
(Services Procured)
Net Capital Turnover Ratio	2.59	4.15	-38%
Net Profit ratio	0.10	0.09	15%
Return on Capital Employed	0.06	0.06	-1%
Return on Investment	NA	NA

Reasons for variation over 25%:

a. Current ratio has significantly increased in current year on account of increase in Inventories & decrease in Short Term Borrowings, trade payables & other current liabilities.

b. Debt equity ratio has significantly decreased in current year on account of increase in Shareholders equity.

c. Debt Service Coverage ratio has significantly increased in current year on account of proportionate increase in profit & repayment of long term borrowings in current year compared to earlier year.

d. Return on Equity ratio has significantly increased in current year on account of proportionate increase in profits & increase in equity share capital and other equity in current year as compared to earlier year.

e. Trade payable ratio has increased in current year on account increase in purchases and decrease in trade payables.

f. Net Capital Turnover Ratio has decreased in current year due to increase in average working capital.

Opportunities

The long-term outlook for the engineering and heavy manufacturing industry remains encouraging.

Indias continued investments in transportation infrastructure, railways, defence manufacturing, steel capacity expansion, mining, renewable energy, and industrial modernization are expected to generate sustained demand for high-quality engineering products.

The Companys recent entry into the railway sector through RDSO approval opens a significant new addressable market, while increasing emphasis on domestic manufacturing and supply chain localization creates additional opportunities across multiple industrial segments.

The Companys diversified customer base, established engineering expertise, integrated manufacturing capabilities, and long-standing market presence position it well to benefit from these structural growth drivers.

Risks & Concerns

Like all engineering businesses, Simplex Castings operates in an environment influenced by macroeconomic conditions, industrial investment cycles, commodity price movements, and competitive market dynamics.

Key risks include fluctuations in raw material prices, changes in customer capital expenditure, project execution delays, supply chain disruptions, foreign exchange volatility affecting export business, and evolving regulatory requirements.

The Company actively monitors these risks and follows a disciplined risk management framework focused on customer diversification, operational efficiency, prudent financial management, quality assurance, and continuous process improvement to mitigate potential business impacts.

Risk Management

Building a Resilient Business Through Proactive Risk Management

Operating in the engineering and heavy manufacturing sector requires the ability to identify, assess, and respond to a wide range of business risks. At Simplex Castings Limited, risk management is an integral part of strategic planning and day-to-day operations. The Company follows a proactive approach to managing risks with the objective of protecting stakeholder value, ensuring business continuity, and supporting sustainable long-term growth.

The Board of Directors, together with the senior management team, periodically reviews the Companys risk profile and evaluates mitigation strategies to address both internal and external challenges. The risk management framework is designed to strengthen operational resilience while enabling the Company to capitalize on emerging business opportunities.

Risk Management Framework

The Companys risk management process comprises four key stages :

Risk Identification : Continuous monitoring of internal and external factors that may impact business performance.

Risk Assessment : Evaluation of the likelihood and potential impact of identified risks.

Risk Mitigation : Implementation of appropriate controls, policies, and operational measures to minimize risk exposure.

Risk Monitoring : Periodic review of risks and mitigation plans by the management and the Board to ensure their continued effectiveness.

This structured approach enables timely decision-making and supports the Companys longterm strategic objectives.

Key Business Risks and Mitigation Measures

Risk Area	Potential Impact	Mitigation Strategy
Economic Slowdown	Lower industrial investments and reduced customer spending may impact order inflows.	Diversified presence across multiple industries and focus on long-term customer relationships reduce dependence on any single sector.
Raw Material Price Volatility	Fluctuations in steel and other input prices may affect profitability.	Continuous monitoring of input costs, efficient procurement practices, and improved operational efficiency help mitigate the impact.
Customer Concentration	Dependence on a limited number of customers may increase business risk.	The Company continues to diversify its customer base across industries and geographies while strengthening relationships with existing customers.
Project Execution	Delays in project execution could affect profitability and customer satisfaction.	Detailed project planning, close coordination between departments, regular progress reviews, and strong quality control systems support timely execution.
Working Capital	Delayed receivable Collections may impact liquidity.	Continuous monitoring of receivables, disciplined credit management, and utilization of the TReDS platform enhance working capital efficiency.
Regulatory & Compliance	Changes in laws, environmental regulations, or industry standards may affect operations.	Regular compliance reviews, internal audits, and adherence to statutory and regulatory requirements ensure compliance across operations.
Technology & Cybersecurity	Increasing dependence on digital systems may expose the Company to cybersecurity threats.	Secure IT infrastructure, access controls, regular data backups, and system monitoring help safeguard critical business information.
Human Capital Risk	Availability and retention of skilled professionals remain important for business continuity.	Continuous employee training, skill development initiatives, performance management, and employee engagement programs help build a capable workforce.

Internal Control Systems

The Company has established an adequate system of internal controls designed to safeguard assets, ensure compliance with applicable laws and regulations, maintain accurate financial reporting, and promote operational efficiency.

Internal control procedures are periodically reviewed by management and supported through internal audits and oversight by the Audit Committee of the Board. Continuous monitoring and regular evaluation help strengthen governance practices while ensuring transparency and accountability across business operations.

Human Resources

The Companys employees remain its most valuable asset and a key driver of sustainable growth. Simplex Castings continues to promote a culture of professionalism, teamwork, technical excellence, and continuous learning. Regular training programmes, skill enhancement initiatives, safety awareness, and employee engagement activities contribute to building a motivated and capable workforce.

Outlook

The management remains optimistic about the Companys long-term growth prospects.

Indias strong economic fundamentals, increasing infrastructure investments, manufacturing expansion, railway modernization, defence indigenization, and continued focus on domestic industrial development are expected to provide significant opportunities for the engineering sector.

With its six-decade engineering legacy, diversified customer base, expanding presence in high-growth sectors, robust manufacturing capabilities, and unwavering commitment to quality, Simplex Castings is well positioned to capitalize on these opportunities. Going forward, the Company will continue to focus on operational excellence, customer satisfaction, technology adoption, financial discipline, and sustainable value creation.

Management remains confident that these strategic priorities will strengthen the Companyscompetitive position and support long-term profitable growth while delivering lasting value to shareholders and all other stakeholders.

Strengthening Business Resilience

Over the years, Simplex Castings has developed a resilient business model supported by:

- Diversified end-user industries.

- Long-standing customer relationships.

- Strong engineering expertise.

- Integrated manufacturing operations.

- Disciplined financial management.

- Robust quality systems.

These strengths enable the Company to respond effectively to changing market conditions while maintaining operational stability.

Looking Ahead

As the business environment continues to evolve, the Company remains committed to strengthening its enterprise risk management framework by enhancing operational controls, improving governance practices, investing in technology, and fostering a culture of accountability and continuous improvement.