SKF India Ltd Management Discussions

MANAGEMENT ?ISGUSSION AND ANALNSIS REPORT

Global Economic Overview

Global growth stood at 3.4% in 2025, with projections pointing to a slight moderation to 3.1% in 2026 before stabilising at 3.2% in 2027. Easing inflationary pressures, resilient private sector investments, and continued momentum in technology-led transformation underpin this phase of steady expansion, even as trade policy uncertainties and geopolitical developments continue to influence the global economic environment. Despite persistent challenges, growth remained relatively resilient, aided by supportive policy measures and sustained investment activity.

Geopolitical tensions continue to shape global trade and economic dynamics. The prolonged Russia-Ukraine conflict has continued to disrupt energy markets, commodity flows, and agricultural trade, particularly impacting Europes energy landscape. In the Middle East, escalating tensions since late February 2026 disrupted shipping movements through the Strait of Hormuz and heightened concerns around other strategic trade corridors, including the Red Sea routes. At the same time, strategic rivalry between the United States and China has intensified through tariff measures, tighter technology restrictions, and competition for critical minerals, accelerating supply chain diversification through friendshoring and nearshoring strategies.

Beyond the major global powers, instability across several emerging markets added pressure on trade, investment, and capital flows. Sanctions, rising defence spending, and shifting geopolitical alliances reshaped global priorities and economic engagements. In response, businesses reassessed sourcing strategies, investment plans, and long-term geographic exposure with greater urgency. Simultaneously, the evolving geopolitical landscape is prompting economies to strengthen domestic manufacturing capabilities, accelerate clean energy transitions, expand electric mobility ecosystems, and invest in digital infrastructure, creating new pathways for medium- term growth.

Amid evolving global economic dynamics, easing inflation offered a measure of relief, with headline inflation standing at 4.1% in 2025 and projected to ease further to 3.4% by 2027, as softer commodity prices and improving supply conditions lend support. However, energy markets are expected to remain volatile due to geopolitical tensions, supply disruptions, and shifting demand patterns, keeping oil prices largely range- bound and creating periodic pressure on energy-importing economies such as India. While trade barriers, policy uncertainty, and geopolitical conflicts may continue to weigh on near-term sentiment, India stands to gain from ongoing global supply chain diversification and rising investments in manufacturing, electronics, clean energy, and digital infrastructure, consolidating its position as a key global manufacturing and growth hub over the medium term.

Outlook

While the geopolitical volatility in the Middle East undoubtedly introduces significant risks to the global energy supply chain, it also serves as a rigorous stress test that is forcing a necessary evolution in economic resilience. In the short term, the pressure on oil & gas prices will continue to create a challenging inflationary environment that demands disciplined fiscal management and careful navigation from central banks to protect consumer purchasing power. However, geopolitical tensions, supply disruptions, and shifting demand patterns are likely to keep energy markets volatile, holding oil prices largely range- bound and creating periodic pressure on energy-importing economies such as India. By addressing the fragilities of the Strait of Hormuz and other maritime chokepoints now, the international community is moving towards a more decentralised and transparent trade model. This transition requires a difficult balancing act, maintaining price stability today while investing in the infrastructure of tomorrow, but it ultimately paves the way for a global economy that is more grounded, self-sufficient and capable of sustaining growth despite the complexities of a shifting geopolitical landscape.

Indian Economic Overview

Even as the global economy navigates geopolitical uncertainty, trade fragmentation, and volatility arising from the Middle East conflict, India continues to demonstrate strong economic resilience. As highlighted in the Economic Survey FY 2025-26, Indias GDP was recorded at 7.7%, reinforcing its position as the worlds fastest- growing major economy for the fourth consecutive time. Growth remained supported by robust domestic demand, with private consumption accounting for 61.5% of GDP as per the First Advance Estimates, aided by moderating inflation, stable employment conditions, improving real incomes, and resilient rural demand supported by strong agricultural performance.

Investment momentum in India remains strong, with Gross Fixed Capital Formation at nearly 30% of GDP, supported by sustained public capital expenditure, infrastructure expansion, and improving private sector confidence. Although the ongoing Middle East crisis and disruptions in global oil & gas supply chains continue to pose risks through elevated energy prices, inflationary pressures, and higher logistics costs, Indias robust macroeconomic fundamentals, fiscal discipline, expanding manufacturing base, and accelerating investments in digital and clean energy infrastructure position the economy favourably for sustained medium-term growth.

Consumption patterns are also evolving, with spending increasingly shifting towards discretionary categories such as consumer durables, housing, travel, and digital services, creating a virtuous cycle of demand, investment, and output that strengthens the economys resilience against global volatility. With inflation expected to remain benign, and CPI is projected at 4.6% for FY 2025-26, the RBI has adopted a calibrated monetary stance, maintaining the repo rate at 5.25% following a series of rate cuts during 2025. The resulting lower cost of capital is expected to support credit growth, further boosting consumption and investment activity. Additionally, the proposed overhaul of the GST framework, the most significant since its implementation, is likely to enhance consumer affordability and stimulate demand across sectors such as automotive, electronics, and construction.

Agriculture and Allied Sectors

Agriculture and allied sectors grew by an estimated 3.1% in FY 2025-26, as favourable monsoon conditions and steady performance in allied activities such as livestock and fisheries supported growth. The increasing contribution of these relatively stable segments supported overall agricultural resilience despite periodic variability in crop output.

Industry

The industrial sector grew by an estimated 6.2% in FY 2025-26. Manufacturing growth reached 8.4% in the first half of the year, contributing to overall industrial growth. Construction activity, a key component of the industrial sector, remains supported by sustained public capital expenditure and ongoing infrastructure investments. Strong demand for materials such as steel and cement reflects continued momentum in infrastructure and real estate development. At the same time, medium- and high- technology industries account for 46.3% of Indias total manufacturing value added, highlighting the sectors increasing shift towards more advanced and value-driven manufacturing capabilities. Notably, Indias industrial momentum has remained resilient despite shortterm stress in the oil and gas sector.

Declines in crude oil and natural gas output, along with moderation in electricity generation, weighed on infrastructure output during parts of the year. However, strong growth in sectors such as steel, cement, automobiles and infrastructure- linked manufacturing helped offset these pressures. Continued public investments, domestic demand resilience and government-led initiatives such as Production Linked Incentive (PLI) schemes have supported industrial activity and strengthened manufacturing competitiveness. The sustained expansion in construction goods and infrastructure-linked industries highlights the broader structural strength of the Indian industrial economy, even amid global geopolitical uncertainties and energy market volatility.

Services

The services sector grew by an estimated 9.1% in FY 2025-26, reflecting expansion across service segments and reinforcing its contribution to overall economic growth. The services sector continues to deepen its contribution to Indias economy, with its share in GDP rising from a pre-covid average of 51.3% during FY 2015-16 to FY 2019-20 to 53.6% in H1 FY 2025-26. Sustained expansion in trade, hospitality, transport, communication and broadcasting services led this growth, complemented by steady momentum in financial, real estate and professional services. The increasing share underscores the resilience of Indias consumption-driven economy and the growing importance of services as a key engine of economic growth.

(Source: https://www.pib.gov.in/PressReleasePage. aspx?PRID=2219912&lang=1&reg=3&utm_)

Outlook

Looking ahead, real GDP growth for FY 2026-27 is expected at 6.8-7.2%, broadly aligned with Indias estimated potential growth rate of around 7%. Domestic demand, supported by improving investment intentions, healthier balance sheets across households and firms, and continued public infrastructure spending, is projected to remain the primary growth driver.

However, global uncertainties, including slower growth among key trading partners, trade policy shifts and financial market volatility, may intermittently affect exports and investor sentiment. Ongoing trade negotiations with major partners, including the United States, could help reduce external uncertainties over time. The macroeconomic outlook remains broadly positive, supported by stable inflation dynamics, sound fiscal management, strengthening financial institutions and continued structural reforms. As firms and households adapt to evolving policy changes and global conditions, India appears well-placed to sustain its growth momentum while maintaining resilience against external shocks.

Indian Automotive Industry Overview

Indias automotive sector stands as a key pillar of the countrys manufacturing economy, supported by rising domestic mobility needs, infrastructure-led freight demand, increasing urbanisation, and deeper integration into global automotive supply chains. The industry produced approximately 34.7 Million vehicles in FY 2025-26, reinforcing Indias position among the worlds largest automotive manufacturing hubs. Contributing nearly 7.1% to the national GDP and close to half of manufacturing GDP, the sector remains central to industrial growth, employment generation, exports, and overall economic momentum.

Despite periodic volatility arising from geopolitical tensions, global trade disruptions, supply chain realignments, and tariff uncertainties, the medium-term outlook for the Indian automotive industry remains structurally strong. Rising income levels, improving affordability, expanding financing access, and sustained investments in infrastructure and logistics continue to underpin domestic demand. At the same time, India is increasingly emerging as a preferred global manufacturing and export base for automotive OEMs.

Reflecting this momentum, Indias automobile exports reached a record 6.64 Million units in FY 2025-26, registering robust growth of 24%, the fastest in the last seven years, as strong demand for passenger vehicles and two-wheelers across global markets fuelled the expansion.

The Passenger Vehicle segment recorded its highest-ever sales of 4.64 Million units in FY 2025-26, growing 7.9% over the previous year. GST rationalisation, personal income tax relief measures, lower financing costs following successive RBI repo rate cuts, and improving consumer sentiment collectively propelled this growth. The segment also achieved record exports of 0.90 Million units, registering growth of 17.5%, with sustained demand from markets across the Middle East, Africa, and Latin America.

The Two-Wheeler segment surpassed its previous peak to achieve record sales of 21.7 Million units, reflecting growth of 10.7% during the year. Improving urban consumption, rising discretionary spending, favourable policy support through GST 2.0 implementation, and increasing electric vehicle adoption drove demand. Export performance remained equally strong, with two-wheeler exports reaching a record 5.18 Million units, up 23.4% over FY 2024-25. Expanding product portfolios, improving global acceptance of Indian brands, robust product quality, and currency advantages further strengthened export competitiveness.

The Three-Wheeler segment also delivered record performance, with sales reaching 0.83 Million units, reflecting growth of 12.8% over the previous year. Rising economic activity, increasing urban and semiurban mobility requirements, and higher movement of passengers and goods supported demand growth. Expansion of electric autorickshaws and the issuance of new ICE vehicle permits by select state governments further aided the segment. Strong demand from Sri Lanka and African markets drove export growth of 50.1% to approximately 0.46 Million units.

Similarly, the Commercial Vehicle segment achieved its highest- ever sales of 1.08 Million units in FY 2025-26, registering growth of 12.6% over the previous year. Strong freight demand, lower financing costs due to repo rate reductions, implementation of GST 2.0 reforms, and sustained public capital expenditure towards infrastructure development continued to support growth in the segment. Commercial vehicle exports also rose by 17.4% to 0.095 Million units, with neighbouring countries and the Middle East remaining key export markets.

Beyond cyclical volume growth, the automotive sector is also witnessing a structural shift towards higher efficiency, reliability, safety, and technological sophistication. Bearings continue to play a mission-critical role across engines, transmissions, wheel assemblies, and emerging electric drivetrains, directly influencing vehicle durability, energy efficiency, noise reduction, and operational performance.

As electrification accelerates and performance standards continue to rise, demand for high-precision, technologically advanced bearing solutions is expected to strengthen further. This increasing technological intensity, combined with Indias expanding automotive manufacturing scale and export competitiveness, continues to provide strong longterm demand visibility for the bearings ecosystem.

Segment-wise sales of automobiles in India from FY 2021-22 to FY 2025-26 (in Million)

Segment	FY 2025-26	FY 2024-25	FY 2023-24	FY 2022-23	FY 2021-22
Two-Wheelers	21.70	19.60	17.97	15.86	13.57
Passenger Vehicles	4.64	4.30	4.21	3.89	3.07
Commercial Vehicles	1.08	0.95	0.97	0.96	0.72
Three-Wheelers	0.83	0.74	0.69	0.49	0.26

Outlook

Building on the strong momentum witnessed during the second half of FY 2025-26, the industry remains optimistic about sustained growth across all vehicle categories in FY 2026-27. However, uncertainties arising from the ongoing West Asia conflict, including volatility in crude oil and commodity prices, currency fluctuations, and disruptions in global shipping routes, continue to pose near-term risks for the sector. A stable geopolitical environment and easing supply chain pressures would be critical in strengthening industry confidence and supporting continued growth momentum for the Indian automotive sector.

Indian Automotive Aftermarket Industry

The Indian automotive aftermarket industry remains structurally attractive and relatively resilient across economic cycles, supported by an expanding vehicle parc, increasing average vehicle age and rising vehicle utilisation across segments. Sustained demand for replacement parts, lubricants, tyres and precision automotive components across Passenger Vehicles, Two-Wheelers, Commercial Vehicles and Electric Vehicles continues to support longterm industry growth.

The sector is also witnessing gradual formalisation, with organised service networks

Indian Automotive Bearing Industry Landscape

The Indian bearings market is recording strong growth momentum, supported by expanding industrialisation, automotive demand, and increasing localisation of manufacturing. The market was valued at around USD 5.2 Billion in 2025 and is expected to grow to nearly USD 12.0 Billion by 2034, reflecting a robust CAGR of around 9.7% during 2026-2034. Rising automotive production, increasing industrial automation, infrastructure development, and the growing need for energy-efficient machinery across sectors are driving this growth. The rapid adoption of electric vehicles, advancements in precision engineering, and evolving manufacturing technologies are further strengthening demand for high-performance bearing solutions. At the same time, Government initiatives aimed at strengthening Indias automotive and manufacturing ecosystem are expected to create significant longterm opportunities for the Indian bearings industry. Schemes such as the Production Linked Incentive (PLI) programme for automobiles and auto components, PM E-Drive, the Advanced Chemistry Cell (ACC) battery initiative, the National Logistics Policy, and the Semicon India programme are accelerating investments across electric vehicles, advanced mobility solutions, domestic manufacturing, and supply chain infrastructure. These initiatives are anticipated to drive higher vehicle production across Passenger Vehicles, Two-Wheelers, Commercial Vehicles, And Electric Mobility segments, increasing demand for high-performance and precision- engineered bearings.

The shift towards localisation and import substitution under these programmes is also encouraging domestic manufacturing of critical automotive components, including bearings, reducing dependence on imports and strengthening Indias position within global supply chains. In addition, expanding investments in logistics infrastructure, railways, industrial equipment, renewable energy, and electric drivetrains are widening the application scope for bearings beyond conventional automotive demand. As vehicles become more technologically advanced and electrification gathers pace, the need for specialised, energy-efficient, and high-durability bearing solutions is set to rise further, creating sustained growth opportunities for technologically advanced bearing manufacturers in India and distribution channels gaining deeper penetration. Consumers are increasingly preferring branded, quality-assured components and organised workshops, while digital integration across spare parts procurement and service workflows is improving accessibility, efficiency and customer experience. Growing localisation and technology-enabled servicing platforms are further strengthening the long-term growth outlook for the auto component and bearings industry.

Beyond revenue contribution, the aftermarket business holds strategic importance for industry participants by providing greater stability during periods of moderation in original equipment demand. The segment also supports stronger customer engagement, enhances brand visibility and offers opportunities for relatively stable, value-added margins through service-led offerings and lifecycle support solutions.

Technology Trends and EV-Led Opportunity

Technology trends and the accelerating adoption of alternative mobility solutions are reshaping Indias automotive landscape at an unprecedented pace. In FY 2025-26, nearly one in every four passenger vehicles sold in India was powered by either CNG or electric technology, with combined sales reaching approximately 1.23 Million units and accounting for 26% of the overall passenger vehicle market, up from 22% in the previous year. When hybrid vehicles are included, the share of alternative powertrains rose to over one-third of the market, reflecting a decisive shift towards cleaner and more efficient mobility solutions.

CNG vehicles continue to drive current industry volumes, supported by lower running costs and increasing availability across mass-market models. CNG-powered passenger vehicles accounted for 21.98% of retail sales in FY 2025-26, compared to 19.60% in FY 2024-25, translating into volumes of nearly

10.3 Lakh units during the year.

At the same time, EV adoption is accelerating rapidly from a smaller base, reflecting the growing shift towards cleaner and technology- driven mobility solutions. Indias electric vehicle (EV) market delivered another strong year in FY 2025-26, with total registrations crossing 2.5 Million units, representing a 24% year-on-year increase. EV penetration also improved to approximately 8.5% of total vehicle registrations, up from 7.7% in the previous financial year. While the pace of adoption continues to strengthen steadily, the market remains at an early-stage relative to the Governments long-term target of achieving 30% EV penetration by FY 2029-30.

This accelerating transition towards electric mobility is increasingly influencing bearing design, materials and application requirements across both global and domestic automotive markets. EVs place greater emphasis on low-friction, high-speed and noise-optimised bearings, particularly for electric drivetrains and wheel-end applications, as manufacturers focus on improving efficiency, driving range and overall vehicle performance. While EV penetration remains gradual in several segments, the transition represents a structural rather than cyclical shift, requiring sustained investments in engineering, testing and application-specific solutions. Beyond electrification, broader technology trends such as lightweighting, efficiency enhancement and predictive maintenance are also reshaping demand across the bearing industry. OEMs are increasingly prioritising precision-engineered solutions that improve vehicle efficiency, support durability and reduce total cost of ownership. These evolving requirements are reinforcing the importance of advanced manufacturing capabilities, material innovation and deep application expertise across the automotive value chain.

Regulatory Transition Reshaping Automotive Technologies

Indias automotive industry is preparing for the next phase of emission and fuel-efficiency regulations through the proposed implementation of BS VII norms and tighter Corporate Average Fuel Efficiency (CAFE) standards. While BS VII regulations are expected to further reduce vehicular emissions through stricter pollutant control and real-world driving emission requirements, CAFE norms are compelling OEMs to improve fleet-level fuel efficiency and reduce carbon emissions across vehicle portfolios.

These evolving regulations are accelerating the adoption of lightweight materials, low-friction systems, hybrid technologies and electrified powertrains across the automotive ecosystem. For component manufacturers, the transition is increasing demand for precision-engineered, energy-efficient and application-specific solutions that support higher operating speeds, improved thermal performance and lower energy losses. The regulatory push towards cleaner and more efficient mobility is therefore expected to drive sustained technology upgradation across both conventional and electric vehicle platforms.

Outlook

The outlook for the Indian automotive bearings industry in FY 2026-27 remains positive, supported by steady growth across Passenger Vehicles, Two-Wheelers and Commercial Vehicles. Demand momentum is expected to be driven by improving domestic consumption, continued infrastructure activity, rural recovery and sustained mobility requirements across segments. Given their critical application across engines, transmissions, drivetrains and wheel systems, bearing demand is expected to remain closely aligned with overall automotive production trends and evolving vehicle technologies.

In addition to OEM demand, the automotive aftermarket segment is expected to remain a key growth driver for the bearings industry, supported by Indias expanding vehicle parc, ageing vehicles and increasing replacement requirements. Rising vehicle utilisation, growth in organised aftermarket channels and increasing preference for high-performance and branded components are expected to support steady replacement demand across Passenger Vehicles, Commercial Vehicles and Two- Wheelers. At the same time, the increasing adoption of CNG, hybrid and electric vehicles is expected to create additional opportunities for advanced and application-specific bearing solutions.

Structural Growth Drivers

Rising Vehicle Production and Ownership

Indias automotive industry continues to witness strong growth in vehicle production and ownership, supported by rapid urbanisation, rising income levels, infrastructure development and increasing mobility requirements across urban and semi-urban markets. In FY 2025-26, Indias automobile industry recorded its highest-ever wholesale volumes, with overall vehicle sales crossing 28 Million units, while passenger vehicle sales reached a record level of 4.64 Million units. The sustained expansion of the vehicle parc continues to support long-term demand for automotive components, including bearings, across OEM and replacement markets.

Electrification and Technology Shifts

The gradual transition towards electric mobility is creating demand for specialised bearing solutions designed for higher efficiency, reduced friction and enhanced precision. Indias EV registrations crossed 2.5 Million units in FY 2025-26, reflecting continued momentum across Two-Wheelers, Three-Wheelers and Passenger Vehicles. At the same time, evolving regulatory frameworks such as BS VII and CAFE norms are accelerating the adoption of lightweight, energy-efficient and technologically advanced automotive systems, prompting manufacturers to strengthen engineering and application- specific capabilities.

Aftermarket Expansion

Indias expanding and ageing vehicle population continues to generate strong replacement demand across automotive categories. The organised automotive aftermarket remains an important contributor to industry growth, supported by rising vehicle utilisation, increasing preference for branded components and growth in service and maintenance networks. Industry estimates indicate that the Indian automotive aftermarket has continued to witness healthy growth momentum, driven by higher vehicle ownership and increasing demand from hinterland and semi-urban markets.

Export and Localisation Opportunities

India is consolidating its position as a global automotive manufacturing and export hub, supported by strong export growth and policy-led localisation initiatives. Auto component exports have crossed USD 22.9 Billion in recent years, while Government initiatives such as the INR 259.38 Billion Production Linked Incentive (PLI) scheme for the automobile and auto component industry are accelerating domestic manufacturing of advanced automotive technologies. The scheme mandates a minimum 50% domestic value addition (DVA) for eligibility, encouraging localisation across critical automotive components and systems.

Company Overview

SKF India Limited (also referred to as ‘SKF, SKF India, or ‘the Company) is a global engineering company serving both industrial and automotive sectors globally. Its portfolio includes bearings, seals, lubrication systems, mechatronics, and reliability solutions, among others used across diverse applications.

SKF India Limited operates as part of the SKF Group and represents the Groups automotive business in India. Historically, the Company served both automotive and industrial applications. During FY 2025-26, the automotive and industrial businesses were demerged into separate entities. Following this separation, SKF India Limited now focuses exclusively on the automotive segment.

The Company delivers high-precision engineering solutions that enhance vehicle performance, safety, efficiency and reliability across both OEM and aftermarket channels. Backed by the technological expertise and global legacy of the SKF Group, SKF India has built a strong presence through advanced manufacturing capabilities, a well- established distribution network and long-standing customer relationships.

The Company aligns its product development and operational capabilities with evolving mobility trends, including electrification, advanced vehicle technologies and sustainability priorities. By combining global innovation with strong local execution, SKF India remains well-positioned to support Indias automotive ecosystem while driving long-term value creation.

Financial Overview

SKF Indias standalone Revenue from Operations for FY 2025-26 stood at INR 21,295.9 Million compared to INR 18,453.4 Million (from continuing operations) in the previous year.

Profit After Tax (PAT) for the year ended 31st March, 2026, decreased from INR 2,633.2 Million in FY 2024-25 to INR 1,172.2 Million in FY 2025-26.

Statement of Profit and Loss (INR Million) Income

Particulars	FY 2024-25	FY 2025-26
Revenue from Operations	18,453.4	21,295.9
Other Income	306.5	770.5
Total Income	18,759.9	22,066.4

Expenses

Particulars	FY 2024-25	FY 2025-26
Cost of Materials Consumed	8493.4	8,527.2
Purchases of Stock-in-Trade	596.2	2,599.3
Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-Trade	(729.6)	316.2
Employee Benefit Expense	1865.4	1,734.0
Finance Costs	0	1.7
Depreciation and Amortisation Expense	527.2	630.2
Other Expenses	4455.8	5,636.8
Total Expenses	15,208	19,445.4

Profitability (from continuing operations)

Particulars	FY 2024-25	FY 2025-26
Profit Before Tax (from continuing operations)	3551.5	2,621.0
Exceptional Item	0	271.0
Profit after Exceptional Item	3,551.5	2,350.0
Total taxes	918.3	1,177.8
Profit for the Year	2,633.2	1,172.2

Key Ratios

Particulars	FY 2024-25	FY 2025-26	% Change	Reason for Change
Debtors Turnover (Times)	2.3	2.7	17%	NA
Inventory Turnover (Times)	1.1	1.9	73%	NA
Interest Coverage Ratio (Times)	0.00	1,914	0.00	NA
Current Ratio (Times)	2.8	2.1	(25%)	NA
Debt-to-Equity Ratio (Times)	0.0	0.0	0.0	NA
Operating Profit Margin (%)	22%	15%	(31%)	NA
Net Profit Margin (%)	14%	6%	(61%)	NA
Return on Net Worth (%)	10.14%	8.82%	(13%)	NA

Disclosure of Accounting Treatment

Where in the preparation of the financial statements, a treatment different from that prescribed by an Accounting Standard has been adopted, such departure should be clearly disclosed. The disclosure should specify the nature of the deviation and include managements rationale for considering the alternative treatment to provide a more accurate and true-and-fair representation of the underlying business transaction.

Risk Management

SKF India follows a structured Enterprise Risk Management (ERM) framework aligned with the global best practices of the SKF Group. The framework is designed to ensure that risk assessment and mitigation are integrated into strategic planning, operational decision-making, and governance processes.

Comprehensive Risk Identification and Assessment

Risk assessments are conducted to identify, evaluate and prioritise risks spanning financial, operational, regulatory, technological, environmental, and human resources, providing a holistic view of potential exposures.

Risk Consolidation and Governance Oversight

Identified risks are consolidated by designated business and functional representatives and reviewed periodically by senior management. The consolidated risk assessment is presented to the Risk Management Committee to provide oversight.

Integration with Strategy and Execution

Insights from risk assessments are incorporated into strategy development and operational planning to ensure informed decisionmaking at every level. Designated risk owners are responsible for implementing mitigation measures, monitoring emerging risks and ensuring timely follow-up.

Transparency and Stakeholder Communication

The Company maintains transparency through periodic internal reviews and external disclosures. A summary of key risks, mitigation priorities, and governance processes is shared annually with stakeholders, providing visibility into the Companys risk oversight framework.

Key Risks and Mitigation Strategy

Risk Type	Impact	Measures
(Si) Geopolitical and Supply Chain Tensions	Global disruptions, trade restrictions, and regional instability may affect supply chain continuity and input cost stability.	SKF India is strengthening localisation initiatives, enhancing dual sourcing strategies and optimising inventory management. Increased deployment of digital supply chain solutions and a more regionalised operational model are improving agility and responsiveness.
Information Security and Cybersecurity	As digitalisation accelerates, exposure to cybersecurity threats and data protection requirements has increased.	SKF India continues to invest in IT security infrastructure, employee awareness programmes, and periodic security audits, aligned with Group-wide data protection standards to safeguard operational continuity.
Climate and Environmental Impact	Climate change, water scarcity, and evolving environmental regulations present both operational and reputational risks.	The Company is advancing its sustainability agenda through water neutrality initiatives, decarbonisation targets, renewable energy adoption, and climate scenario risk assessments, ensuring preparedness for future regulatory and environmental challenges.
Talent and Leadership Risks	Access to skilled talent in critical domains remains essential for sustaining innovation and operational excellence.	Focused initiatives in leadership development, employee engagement, diversity and inclusion, and strategic talent acquisition support capability building and succession planning.
Cost Volatility	Fluctuations in raw material prices, energy costs, and logistics expenses may impact profitability and operational planning.	Pricing strategies, productivity improvement, cost optimisation programmes, and flexible sourcing models are deployed to manage cost pressures.
Technological Change and Innovation Pace	Rapid advancements and evolving business models require continuous innovation to remain relevant.	The Company leverages SKF Groups Technology Radar, open innovation platforms, and sustained R&D investments to accelerate innovation, strengthen product development, and remain aligned with emerging customer needs.
Digitalisation and IT Modernisation	Growing expectations for seamless customer experiences and integrated digital operations are accelerating digital transformation initiatives.	Strategic investments in digital capabilities, IT landscape simplification, and targeted hiring of digital talent are enhancing operational efficiency and enabling data-driven decision-making.
Manufacturing Footprint and Localisation	Shifting global economic dynamics and the increasing emphasis on supply chain resilience make localisation a strategic priority.	The Company continues to refine its manufacturing strategy through process improvements, regional supplier development, scalable production technologies, and localisation initiatives that support long-term competitiveness.

Human Resources Review

At SKF India, people are viewed as a critical enabler of long-term value creation. The Company prioritises building a workplace where diversity, inclusion and equal opportunity support innovation, collaboration and sustainable growth. The ‘People Strategy is centred on strengthening leadership capabilities, preparing the future workforce and enhancing the overall employee experience, enabling the organisation to remain agile in an evolving business environment.

During the year, investments in learning and development remained a key priority, with focused initiatives aimed at aligning employee capabilities with evolving technological, leadership and business requirements. The Company strengthened its talent pipeline through programmes such as the Leadership Accelerator Programme for key talents, Leadership Development initiatives for mid and senior leaders, New Manager Assimilation and the Manage-Lead-Coach programme. In addition, AI awareness training sessions and external role-based learning interventions, including programmes on strategic business planning, were conducted to build future-ready capabilities across the organisation. Competitive rewards, comprehensive benefits and structured well-being initiatives continued to foster a supportive environment where employees feel motivated to grow and contribute meaningfully.

SKF India employed 275 individuals (including workers) in FY 2025-26, with women accounting for 35% of new hires, reflecting progress towards a more balanced workforce.

Digital Transformation and IT Enablement

Digital transformation continues to play a pivotal role in strengthening SKF Indias competitiveness, enabling faster responses to evolving customer expectations, operational complexities, and market dynamics. As businesses increasingly rely on data, connectivity, automation, and AI, SKF India is embedding digital capabilities across its value chain from product development and manufacturing to customer engagement and supply chain management to enhance agility, efficiency, and decision-making.

A key milestone during the year was the transition to the SAP S/4HANA ERP platform, which unifies processes across functions and geographies, improves data transparency, and enhances operational visibility. Alongside this, continued collaboration with SKFs global IT ecosystem is accelerating the adoption of advanced digital tools, including AI-powered analytics and automation solutions that improve oversight, streamline operations, and foster data-driven management practices.

Looking ahead, SKF India remains focused on leveraging Industry 4.0 technologies, AI-driven insights, advanced analytics, and digital supply chain initiatives to boost manufacturing productivity and customer responsiveness. Continued investment in digital infrastructure, including scalable AI platforms and intelligent automation is intended to support operational efficiency, system scalability, and long-term execution capability.

Internal Control Systems and Their Adequacy

SKF India maintains an internal control framework aligned with the scale and nature of its operations to ensure reliable financial reporting, operational efficiency and regulatory compliance. These systems are embedded within business processes and are subject to periodic review to assess their adequacy and effectiveness. As part of the SKF Group, SKF India follows the SKF Internal Control Standards (SICS), a customised global control framework applicable across all SKF entities. Standard operating procedures across business functions incorporate SICS requirements, including compensating controls, minimising deviations and managing exceptions.

During the year, the Company reviewed its Internal Financial Control (IFC) framework with a focus on enhancing consistency and effectiveness. The Internal Control team conducts regular control adequacy testing, while the Internal Audit function performs independent process audits, supported by specialised external firms. Observations and improvement areas identified through these reviews are documented, and corrective actions are implemented and monitored by the Audit Committee.

The Company operates a three- line defence model comprising operational management, the internal control function and internal audit, providing layered oversight across processes.

The Audit Committee reviews internal audit findings, statutory audit observations, management responses to them and engages periodically with statutory auditors to evaluate the overall effectiveness of the control framework.

Based on these evaluations, the Committee concluded that, as of 31st March, 2026, the Companys Internal Financial Controls were adequate and operating effectively. The Company also complied with the requirements of Section 134(5) (e) of the Companies Act, 2013, relating to the establishment of an effective internal financial control framework in support of the Directors Responsibility Statement.

Systems are reviewed continuously, with significant observations, management responses and implementation status reported to and monitored by the Audit Committee.

Cautionary Statement

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations, or predictions may be forward-looking statements within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied since the Companys operations are influenced by many external and internal factors beyond its control. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, based on any subsequent developments, information, or events. Readers are cautioned that the risks outlined here are not exhaustive. Readers are requested to exercise their judgment in assessing the risks associated with the Company.