Subros Ltd Management Discussions

1. Industry Outlook

1.1 The Indian automotive industry demonstrated a resilient and broadly positive performance in FY 2024-25. Passenger vehicles achieved an all-time high in sales, driven by the growing preference for utility vehicles. The two-wheeler segment showed strong recovery, particularly due to improved rural sentiment and the launch of value-oriented models. However, the commercial vehicle segment faced headwinds, recording a slight decline due to financing constraints and uneven fleet demand.

1.2 Overall, the industrys performance was fortifiedby infrastructure growth, government incentives, and evolving mobility preferences, positioning it on a steady path toward long-term objectives. Domestic sales grew by 7.3% in FY 2024-25, supported by sustained consumer demand, rising urbanisation, and improved macroeconomic indicators and on the global front, automotive exports surged by 19.2%, reflecting Indias growing competitiveness in international markets. 1.3 Electric vehicles continued their upward trajectory, gaining greater market penetration, especially in the two-wheeler and passenger vehicle categories. Electric Vehicle (EV) sales for FY 2024-25 reached 1.97 million units, marking a 17% year-over-year (YoY) increase. 1.4 The Indian automotive component industry demonstrated robust growth in FY 2024-25, driven by domestic demand, export momentum, and strategic investments in innovation. The sector achieved 11.3% year-on-year growth Financial Performance.

1.5 India is progressing in alternate automobile fuels notably, with ethanol blending reaching 19% in petrol, a significant step towards the 20% target by 2025. CNG vehicle sales are also surging, and the government is promoting EVs and hybrids, though auto fuel sales overall show some erratic trends.

1.6 The Indian automobile industry is actively embracing sustainability through various initiatives, including electric vehicles, sustainable manufacturing practices, and government policies. These efforts aim to reduce emissions, promote circular economy principles, and enhance road safety. The “Vehicle Scrappage Policy” aims to reduce pollution and the need for new raw materials by promoting the recycling of end-of-life vehicles. The “Gas Gatisheelta” initiative encourages the use of Compressed

Natural Gas (CNG) and Liquefied Natural Gas (LNG) in various vehicle types. The “Surakshit Safar” campaign emphasises road safety through education, engineering, enforcement, and emergency care. The “Harit Hydrogen” initiative focuses on the use of hydrogen as a fuel source for vehicles, aligning with the governments Green Hydrogen Mission. 1.7 Looking ahead to FY 2025-26, the automotive industry is poised for further transformation and growth, driven by several key factors, including the adoption of electric vehicles. It is expected to accelerate, fuelled by government incentives, expanding charging infrastructure, and declining battery costs. Automakers will continue to launch new EV models and expand their EV portfolios to meet growing demand. The Indian ADAS (Advanced Driver-Assistance Systems) market is projected to experience substantial growth. This progress is driven by factors like increasing vehicle production incorporating ADAS features, heightened safety awareness, and government regulations.

1.8 The industry is expected to continue its transformation journey, driven by technological advancements, shifting consumer preferences, and evolving regulatory landscapes. Looking ahead in FY 2025-26, the Company is optimistic to maintain the leadership position in Thermal Segment for Indian Market.

1.9 The organisation stands at a pole position to get benefitted of its continuous product development work done over so many years. The Company started its supplies of Railways Coach ACs to Indian Railways. Mandatory Regulation of Goods Carrier Cabin ACs implementation will also be effective from June 2025 with significant increase of volume to be supplied to OEMs. As a leading automotive thermal solutions provider, the Company is well-positioned to capitalise on these trends through its innovative products and customer-focused approach.

Automobile Domestic Sales Trends¹

Category	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles	30,69,523	38,90,114	42,18,750	43,01,848
Commercial	7,16,566	9,62,468	9,68,770	9,56,671
vehicles
Three Wheelers	2,61,385	4,88,768	6,94,801	7,41,420
Two Wheelers	1,35,70,008	1,58,62,771	1,79,74,365	1,96,07,332
Quadricycles	124	725	725	120
Grand Total	1,76,17,606	2,12,04,846	2,38,57,411	2,56,07,391

2. Financial and Operational Performance

2.1 The Company achieved a strong comprehensive performance in FY 2024–25. The Company reported total revenue of INR 3367.57 Crores, representing a 9.67% increase from the previous year. This growth was driven by the strong demand for automotive thermal solutions, especially in emerging markets.

2.2 The Companys profitability witnessed a substantial improvement during FY 2024 25, with net profit rising to INR 150.39 Crores, an increase of 53.99% over the previous year. This growth was primarily driven by effective cost optimisation initiatives and enhanced operational efficiency. Operating margins stood at INR 343.10 Crores, representing 10.19% of the Revenue from Operations, while profit before tax increased to INR 203.45 Crores.

2.3 Continuing its focus on operational excellence, the

Company intensified and supply chain optimisation. These initiatives led to a notable reduction in operating costs and contributed to improved margins.

2.4 All business segments contributed positively to revenue growth. The passenger vehicle segment, particularly, thermal components, registered a growth of 8%. The commercial vehicle segment also saw healthy growth of 39%, supported by strong performance in truck AC products 38% and bus AC products 15%.

2.5 The Company has consistently invested in expanding its geographic footprint, developing advanced product technologies, and entering new market segments. The Company has also earmarked adequate funds for capacity expansions across its manufacturing plants, while continuing to implement cost reduction measures and drive operational efficiency to maximise profitability

2.6 As of March 31, 2025, the Company maintains a debt-free position with no outstanding long-term borrowings. Effective from April 1, 2024, the Company has transitioned to the new tax regime, adopting a reduced corporate tax rate of 22%.

2.7 Key Financial Ratios

Particulars	FY 2025	FY 2024	Change	Remark
			(%)
Debtors Turnover Ratio	9.17	12.50	-26.65%	(i)
(Times)
Inventory Turnover Ratio	6.50	6.35	2.23%
(Times)
Interest Coverage Ratio	29.89	23.04	29.73%	(ii)
Debt Equity Ratio	0.04	0.04	3.45%
Current Ratio	1.45	1.29	12.72%
Operating Profit Margin (in %)	10.19	8.76	16.32%
Net Profit Margin (in %)	6.04	4.58	31.88%	(ii)
Return on Net Worth (in %)	18.94	15.38	23.15%
Net worth (Rs. in Crores)	1093.93	955.85	14.45%

(i) Decreased due to change in payment term from early payment to normal credit period.

(ii) Increased due to the higher cash accruals on account of increase revenue, cost optimisation initiative and operational efficiencies.

3. Research and Development

3.1 The Indian government is pushing to upgrade regulatory framework, aligned to European and other advanced automotive markets. Based on this, the Indian automotive industry is undergoing a significant by a series of progressive policy reforms and regulations. Initiatives such as CAFE (Corporate Average Fuel

Efficiency) push for alternative refrigerants, the Vehicle Scrappage Policy, PLI schemes, Quality Control Orders (QCOs), Circular Economy measures, and enhanced safety standards are not just shaping the future of mobility, but also playing a vital role in achieving Indias broader national goals, energy security, sustainable development, and the ambitious target of net-zero carbon emissions by

2070. These reforms are redefiningproduct development priorities across the entire automotive value chain.

3.2 In alignment with Indias sustainability vision, the industry is shifting towards greener, more energy-efficient technologies. The Company is actively aligning its roadmap to support this transition. Our R&D teams are committed to innovating future ready thermal management solutions that meet emerging environmental standards, reduce energy consumption, and support the electrification of vehicles across segments.

3.3 Leveraging its strong in-house R&D capabilities, the

Company has made significant development. This includes successful design and development of Railway LHB Coach AC systems, integrated thermal management systems for hydrogen fuel cell buses (both 9m and 12m variants), thermal components for electric cars, electric trucks, and electric tractors and complete thermal systems with control panels aligned with the upcoming Truck AC mandate.

. These projects mark our continued commitment to both innovation and self-reliance in advanced mobility solutions.

3.4 The Companys persistent focus on innovation is reflected in the 14 patents granted it across a diverse product portfolio. These achievements have been accompanied by consistent customer recognition for its speed, creativity, and collaborative design capabilities. Furthermore, the Companys research efforts have been acknowledged by technical bodies such as SAEINDIA (Society of Automotive Engineers India), where its engineers have received special appreciation for active participation and technical contributions.

3.5 To address the growing demand for truck cabin air-conditioning, the Companys R&D team has developed modular, compact, and cost-effective thermal solutions. This innovative solution is designed to cater to a broad spectrum of truck and pickup models with minimal changes to ducting and casing offering versatility and scalability. In line with its diversification strategy, the Company has also ventured into the rail segment, developing coach AC systems, and establishing dedicated infrastructure for testing and manufacturing to support the evolving needs of Indian Railways.

3.6 The Company is localizing design processes and enhancing the skill base of its engineering teams. This approach enables the Company to not only meet Indian transformation driven market requirements more effectively but also contribute to the development of globally competitive products. 3.7 Evolving norms, regulatory RDE (Real landscapes Driving focused Emissions), on emissions, the energy efficiency, circular economy practices, and safety are shaping the Companys product development strategy. To stay ahead, the Company has strengthened its in-house capabilities for localising critical components, building partnerships with start-ups, collaborating with academic institutions for advanced research. These initiatives reflect the Companys strategic intent to build resilient, future ready solutions that meet the next generation of mobility demands.

4. Information Technology – Powering Our Digital Future

4.1 Technology is reshaping the way the automotive industry operates, turning vehicles into smart, connected machines. The Company see Information Technology as more than just a support system, it is a key driver of its growth and performance. By integrating advanced IT across every part of its business, the Company is boosting efficiency, encouraging innovation, and staying closely aligned with what its customers need. 4.2 The Company is embracing digitization with Industry 4.0 to transforming how it manufacture. From installing IoT-enabled devices to deploying robotics and real-time analytics, the Company is making its plants smarter and more responsive. These digital tools help it cut down waste, streamline processes, and ensure the highest quality in every product the Company makes.

4.3 The Companys IT systems also connect it seamlessly with its suppliers and logistics partners. This real-time integration gives the Company a complete visibility across the supply chain. It helps the Company to manage inventory better, reduce waiting time for parts, and make sure components arrive exactly when needed keeping its operations smooth and cost-efficient.

4.4 Technology plays a big role in how the Company design and develop new products. The Companys teams use advanced software and Product Lifecycle Management (PLM) tools that allow it to collaborate better across departments. Whether its engineering, manufacturing, or sourcing, everyone works from the same data, speeding up development and improving accuracy throughout the product life cycle.

4.5 With increasing reliance on digital systems, cyber security has become a top priority. The Company has put in place strong protections, like data encryption, intrusion detection systems, and regular audits to keep both the Company and customers information safe. As technology grows more complex, so do potential risks, and the Company is constantly updating its systems and training its teams to stay ahead of emerging threats.

4.6 The Company has also built a solid disaster recovery plan to make sure its critical systems stay up and running, no matter what. This ensures that in case of any disruption, technical or natural the Companys operations can continue with minimal impact.

4.7 Looking ahead, the Company has developed a long-term IT roadmap that is aligned with the latest trends in digital transformation. This strategy focuses on five key areas: infrastructure, application support, data management, cyber security, and building the right skill sets. It is a future focused plan designed to help us stay agile, secure, and ahead of the curve in a fast-changing industry.

5. Internal Controls and Their Adequacy

5.1 Internal controls are an essential part of how the Company run its business responsibly. The Company has built a strong system of checks and balances that helps it protect its assets, manage risks, and ensure its financial reporting is accurate and trustworthy. These controls are a vital part of the Companys governance structure and help maintain the integrity of its operations.

5.2 The Companys approach to internal controls is guided by its core values, which lay the foundation of how it work.

These values include: Respect, Passion & Commitment,

Trust and Teamwork. These values not only shape its culture but also strengthen the way the Company manage internal controls.

5.3 The Company has clear and well documented policies and procedures in place, supported by defined roles, responsibilities, and a structured delegation of authority. This ensures accountability at all levels and clarity in decision-making.

5.4 Risk management is a continuous process in the Company. It regularly assess risks across different parts of the organisation and implement proactive measures to reduce their impact. This helps it keep potential issues within manageable limits while supporting its long-term business goals.

5.5 The Companys internal control system also ensures it stay fully compliant with all applicable laws, regulations, and internal policies. The Company continuously monitor the evolving regulatory environment and update its frameworks as needed, so it is always aligned with the latest legal and industry standards.

5.6 The effectiveness of the Companys internal controls is reviewed regularly through internal checks and independent audits. It works with external auditors who provide an unbiased view of how well its systems are functioning. Their insights help it strengthen its processes and make continuous improvements to stay ahead of potential risks.

6. Risks, Concerns, Opportunities, and Threats

6.1 The Companys Enterprise Risk Management (ERM) framework is aligned with ISO 31000:2018 risk standards across all functions. The risk management process focuses on identifying risks, primarily in four categories: strategic, operational, financial, and regulatory. 6.2 In FY 2024–25, the following risks and mitigation actions were identifiedto ensure business continuity and growth: a. Regulatory and Compliance Risk: Extension of QCOs beyond raw materials used by the industry, Materiality of events, Business Responsibility and Sustainability Report and other regulatory compliances that may impact its operations. The Company has taken measures to comply with the QCOs and regulatory risks. b. Supply Chain Risk: The Company envisages supply chain risk due to strategic sourcing for overseas suppliers (China specifically) and Tier II and Tier III suppliers facility and system gap. Weak Organisational structures, inadequate infrastructure, financial and safety aspects are some of the key focus areas. c. Information & Cyber Security Risk: Cyber Security

Risk is most imminent, impacting IT processes and business continuity. The Company has taken various measures by implementing tools and technology to strengthen the IT infrastructure, data management and backup systems, and insurance coverage is continuing to mitigate the financial implications. d. Technology Risk: Keeping pace with fast changing technology is one of the risks for the organisation. Time bound plan to introduce new technology and product is paramount to remain leader in the business. The Company has adequately covered risks by focusing on developing and introducing new products in line with customer demands and Company is supported by Denso Corporation, Japan. The Company has a Risk Management Committee that periodically reviews the risks and opportunities with the action plan. The Committee shares suggestions and advice with the management team for further improvement and provides guidance on new emerging risks.

7. Human Resource and People Practices

7.1 To make future ready organisation, it is important for the Company to develop right skill set required to manage future. At its core, the Company believes its people are its biggest strength. That is why it is committed to building a workplace where excellence, collaboration, and innovation thrive. Everything the Company do from hiring to leadership development is focused on attracting great talent, helping them grow, and making sure they are in the right roles to succeed.

7.2 Learning and development for future ready organisation is the highest focus in the Company. Whether it is hands on training, workshops, or leadership development, it offer a variety of programs to help its people stay sharp, grow their careers, and be ready for whatever the future brings. The Company wants everyone to feel confident and capable in a fast-changing world. “LEAD” and

“NEXT” are flagship programs for talent development in the Company.

7.3 The Company has efficient and effective performance management framework in place. Each employee is well aware about his deliverable and periodic performance review ensure the efficiency and effectiveness of their deliveries. The Company also believe that best ideas often come from within, which is why it encourage employees to participate surveys, open forums, and feedback sessions. This way, the Company encourage to have open culture to make the workplace better.

7.4 Health, safety, and well-being are most important priority for the Company. The Company has built strong health and safety policies and promote a culture of care, whether through safety trainings or wellness programs that support both body and mind. The Company wants everyone to feel safe and supported every day.

7.5 The Company is working to bring Inclusive Culture where everyone deserves to feel valued and respected at work. The Company is constantly working to build a workplace where different voices are heard and different backgrounds are celebrated. From inclusive hiring to training and policy, the Company is creating a space where everyone can thrive.

7.6 To be future-ready, the Company is building the organisation for tomorrow. The Company is investing in leadership development to prepare our next generation of leaders. It focuses on helping them grow the skills they need to lead with confidence, drive innovation.

8. Marketing and Business Development

8.1 Marketing is dynamic and strategic function in the Company. It is not just about promotion, but about understanding customer needs, creating real value, and building lasting relationships. In todays industrial revolutionary environment, the Companys marketing function helping it stay ahead of the curve and drive long-term growth.

8.2 The Company has developed a well-rounded marketing mix-product, price, place, promotion, and to connect effectively with its customers. This approach is constantly refined based on market insights, customer feedback, and performance data. The Company uses a healthy blend of traditional and digital channels to communicate its values. The Companys integrated communications strategy ensures that its message is consistent, clear, and compelling across all platforms.

8.3 Expanding into indigenised tooling and localization, the

Companys business has successfully diversified the manufacturing of tools and dies for the automotive industry, catering to both OEMs and Tier 1 suppliers. A major milestone has been its delivery of critical tools to the white goods industry, a significant for the Company. By localizing these capabilities, the Company is not only reducing import dependency but also creating cost efficiencies and greater flexibility through in-house production.

8.4 Growth in the Railways Segment is another milestone the Company has achieved in last year. The Company is proud to have established ourselves as a trusted supplier to Indian Railways, providing AC systems for both coaches and driver cabs. The Company is optimistic about the positive business outcomes this segment will bring in the near future.

8.5 For Regulatory Compliance and Growth in alignment with the Indian governments mandate for air-conditioning in N2 and N3 category goods carrier vehicles, the Company has partnered with all major OEMs to ensure timely compliance. The Company has already secured new business in this space, and as production ramps up, the Company expect this to significantly boost both its revenue and profitability.

8.6 With regards to driving growth in Clean Energy Vehicles, the Company is aligning closely with OEMs to support their shift toward alternate fuels. The Companys clean fuel product portfolio which includes CNG, hybrid, and electric vehicle solutions, now contributes 21% of our total revenue, and the Company see this share growing steadily in the years to come.

9. Social Responsibility and Community Initiatives

9.1 The Company believes that business success is meaningful only when it goes hand-in-hand with social progress. As a responsible corporate citizen, the Company is deeply committed to giving back to society, especially to the communities living around our factory locations. The Company focuses areas include gender equality, inclusivity, education, skill development, and creating opportunities for people with special needs.

9.2 The Companys efforts are rooted in creating real change where it matters most. It continues to support initiatives that promote gender equality, inclusiveness, and employment opportunities for differently-abled individuals. These are not goals; they are priorities we work toward every day.

9.3 To help women in nearby communities become self-reliant, the Company has set up a skill development centre in a village near Manesar. The centre offers hands-on training and resources to local women, equipping them with the skills they need to start their own ventures or seek employment. Many women have already benefited from this initiative, gaining both, confidence and financial independence.

9.4 Supporting local schools and education, the Company has adopted several schools near its plant locations, with a mission to improve the learning environment for children. These efforts include upgrading school infrastructure and focusing on the quality of education. The Companys initiatives have been warmly received by local communities and reflect our belief that every child deserves access to good education and a better future. 9.5 Collaborating for greater impact with local NGOs, the Company is running programs under our CSR umbrella that go beyond infrastructure. One such initiative supports the education and emotional well-being of children whose parents are incarcerated, a segment of society often overlooked. Through these collaborations, the Company aims to uplift vulnerable sections of the community and help them lead dignified lives.

10. Roadmaps for the Future

10.1 The Company continues to work towards new solutions in line with changing technology, customer preferences, and regulatory framework to continue its growth momentum. The Company roadmap for the future outlines key strategic initiatives that will propel the Company towards vision of being a global leader in automotive thermal solutions.

10.2 The design team continues to work towards innovative solutions using cutting edge technology and meet requirement of its customer. Focus on sustainability using less power, hence less emission and overall improvement in the performance of the product is primary driver for Company and its strong design workforce.

10.3 The Company has been continuously investing with a target to achieve digital transformation. Current drive of digitisation is not limited to any one process but encompasses wide range of areas including Companys operations, processes, and customer interactions. The Company is consistently upgrading while using all tools available to enhance optimization of its operations, enhance the customer experience, and drive efficiency. 10.4 The Company has created specific role and task force to bring focus and speed in execution of its commitment to sustainability and reducing its environmental impact. The Company will continue focus on developing products which are eco-friendly, generate less of waste and emissions. The Company is also working to promote sustainable practices across its value chain.

10.5 The Companys efforts to work on new opportunities, market expansion and diversification positive results and the Company will continue to further strengthen its efforts to reduce dependence on any single market or product segment. The Company will continue to prioritise customer satisfaction and engagement. This will include enhancing its customer service offerings, building strong relationships with customers, and leveraging customer feedback to improve its products and services.

10.6 Employees are vital to the Companys success. They also play a crucial role in shaping its culture and are natural ambassadors for the organisation. Essentially, employees are the building blocks of an organisation, bringing unique skills, talents, and knowledge that are essential for achieving goals and driving business growth. The Company will continue to invest in talent development programmes, promote a culture of learning and innovation, and ensure that its employees are engaged and motivated.

10.7 The Company is embarking on an exciting journey towards a sustainable and successful future. The Companys roadmap outlines its strategic priorities and initiatives that will guide everyone as the Company strives to achieve its vision and create long-term value for its stakeholders.

11. Mid-term and Long-term Plans

11.1 As the Company looks ahead, the Company remains focused on aligning its medium and long-term goals with its vision of becoming a leader in automotive thermal solutions. The Companys five-year roadmap sets out the strategic priorities and initiatives that will help the

Company gets there firmly rooted in innovation, agility, and customer-centricity.

11.2 The Company is shaping the future with clear strategic focus. Its strategy is built around growth, sustainability, and technology, enabling it to stay ahead in a rapidly-evolving industry. From expanding its product portfolio to enter new markets, every step the Company takes is guided by a clear purpose and a strong commitment to excellence.

11.3 The Company is actively moving towards a digitally enabled future. Its digital transformation journey is reshaping the way it work streamlining operations, improving collaboration, and unlocking new levels of efficiency. By adopting automation, advanced data analytics, and cloud technologies, it is making faster, smarter decisions while empowering its teams with better tools and insights.

11.4 To drive Operational Efficiency, the Company is continuously investing in ways to do more with less, hereby optimizing how it uses time, resources, and energy. By reducing waste, enhancing productivity, and staying agile in its operations, the Company is improving its bottom line, while building a more competitive and resilient business.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing Companys projections, estimates and expectations may be interpreted as ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply, price conditions in the domestic and international markets in which the Company operates, changes in Government regulations, tax laws, and other statutes. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements based on any subsequent development, information, or events.

Source: 1. SIAM cumulative production, domestic sales & exports