Sundaram Brake Linings Ltd Management Discussions

Global Economy

In FY 2024–25, the global economy experienced 3.3% growth and the IMF expects, at best, the same for both 2025 and 2026, reflecting a slight upward revision from earlier estimates. Advanced economies are expected to expand by 1.9% in 2025, while emerging markets and developing econ-omies maintain a steady growth rate of 4.2%. Notably, Indias economy is projected to grow robustly at 6.5% in 2025, underscoring its resilience and strong domestic demand.

Commodity markets experienced significant volatility during the year. The World Bank reported that overall global commodity prices declined by 3% in 2024 and are projected to fall by an additional 4% in 2025. Energy prices, particularly oil, remained volatile due to geopolitical tensions and supply-demand imbalances. Brent crude oil prices averaged $84 per barrel in 2024 and are expected to decrease to $79 per barrel in 2025, assuming no major supply disruptions. Additionally, gold prices surged to record highs in 2024, driven by heightened geopolitical uncertainties and increased demand from central banks.

The automotive sector showed signs of recovery. Easing semiconductor shortages and a growing demand for electric and fuel-efficient vehicles contributed to a gradual revival in automotive produc-tion and sales. However, the sector continues to navigate challenges such as supply chain disruptions and evolving trade policies. For the automotive industry, these dynamics underscore the importance of resilience and long term planning coupled with adaptability to near term demands.

Indias economy demonstrated robust performance in FY 2024–25, with real GDP growth projected between 6.5% and 7.2%, positioning it as one of the fastest-growing major economies globally. This growth was underpinned by strong domestic demand, increased private consumption, and sustained investment momentum. The International Monetary Fund (IMF) maintained its growth forecast at 7% for FY 2024–25, citing resilient rural consumption and a buoyant services sector as key drivers. The Reserve Bank of India (RBI) also projected a 6.5% growth rate, highlighting macroeconomic stability and healthy financial sector indicators.

Inflationary pressures eased during the fiscal year, with headline inflation converging towards the RBIs target of 4%. This moderation in inflation provided the central bank with the flexibility to implement accommodative monetary policies aimed at supporting economic growth. The RBI is anticipated to reduce the repo rate by 25 basis points in its upcoming policy meeting, marking the third consecutive rate cut. The manufacturing sector experienced steady expansion, with the Purchasing Managers Index (PMI) remaining above the 50.0 threshold, indicating growth. However, the sector faced challenges such as rising input costs and global geopolitical tensions, which impacted demand and supply chains. Despite these headwinds, the automotive industry, a significant consumer of brake linings, showed signs of recovery, driven by easing semiconductor shortages and increased demand for electric and fuel-efficient vehicles.

The global automotive industry in FY 2024–25 witnessed continued transformation driven by electrification, digital innovation, and evolving regulatory landscapes. Electric vehicles (EVs) remained a key growth area, supported by ongoing government incentives and advancements in battery technologies, such as faster charging times and extended vehicle range. Automotive manu-facturers worldwide expanded their EV portfolios and ramped up production capacities in response to shifting consumer preferences.

The industry also navigated several challenges, including inflationary pressures, evolving trade policies, and geopolitical uncertainties, which affected global supply chains and production schedules. Many regions experienced fluctuations in vehicle exports and imports due to changing tariff structures and logistics disruptions. These factors highlighted the importance of supply chain resilience and the need for diversified sourcing strategies across the sector.

Sustainability and safety have emerged as central themes globally, with regulators tightening emission standards and pushing for advanced driver assistance systems (ADAS) and eco-friendly materials. As vehicles become more connected and technologically complex, component suppliers including those in braking systems are under increasing pressure to innovate and meet stringent quality and performance benchmarks.

The Auto-industry Production & Sales Volume data (in Lakhs / No.s)

Source: ACMA

Indias automotive sector experienced steady growth in FY 2024–25, driven by strong domestic demand, favourable government policies, and improving rural and urban mobility. The industry is on track to reach USD 300 billion in value by 2026, with rising sales of passenger vehicles, especially in the SUV and utility vehicle segments. This shift reflects changing consumer preferences for larger, more comfortable vehicles with modern features.

Electric vehicle adoption in India accelerated, bolstered by schemes such as FAME II and the Production-Linked Incentive (PLI) program. EV sales reached record levels, supported by growing infrastructure and cost competitiveness. At the same time, alternative fuel vehicles like CNG-powered models also gained traction in various states, indicating a broadening energy mix in Indias transportation ecosystem.

Your Companys 2024-25 net sales of Rs 349.16 crores was almost same as that of the previous years Rs 349.60 crores. While your Company increased the export turnover by 11.93%, there was a drop of 7.35% in Domestic segment.

The global economy is projected to maintain a growth rate of approximately 3.3% in both 2025 and 2026, slightly below the historical average of 3.7% observed between 2000 and 2019. This steady yet modest expansion reflects a balance between robust growth in certain regions and slower recovery in others. Advanced economies are anticipated to experience moderate growth, while emerging markets continue to drive global economic activity.

Inflationary pressures are expected to ease globally, with headline inflation declining to 4.2% in 2025 and further to 3.5% in 2026. This downward trend is attributed to the unwinding of supply-side constraints and the impact of restrictive monetary policies implemented by central banks worldwide. However, the pace of disinflation may vary across regions, influenced by differing economic conditions and policy responses. The manufacturing sector faces a mixed outlook, with ongoing challenges such as trade tensions, supply chain disruptions, and geopolitical uncertainties impacting production and investment decisions. Notably, Asias manufacturing activity has shown signs of contraction, influenced by factors like weakened demand and increased tariffs. These dynamics underscore the importance for companies in the automotive supply chain, including brake linings manufacturers, to adopt flexible strategies and diversify markets to navigate the evolving global economic landscape.

Indias economy is projected to grow between 6.5% and 6.7% in FY 2025–26, maintaining its position as one of the fastest-growing major economies globally. The Reserve Bank of India (RBI) forecasts a 6.7% growth rate, attributing this to robust household consumption, improved employment conditions, and strong investment momentum supported by government policy initiatives and tax relief measures. Similarly, the International Monetary Fund (IMF) anticipates a 6.5% growth, emphasizing the role of sustained macroeconomic and financial stability in driving private consumption.

Inflation is expected to moderate, with the RBI projecting Consumer Price Index (CPI) inflation to average 4.2% in FY 2025–26, aligning with its medium-term target. This outlook is supported by factors such as a favorable monsoon season, high reservoir levels, and declining global commodity prices, which are anticipated to stabilize food prices and bolster rural incomes. The easing inflationary pressures provide the central bank with greater flexibility to support economic growth through accommodative monetary policies.

The manufacturing sector, particularly in areas like electronics and automotive components, is poised for significant growth, driven by government initiatives such as the Production-Linked Incentive (PLI) schemes. These policies aim to enhance domestic manufacturing capabilities and attract foreign investments, positioning India as a key player in global supply chains. For the automotive industry players, these developments present opportunities for expansion and increased demand, especially as the industry continues to recover and evolve.

Indian automotive industry growth in FY 2025–26 is expected to see increased production across passenger, commercial, and two-wheeler segments. The Company is well positioned to benefit from its strong partnerships with OEMs and its product portfolio expansions. The growing Indian vehicle parc supports the Companys aims to grow its aftermarket business, and the increasing vehicle ton-nage aligns with its focus on high-quality, long-life brake linings that ensure safety and enhance both the brand and repeat purchase.

The continuing consumer shift toward SUVs and light commercial vehicles presents a favourable opportunity for your companys established strengths in heavier vehicles and the development of robust, noise-free brake linings engineered for high-load applications. Your company is also working closely with OEMs and fleet operators to offer customized solutions, to expand its presence in both domestic and selected export markets which increasingly demand high performance, high quality braking.

With the rising adoption of electric vehicles (EVs), the Companys R&D initiatives include the de-velopment of specialized friction materials compatible with regenerative braking systems. These in-novations include corrosion-resistant, low-dust, and quieter linings tailored to the performance and environmental requirements of EVs and anticipate the increasing regulatory requirements of EU VII and by extension BS VII. The increasing focus on EV range and vehicle weight have supported the companys early forays into composites.

The resources of your companys friction business have created the ability for investment in its composites business and the opportunity for that to become a significant growth engine in the near future. The complex geopolitical situation has also given added impetus to the companys drone component supply initiatives. In response to global supply chain realignments, the Company is actively exploring new export op-portunities in the United States. The changing trade policy surrounding iron&steel further advantage your companys non-ferrous composite solutions and promise to provide sustainable opportunities. The Company intends to intensify its focus on European and African markets as near and long term drivers of growth.

Environmental regulations and a global push toward sustainability are creating new product oppor-tunities in both the friction and composite businesses. The Company is proactively investing in eco-friendly and more than regulation-compliant technologies, including new generation asbestos-free friction. Additionally, it is exploring advanced composites for integration with ADAS-compatible braking systems. These initiatives are aligned with the Companys vision to deliver next-generation friction that is safe, efficient, and environmentally responsible.

The automotive industry is heavily dependent on stable supply chains. Your company depends on raw materials including metals, resins, fibers, abrasives and lubricants and exports nearly half of its revenue. Disruptions in the availability, price stability, and delivery lead times of key inputs can ad-versely impact production costs, sales, and margins. In FY 2024–25, fluctuating commodity prices and procurement lead times, and non-tariff export restrictions, particularly for friction-grade raw materials, posed challenges. The Company has adopted a multi-supplier sourcing strategy, diversified its procurement base across geographies, and maintained strategic raw material inventories to ensure continuity of operations and mitigate single-points-of failure.

The changing tariffs landscape in automotive components and industrial goods has created the need for major adjustments in global trade. The emergence of an adverse change in trade policy—including differential tariffs, countervailing tariffs, and non-tariff barriers, —can impact export competitiveness and supply chain efficiency. To counter this, the Company continuously monitors trade policy developments and is developing tariff-friendly products.

Another tailwind to global trade is the continuation or fresh outbreaks of conflicts in Eastern Europe and the Middle East which lead to higher freight rate and insurance premiums, and shipping route disruptions with attendant delays. The Company attempts to mitigate these risk by diversifying its logistics partners, utilizing alternate shipping corridors where feasible, and working closely with suppliers and customers to forecast and plan inventory.

The increased adoption of new braking technologies, such as regenerative braking systems in electric vehicles and ADAS-integrated solutions, may reduce the salience of traditional brake lining ma-terials. Failure to adapt to changing technological standards can result in product obsolescence. To address this, the Company has committed increased R&D investments toward the development of EV-compatible, low-dust, corrosion-resistant and eco-friendly brake linings, thereby future-proofing its product portfolio and sustaining relevance in a rapidly evolving automotive landscape.

Increasing global and domestic regulations on emissions, noise, and end-of-life, have made compli-ance more complex and cost-intensive and risk market-access. The Company has proactively in-vested in greener technologies, such as new generation, low shed, asbestos-free and copper-free products, and regularly upgrades its testing and validation facilities to ensure conformity ahead of evolving safety and environmental standards across target markets. The composite business provides additional capabilities in staying on the forefront of minimising transports environmental footprint.

The accelerating transition towards electric vehicles (EVs) is set to transform the dynamics of braking systems. Recognizing this shift early, your Company has proactively invested in the development and characterization of EV-specific friction formulations, tailored for Indian road and climatic conditions. With the support of its in-house DEFCON tool, the Company is uniquely positioned to analyze EV duty cycles and engineer optimized friction materials that ensure safety, durability, and low noise performance in electric drivetrains. Meanwhile the composite business is uniquely positioned to address the specific requirements of increased EV adoption. All of your Companys manufacturing is located in Tamil Nadu and while the state remains a major automotive and manufacturing hub, concentrated region-specific risks may impact operations. These include (1) seasonal disruptions due to flooding that impacts plant operations, logistics, and man-power (2) Power availability and unceasing increases in industrial electricity tariffs that pose risks to competitiveness and productivity (3) Labour availability driven by Governmental handouts affect factory staffing. The Company attempts to actively mitigates these risks through disaster prepared-ness protocols, alternate power sourcing, and maintaining strong community and employee relations to ensure continuity and resilience in its operations.

In the domestic OEM segment during FY 2024–25, some friction material manufacturers collaborate with braking system suppliers whose business practices violate long-standing ethical norms. These attempts aim to secure entry into Indian OEM programs under questionable pretexts. Your Company believes that the unique Indian driving duty cycles, coupled with its extensive and localized product portfolio, serve as significant entry barriers for such players. The Companys capability to internally develop and validate friction materials provides a strategic edge, enabling real-time demonstration of product performance through its proprietary DEFCON (Drivers Experience of Friction Conditions) system, which simulates realistic Indian road and usage conditions. In the M&HCV aftermarket, both organized and unorganized sector players persist in supplying dangerous asbestos-based linings, despite global scientific consensus on the health hazards posed by a material banned in over 67 countries. Your Company remains firmly committed to promoting safe, asbestos-free alternatives. Through continuous advocacy in industry forums, collaborative efforts with regulatory bodies, and direct engagement with customers and fleet operators, the Company continues to push for a complete phase-out of asbestos in the Indian aftermarket .

The Companys system of internal controls for business processes, operations, financial reporting, fraud prevention, and compliance with applicable laws and regulations is sufficient. The audit function of the Company provides reasonable assurance on the effectiveness and efficiency of operations, protection of assets, accuracy of financial records and reports, and the observance of applicable laws and regulations. Regular internal audits and inspections guarantee that responsibilities are carried out successfully. The Audit Committee, conducts periodic reviews of the performance of statutory/internal auditors, the adequacy and effectiveness of internal control systems, and suggests improvements for strengthening the existing control system in the light of changing business requirements.

Your Company is continuing its focus on improvements to sustain quality management systems through Total Employee Involvement at all levels with a view to achieve enhanced level of customer satisfaction in Domestic as well as Overseas markets. Your company continues to closely monitor and focus on various cost reduction activities and cost control initiatives to achieve planned targets during the year.

The Industrial Relations in all four plants of the Company continued to be cordial. Talent attraction and retention in the apprentices category is posing a strong challenge and the dearth of employable candidates, at this level, has drastically risen over the last one year and our company is taking various HR initiatives in this area. The total number of employees on roll as on 31st March 2025 in all the Plants was 1035.

The company has spent significant resources to ensure the health, safety, and wellbeing of our employees- at home, at work, and in between the two.

We have rolled out grade elevation and salary enhancement letters to Managerial and Executive category employees during the Financial Year 2024–25 so that all of your companys employees may share in the enterprises success.

The Company has followed all the applicable Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs (MCA) in the preparation of financial statements.

Financial and Operational Performance (RS In Lakhs)

Note: Previous year figures have been regrouped wherever necessary to conform to this Years classification.

Certain statements in the "Management Discussion and Analysis Report" may be forward looking and are as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of the future performance and outlook.