Talbros Automotive Components Ltd Management Discussions

GLOBAL ECONOMY REVIEW

The global economy registered a moderate growth rate of 3.3% in 2024, demonstrating a stretch of restrained fluctuations. Despite this measured expansion, the underlying dynamics remained tepid. Entering 2025, the global economic environment is undergoing a structural realignment, driven by an evolving policy landscape. Intensifying geopolitical uncertainties and persistent macroeconomic challenges are catalysing this transformation, as nations respond with strategic recalibration of national priorities.

In 2025, the imposition of a new wave of tariff measures by the United States acted as a major disruptor in the global trade environment, eliciting prompt and reciprocal actions from key trading partners. These escalating trade tensions culminated on April 2, 2025 with the enforcement of a near-universal tariffs, propelling effective global tariff rates to a level not witnessed in over a century. This abrupt rise in protectionist barriers dealt a significant blow to global trade and economic growth.

The pace and unpredictability of recent policy shifts amplified global economic uncertainty, complicating the near-term outlook. Amidst this evolving environment, traditional forecasting models are proving increasingly less effective, as long-standing assumptions are being rapidly upended.

In the face of this rising volatility, global headline inflation is now projected to decelerate at a slower pace than previously expected. Inflation is anticipated to ease to 4.3% in 2025 before further moderating to 3.6% in 2026. This revised trajectory reflects persistent inflationary pressures in advanced economies, partially offset by marginal downward adjustments in emerging and developing markets.

Simultaneously, concerns over financial fragility are mounting, especially in emerging markets and within the Non-Bank Financial Institutions (NBFIs) ecosystem. Elevated equity market volatility, inflated asset valuations, and sustained high levels of corporate debt are contributing to a more precarious financial landscape. As a consequence, central banks are facing the prospect of navigating a delicate balance - containing inflation while avoiding systemic risks to financial stability.

Emerging markets are particularly exposed under prevailing conditions. Rising sovereign debt servicing burdens, coupled with capital outflows, driven by widening interest rate differentials and sustained currency depreciation, are amplifying inflationary stress and macroeconomic imbalances. In the absence of timely multilateral assistance and credible debt restructuring frameworks, these vulnerabilities aggravate the risk of abrupt investment halts or episodes of debt distress.

Outlook

While the global economy continues to navigate persistent headwinds, the current environment also offers a strategic window to bolster economic resilience and pivot towards a more sustainable growth trajectory. The adaptability demonstrated by many economies under strain highlights the potential for recovery - achievable through an effective blend of coordinated policies and structural reforms.

Looking ahead, a renewed emphasis on setting up transparent and predictable trade frameworks, expediting the debt resolution process, and addressing long-standing structural inefficiencies will be instrumental in fostering a balanced and inclusive global recovery. Simultaneously, clarity in monetary policy, effective use of macroprudential tools, and credible fiscal strategies will be pivotal in restoring market confidence, containing financial vulnerabilities, and fortifying the foundations for long-term growth.

International cooperation will play a defining role in shaping this phase of global economic recovery. Achieving meaningful progress will require policy realignment, decisive leadership, and a collective resolve to advance shared goals. A coordinated multilateral approach is the need of the hour to restore global economic momentum, rebuild essential buffers, and unlock new avenues for inclusive and sustainable prosperity.

(Source: World Economic Outlook, April 2025: A Critical Juncture amid Policy Shifts)

Indian Economy

Indian economy continues to chart a robust growth path amidst a challenging global environment, with GDP expected to grow between 6.5% and 6.7% in 2024-25. This sustained momentum reaffirms Indias stature as one of the fastest- growing major economies, driven by strong domestic demand, rising capital outlays, and an enduring and dynamic services sector, accounting for 55.3% of Gross Value Added (GVA). The nations IT and computer services exports remain a key bright spot, continuing to deliver double-digit growth and bolster external resilience.

The industrial sector is projected to grow by 6.2%, supported by solid gains in electricity and construction. However, the pace of manufacturing growth is anticipated to ease to 5.3%, down from 9.9% in the previous fiscal, demonstrating the effects of subdued global demand and lower corporate investments.

Indian Economy GDP Growth Rate

Indias renewable energy capacity recorded a 15.8% year-on- year surge, now accounting for 47% of total installed capacity, exemplifying the nations accelerated transition towards clean energy. Similarly, the real estate sector is on a stronger footing, gaining traction from rising urban housing demand, while the digital economy is on a robust growth trajectory, projected to exceed US$1Tn by 2025.

Inflation is expected to remain stable, supported by a prudent mix of fiscal and monetary policies. Key policy interventions, including the Production-Linked Incentive (PLI) scheme and Ease of Doing Business 2.0 are progressively reshaping the investment climate through regulatory simplification, digitalisation, and tax rationalisation. Complementary reforms in labour markets and institutional governance are further strengthening Indias economic resilience to navigate evolving global challenges.

Collectively, these efforts are laying a strong foundation for sustainable, innovation-led growth, aligned with Indias longterm development priorities.

(Source: https://www.india-briefing.com/news/economic-survev-of- india-2024-25-kev-highlights-36004.htmlA

Outlook

Indias GDP is forecast to grow between 6.3% and 6.8% in 2025-26, driven by key levers including, ongoing structural reforms, rapid digital adoption, and a growing consumption base. Flagship programmes such as ‘Make in India and the PLI schemes are catalysing the growth of a competitive manufacturing ecosystem. In addition, these pointed strategic interventions are attracting large-scale investments in priority sectors, including electronics, semiconductors, and renewable energy.

Simultaneously, massive infrastructure investments in highways, ports, logistics hubs, and smart cities are expected to further stimulate economic activity and generate greater employment opportunities. With continued policy momentum, strategic capital deployment, and a clear vision, India is well-positioned to maintain a consistent high-growth path, accelerating its ascent as a formidable global economic force.

(Source: httos://www.ibef.org/news/indian-economv-exoected -to-grow-6-3-6-8-in-fv26-economic-survev#:~:text=Indian%20 Economv%20News-,Indian%20economy%20exDected%20 to%20grow,6.8%25%20in%20FY26%3A%20Economic%20S- urvev&text=Indias%20economy%20is%20exDected%20 to,%2C%20on%20Januarv%2026%2C%202025.)

INDUSTRY OVERVIEW Global Automotive Industry

The global automotive industry, valued at approximately US$4,359.98 Bn in 2024, is poised for significant growth, with projections indicating its rise to US$6,678.28 Bn by 2032, at a CAGR of 5.66%. This robust outlook points to the efficacy of the dynamic transformation the industry is currently undergoing, driven by technological innovation, shifting consumer preferences, stricter regulatory mandates, and emerging business models.

This evolution is being shaped by four defining trends, including electrification, autonomous mobility, connectivity, and the emergence of next-generation mobility solutions. In response, automakers are strategically diversifying their portfolios to include electric, hybrid, and connected vehicles. Simultaneously, they are ramping up investments in sophisticated software platforms, battery technology, and autonomous driving systems to remain competitive in this rapidly evolving market landscape.

Emerging markets, particularly in the Asia-Pacific region, continue to serve as key growth engines for the global automotive sector. China maintained its leadership in global vehicle production in 2024, manufacturing over 31.3 Mn units. Meanwhile, countries like India and several African economies are gaining ground, supported by favourable demographics, proactive policy interventions, and rising vehicle penetration.

Electrification is gaining traction globally, backed by declining battery prices and scaled investments in EV infrastructure. With battery prices expected to fall below US$ 100/kWh by 2025, the economics of electric vehicle adoption are becoming progressively viable across markets. At the same time, hybrid electric vehicles (HEVs) are experiencing robust uptake globally, including in India, with projected growth of 20-25% between 2024 and 2025. HEVs are emerging as effective bridge technology, supporting the transition, as EV ecosystems mature.

As vehicle electrification and digitalisation advance, the demand for semiconductors is rising sharply. The average semiconductor content per vehicle is expected to double by 2030, driven by adoption of ADAS, infotainment, and telematics systems.

Despite this progress, the industry faces several headwinds, including persistent supply chain disruptions, chip shortages, and increasing environmental expectations that collectively continue to test the agility of the global automotive industry. In response, automakers are intensifying focus on sustainability-centric R&D, efficient manufacturing, and resilient supply chains.

The rise of shared mobility, telematics, and over-the-air (OTA) updates is redefining the automotive user experience and unlocking new revenue streams for manufacturers and service providers. As the evolution continues, long-term success will increasingly depend on the industrys ability to stay agile, embrace digitalisation, and maintain a firm focus on innovation-led, sustainable mobility.

(Sources: httDs://www.fintechfutures.com/Dress-releases/automotive -industrv-size-exDected-to-reach-usd-6-678-28-bn-bv-2032 https://www.iea.org/reDorts/alobal-ev-outlook-2023 https://www.mckinsev.com/industries/automotive-and- assemblv)

Indian Automotive Industry

The Indian automotive industry stands as a vital engine of economic growth, contributing approximately 7% to the nations GDP, while driving momentum across key ancillary industries, including steel, aluminium, plastics, and oil & gas. The sector is also a major enabler of employment, innovation, and supply chain sophistication. On the global front, India cemented its stature as the largest producer of two-wheelers and tractors, the second-largest for buses, and the third- largest for medium and heavy commercial vehicles.

Maintaining its robust momentum, the domestic automobile sales in 2024-25 recorded a year-on-year surge of 7.3%, buoyed by sound urban demand, evolving vehicle replacement cycles, and policy-led tailwinds, including the vehicle scrappage initiative. At the same time, exports staged a strong rebound, rising by 19.2%, signalling resurgence of demand across key global markets. Together, these trends reinforce Indias leadership in global automotive supply chain and bolster the nations ascent to achieve the milestone of becoming the third-largest automotive market by volume in 2025-26.

Indias automotive growth is supported by several structural strengths, including rising household incomes, a young and aspirational population, and a thriving R&D ecosystem. Complementing these are a cost-effective manufacturing landscape, a skilled workforce, and the allowance of 100% FDI through the automatic route, all of which amplify Indias appeal as a preferred destination for global automotive investments.

Strategic policy frameworks such as FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) and the PLI scheme are accelerating the adoption of electric mobility. At the same time, these interventions are reshaping Indias industrial backbone by catalysing advanced manufacturing at scale. As the industry undergoes a paradigm shift, sustained investments in EVs, autonomous technologies, and sustainable mobility are set to redefine the competitive advantages.

Backed by robust policy impetus, continued innovation, and a dynamic consumer market, Indias automotive sector is uniquely poised to steer the course of the nations industrial and technological advancement. Moreover, this synergy is poised to reaffirm Indias global relevance and contribute to its long-term economic resilience.

(Source: SIAM)

Indian Automotive Component Industry

Indias auto component industry is charting a steady growth path, propelled by robust domestic demand, strong export momentum, and a strategic push towards localisation. Even amidst global uncertainties, the industry remains grounded in robust fundamentals, well-placed on the trajectory of longterm growth.

ICRA projects the industry to grow by 8-10% in 2025-26, following a 7-9% expansion in 2024-25. While this presents a moderation from the 14% growth phase in 2023-24, the industrys operating margins are expected to remain stable at 11-12%. The drivers supporting this resilience include economies of scale, a shift towards premiumisation, and a growing share of high-value components.

Indias component production is projected to reach US$145 Bn by 2030, according to a joint report by NITI Aayog and CRISIL, with exports likely to touch US$60 Bn, resulting in a US$25 Bn trade surplus. The recent hike in US tariffs on Chinese EVs and auto parts are poised to recalibrate global sourcing dynamics, bringing forth both competitive risks and strategic opportunities for Indian suppliers.

Capital inflows into the sector are set to remain strong, with investment estimated at 7 25,000-30,000 Crores in 2025-26.

A significant portion of this is earmarked for EV-specific component development, exhibiting the industrys shift towards future-ready technologies. Localisation in the EV value chain already reached 30-40%, with substantial advancements in battery management systems, traction motors, and power electronics. However, battery cell manufacturing continues to be a key white space, presenting high-impact opportunity for the domestic ecosystem.

The OEM segment, which contributes over half of the industrys revenue, is anticipated to grow by 7-9% in 2024-25, before further climbing up to 8-10% in 2025-26. This upward momentum is driven by platform renewals, content enrichment per vehicle, and higher consumer expectations. Additionally, the replacement market is on a robust growth curve, gaining traction from an aging vehicle population and a shift towards preventive maintenance.

Buoyed by the strong domestic tailwind and robust international demand, Indias auto component exports reached US$21.2 Bn in 2023-24, turning a US$2.5 Bn trade deficit in 2018-19 into a modest surplus. According to BCG and ACMA, Indias export potential could scale up to US$100 Bn, especially in underpenetrated markets like North America and Europe.

The next wave of growth will be driven by localisation of high- value, software-integrated, complex components such as ECUs, instrument clusters, telematics systems, and ABS modules. As global OEMs adopt diversified, multi-region sourcing strategies, Indias engineering depth, cost competitiveness, and supplier diversity offer a compelling alternative.

Simultaneously, the pivot towards connected and intelligent mobility is intensifying the demand for embedded software, advanced sensors, and control systems. The domestic industry is swiftly evolving to meet these emerging needs.

Contributing 2.3% to Indias GDP and directly employing over 1.5 Mn people, the auto component industry stands as a crucial enabler of the countrys industrial and employment growth.

Government Initiatives

The Government is playing a catalytic role in advancing the industry through multiple enablers including fiscal incentives, R&D-linked subsidies, cluster infrastructure development, and IP facilitation. These efforts are fostering the growth of high- precision manufacturing, improving global competitiveness, and accelerating the localisation of advanced technologies.

The shift towards EVs and intelligent mobility is being actively supported by focused interventions aimed at ecosystem development, skill enhancement, and regulatory streamlining. Simplified labour codes, corporate tax rationalisation, and the expansion of logistics infrastructure are further strengthening the industrys foundation.

PLI Schemes

The PLI scheme for the auto and auto component sector, launched by the Government of India, is proving instrumental in catalysing innovation and localisation. With ? 25,938 Crores budgetary allocation, the scheme incentivises production of leading-edge automotive technology components, including those critical to electric and hydrogen fuel cell vehicles.

A growing number of domestic and international players secured approval under the scheme, pledging investments across key component areas, such as electronic control units, battery systems, sensors, drive motors, and power electronics. This initiative is cementing Indias positioning as a global manufacturing hub for next-generation mobility technologies.

(Sources: httDs://timesofindia.indiatimes.com/business/india-business/ indio-outo-component-industry-revenues-to-expond-8-10-in-2025-26- icra/artideshow/118414171.cms

https://www.businesstoday.in/auto/story/indias-auto- component-industry-targets-100-bn-in-exports-4 666742025-03-04

Revving Up Exports: The Next Phase of Export Growth for the

Auto Component Industry I BCG

Indian Auto Components Industry Analysis I IBEF

Automotive-Industrv-Powerina-India-Darticipation-in-GVC_

Non-Confidential.pdf

Press Release: Press Information Bureau)

COMPANY OVERVIEW

Talbros Automotive Components Limited (also referred to as ‘Talbros or ‘The Company), founded in 1956, is a distinguished force in the Indian auto component industry, recognised for its enduring legacy of engineering innovation and manufacturing excellence. With over six decades of deep domain expertise, the Company has evolved into a diversified, multi-location enterprise. It offers a comprehensive portfolio, including gaskets and heat shields, forgings, suspension systems, anti-vibration components, and hoses. Talbros serves a wide spectrum of mobility segments, spanning two-wheelers, passenger cars, commercial, off-highway, and agricultural vehicles. The Company is a trusted partner to over 30 leading OEMs across global markets. Its competitive edge is further sharpened by strategic international technology alliances and two synergistic joint ventures, which amplifies product innovation, manufacturing scale, and global reach.

• Marelli Talbros Chassis Systems Private Limited (MTCS): This 50:50 joint venture brings together Talbros robust local manufacturing strength with Marelli Suspension Systems S.p.A., Italys global expertise in chassis technology. MTCS specialises in advanced suspension systems and is a trusted partner to marquee automotive OEMs.

• Talbros Marugo Rubber Private Limited (TMR): This 50:50 joint venture combines Talbros local agility with the technical mastery of Japans Marugo Rubber Industries Limited. The joint venture specialises in the development and production of high-performance antivibration components and rubber products, offering tailored, technologically superior, and future-ready solutions that support evolving mobility needs.

Through these strategic alliances, Talbros delivers world- class automotive solutions, fulfilling its sustained commitment to innovation, quality, and technological excellence. At the same time, the Company remains firmly focused on financial prudence and sustainable value creation. Its unbroken track record of dividend payouts for over five decades speaks volumes of its consistent performance, deep-rooted integrity, and shareholder-centric approach. Moreover, it highlights the enduring confidence it commands among its stakeholders in a rapidly evolving global auto components industry.

Product Portfolio and Revenue Contribution during 2024-25

	Company	Revenue Contribution (? in Lacs)
Gaskets and Heat Shields	Talbros Automotive Components Limited (Standalone)	53,886.08
Forgings	Talbros Automotive Components Limited (Standalone)	28,819.14
Chassis Components	Marelli Talbros Chassis Systems Private Limited- a JV Company	28,443.10
Anti-Vibration Products and Hoses	Talbros Marugo Rubber Private Limited- a JV Company	12,984.51

SWOT ANALYSIS

Strengths

• Legacy of Excellence: Over six decades of expertise has positioned Talbros as a trusted name in the auto component industry, enabling it to maintain a competitive edge.

• Robust OEM Partnerships: Strategic and long-standing relationships with more than 30 OEMs across passenger, commercial, off-highway, and exports segments continue to drive sustained growth and cement Talbros market leadership.

• Strategic Global Collaborations: Joint ventures and international technology tie-ups empower the Company to deliver globally benchmarked, high-performance products.

• Diversified Export Footprint: Rising exports to mature international markets support revenue diversification and bolster global presence.

• State-of-the-art Manufacturing: Multi-location, leading- edge facilities, coupled with a comprehensive product portfolio, strengthen the Companys operational resilience and delivery excellence.

• Uncompromising Quality Standards: Global certifications and a rigorous quality control ensure high customer retention and repeat business.

Weakness

• Limited EV-specific Product Penetration: While EV adoption accelerates globally, Talbros current share in EV-specific components remains relatively modest. However, the Company is actively diversifying its offerings to address this gap and align with electrification trends.

Opportunities

• EV Sector Growth: Growing demand for electric and plug-in hybrid vehicles offers significant opportunities across emerging and existing product lines.

• Rising Domestic EV Demand: New orders from leading Indian OEMs in the EV space reflect Talbros growing relevance in this high-potential segment.

• Non-auto Diversification: Expansion into non automotive domains opens up new revenue streams and insulates the Company from cyclical automotive sector risks.

• Global Market Expansion: Surging demand for precision-engineered components in the international markets positions Talbros to scale its export footprint.

• Focus on R&D and Innovation: Continued investment in technology, embedded systems, and software integration enhances product competitiveness.

• Policy Tailwinds: Government initiatives, such as PLI, Make in India, and FAME-II offer strategic support for capacity expansion, R&D, and localisation.

• India as an Automotive R&D Hub: The evolving domestic ecosystem presents opportunities for innovation-led partnerships and domestic value creation.

Threats

• Raw Material Price Volatility: Fluctuating raw material costs and global supply chain disruptions can impact profitability. Proactive risk management strategies, including hedging and localisation, are key to mitigating these risks.

• Macroeconomic and Geopolitical Risks: Global headwinds, such as pandemics, global recessions, and geopolitical volatilities could impact demand and operations. A diversified portfolio and geographic footprint help cushion these risks.

FINANCIAL PERFORMANCE

Talbros continues to demonstrate strong financial resilience and strategic agility, capitalising on emerging opportunities to deliver sustained value. The Companys performance in 2024-25 reflects a solid growth momentum, supported by operational efficiency, enduring customer relationships, and disciplined execution.

During the year, Talbros reported a standalone revenue of 827.05 Crores, representing a 6.27% increase over the previous years turnover of 778.27 Crores. This strong topline performance reflects the Companys ability to navigate dynamic market conditions, while maintaining healthy volume growth and pricing discipline.

Profitability registered an impressive uptrend, with Profit After Tax (PAT) for 2024-25 at 77.87 Crores, a 39.66% decrease from 129.06 Crores in 2023-24. However, last years PAT included an extraordinary profit of 61.15 Crores. So, in real terms, operational PAT increased by 14.66% as compared to previous year operational PAT of 67.91 Crores. This substantial improvement in bottom-line performance was driven by enhanced operational leverage, improved cost structures, and strong demand across key product segments.

On a consolidated basis, Talbros mirrored this growth momentum, with total revenues rising by 6.27%, from 778.27 Crores in 2023-24 to 827.05 Crores in 2024-25 - further reinforcing Talbros financial strength and its readiness to scale new horizons.

Details of Key Financial Ratios and Significant Changes therein

The details of changes of 25% or more in the key financial ratios as compared to the previous financial year, along with explanations for the same:

Particulars	2024-25 (%)	2023-24 (%)	Change (%)	Explanation of Change
Inventory Turnover Ratio (times)	3.41	3.17	7.38	-
Debtors Turnover Ratio (times)	3.63	4.11	(11.71)	-
Current Ratio	1.72	1.38	24.95	-
Interest Coverage Ratio	7.26	8.83	(17.78)	-
Debt Equity Ratio	0.14	0.17	(16.50)	-
Net Profit Margin (%) (Including Exceptional Items)	9.42	16.58	(43.22)	An extra-ordinary profit of 61.15 Crores in the previous year
Net Profit Margin (%) (Excluding Exceptional Items)	9.42	8.73	11.74	-
Return on Net Worth (Including Exceptional Items)	14.15	30.98	(54.33)	An extra-ordinary profit of 61.15 Crores in the previous year
Return on Net Worth (Excluding Exceptional Items)	14.15	17.58	(19.51)	-
Operating Profit Margin (%)	17.95	16.50	8.79	-

Human Resource Management

Talbros credits its sound performance and enduring growth to the dedication, agility, and talent of its people. Recognising that a future-ready workforce is the engine of sustained success, the Company continues to invest heavily in employee development through customised career progression plans that empower employees to thrive. Beyond traditional compensation and performance metrics, Talbros embraces a partnership-driven HR approach that fosters deeper employee engagement and loyalty.

Employee Lifecycle and Well-being

Talbros places a strong emphasis on employee well-being and work-life balance, recognising their critical role in sustaining motivation and productivity. By fostering a supportive environment and ensuring long-term career fulfilment, the Company enhances retention and cultivates a more engaged and satisfied workforce.

Training and Development

Talbros offers a comprehensive suite of internal and external training programmes to sharpen leadership capabilities and technical skills across key functions such as manufacturing, quality control, sales, marketing, and IT. The Company encourages the employees to pursue external learning opportunities to continuously broaden their knowledge base.

Retention Strategies

Talbros is committed to retaining top talent through competitive compensation packages, attractive benefits, and well-defined career advancement paths. The Company cultivates a positive, inclusive workplace culture where employees feel valued and recognised, strengthening loyalty and reducing turnover.

CAUTIONARY STATEMENT

The statements in the Management Discussion and Analysis section describing organisational objectives, projections, estimates and prediction may be considered as forwardlooking statements. All statements that address expectations or projections about the future, including, but not limited to, statements about the Companys strategy for growth, product development, market positioning, expenditures, and financial results, are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Companys actual results, performance or achievement may thus, differ materially from those projected in such forward-looking statements. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statement on the basis of any subsequent developments, information, or events. To avoid duplication and repetition, certain heads of information required to be disclosed in the Management Discussion and Analysis have been included in the Boards Report.