The Hi-Tech Gears Ltd Management Discussions

GLOBAL ECONOMIC - REVIEW

The global economy is heading into a period of slower expansion as trade tensions intensify. Projected worldwide growth is set to ease from 2.7% in 2024 to 2.3% in 2025, reflecting the impact of ongoing trade disputes. Despite this moderation, the international economy has remained notably resilient in the face of numerous setbacks, including increased geopolitical strain, banking sector vulnerabilities, persistent conflicts such as Russia- Ukraine and Iran-Israel, the Red Sea crisis, high interest rates, and overall macroeconomic volatility. Furthermore, a rapid albeit short-lived tightening in financial conditions contributed to the broader challenges facing global economic performance.

The US economy has demonstrated resilience, supported by strong growth in the services sector, a solid labour market, and elevated real wages. In contrast, Europe, including the UK, has experienced subdued growth, largely due to the ongoing war in Ukraine, elevated energy costs, and a slowdown in both manufacturing and services. Chinas economic performance fell short of expectations, impacted by a sluggish real estate market and declining industrial activity. Meanwhile, the Asia-Pacific region is expected to lead global growth, emerging as the fastest-growing economic zone. This resilience was underpinned by several key factors: robust labour market performance supported a recovery in real incomes; economic activity gradually shifted towards service-oriented sectors; the impact of tighter monetary policy was cushioned by the strength of household and corporate balance sheets; and targeted fiscal interventions in select economies provided timely support.

A moderation in inflation supported global economic resilience, aided by easing supply chain disruptions, improved labour market conditions, declining energy prices, and tempered demand expansion. As a result, global growth surpassed earlier projections. The Asian market, led by China, remained strong as compared with other countries, fuelled by aggressive New Energy Vehicle (NEV) incentives and a trade-in scheme. In contrast, the Eurozones economic momentum slowed, weighed down by subdued consumer confidence, persistently elevated energy costs, and a downturn in manufacturing and investment activity sensitive to interest rate fluctuations.

The global transition toward electrification continued to gain momentum, with electric vehicle (EV) sales reaching 17.5 million units?€”representing 22% of total light vehicle sales worldwide, as reported by the International Energy Agency (IEA). China remained at the forefront of this shift, where New Energy Vehicles (NEVs) made up 48% of passenger vehicle sales, driven by supportive tax incentives and a steady decline in battery prices.

INDIAN ECONOMIC - REVIEW

Indias economy maintained strong momentum in FY 2024-25, with real GDP estimated to have expanded by 6.4 percent, driven by robust performance across services, industry, and agriculture sectors and underpinned by sustained public and private capital expenditure. Gross Value Added (GVA) growth was also estimated at 6.4 percent. Infrastructure investment rose sharply, with capital outlays growing 8.2 percent year-on- year in the five months to November 2024, and policy measures continued to bolster credit flow, leading to bank credit growth converging with deposit growth and non-performing assets declining to a 12-year low of 2.6 percent by September 2024.

Looking ahead, the Economic Survey projects real GDP growth of 6.3-6.8 percent in FY 2025-26, supported by grassroots-level structural reforms, continued infrastructure investment, and stronger participation of the private sector in core areas such as energy, transport, and digital connectivity. The RBIs June 2025 Monetary Policy Update reiterates this outlook with a GDP projection of 6.5 percent for FY 2025-26, alongside an inflation forecast of 3.7 percent, reflecting manageable price pressures and balanced monetary conditions.

By comparison, Indias growth rate is the highest among major economies, outpacing global growth, which is projected at around 3 percent in calendar 2025. This performance underscores Indias role as a key engine of world growth and highlights the effectiveness of its policy framework in navigating external headwinds and delivering sustainable expansion.

India, now officially the fourth-largest economy after surpassing Japan, continues to be one of the fastest-growing major economies in the world. Further, the growth is expected to be propelled by improvements in capital formation and productivity, enabled by the effective convergence of digital and physical infrastructure. The manufacturing sector, in particular, is poised for renewed momentum?€”driven by supportive government policies, emerging global opportunities, and a strategic pivot toward clean and sustainable energy solutions.

While external headwinds remain a concern, near-term growth is expected to broadly track earlier projections, with minor adjustments reflecting the higher base achieved in the previous fiscal year.

During FY 2024-25, the Reserve Bank of India maintained a cautiously accommodative stance and outlined calibrated support for FY 2025-26 to sustain growth while anchoring inflation. In its June 2025 Monetary Policy Committee meeting, the RBI cut the policy repo rate by 25 basis points to 6.25 percent, targeting inflation around the 4 percent band and bolstering economic momentum.

INDIAN AUTO SECTOR AND PRODUCTION TREND

Indias manufacturing sector has made significant strides, complementing its reputation as a global services hub. The "Make in India" initiative has been a cornerstone in transforming the nation into a global manufacturing hub. With a strong focus on enhancing industrial capabilities, fostering innovation, and creating world-class infrastructure, this initiative aims to secure Indias position as a key player in the global economy. The nation is harnessing its youthful workforce and enhancing its manufacturing and service sectors, standing poised to emerge as a leading global economic powerhouse. As per data released by SIAM, there is an upward trend in the sales/production of all segments of automotive except minor decline in commercial vehicles in comparison to previous year.

Tab I: Automobile production trends
Category	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles	34,24,564	30,62,280	36,50,698	45,87,116	49,01,840	50,61,164
Commercial Vehicles	7,56,725	6,24,939	8,05,527	10,35,626	10.67,504	10,32,645
Three Wheelers	11,32,982	6,14,613	7,58,669	8,55,696	9,96,159	10,50,020
Two Wheelers	2,10,32,927	1,83,49,941	1,78,21,111	1,94,59,009	2,14,68,527	2,38,83,857
Grand Total	2,63,47,198	2,26,51,773	2,30,36,005	2,59,37,447	2,24,64,686	3,10,27,686

[Source: Society of Indian Automobile Manufacturers (SIAM)]

Tab II: Automobile domestic sales trends

Category	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles	27,73,519	27,11,457	30,69,523	38,90,114	42 18,750	43,01,848
Commercial Vehicles	7,17,593	5,68,559	7,16,566	9,62,468	9,68,770	9,56,671
Three Wheelers	6,37,065	2,19,446	2,61,385	4,88,768	6,94,801	7,41,420
Two Wheelers	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,771	1,79,74,365	1,96,07,332
Grand Total	2,15,44,609	1,86,20,245	1,76,17,482	2,12,04,121	1,96,37,936	2,56,07,271

[Source: Society of Indian Automobile Manufacturers (SIAM)]

The automotive industry has undergone a period of significant disruption driven by global economic uncertainties, evolving consumer preferences, and persistent supply chain challenges. Shifts in mobility trends, imposition of additional taxes by US, rapid technological advancements, and fluctuating input costs have further impacted production and demand dynamics. These factors collectively reshaped industry operations, requiring companies to adapt quickly to a changing landscape while maintaining resilience and competitiveness.

Achieving sustainability remains a central challenge for the global automotive industry, as governments worldwide tighten emission norms and push for climate neutrality. The European countries also mandating stricter CO, emission standards and targeting a complete phase-out of new petrol and diesel cars and vans by 2035. In response, automakers are accelerating their transition to electric mobility. These ambitious transitions demand substantial investment in R&D, infrastructure, and consumer outreach, compelling automakers to balance ecological goals with financial sustainability.

The automotive industry is undergoing a transformative shift, driven by rapid technological advancements and evolving consumer preferences.

Todays buyers prioritize electric mobility, autonomous features, and seamless digital connectivity in their vehicles. Automakers are responding with significant R&D investments to stay competitive. Developing smart car technologies, including autonomous driving capabilities and advanced driver-assistance systems (ADAS) are technologies in which continuous innovations still required to survive in market. However, the transition from internal combustion engines to electric vehicles is proving to be a formidable task.

Rare earth minerals have emerged as a critical input for Indias autocomponent industry?€”especially in the burgeoning electric-vehicle (EV) sub-sector?€”during FY 2024-25 and will remain a defining factor in FY 2025-26. Neodymium, praseodymium, and dysprosium are essential for manufacturing high-efficiency permanent magnet motors used in e-two- wheelers, e-three-wheelers, and EV traction drives. In FY 2024-25, India imported over 95% of its rare earth oxides and magnet alloys, primarily from China, exposing domestic component makers to supply disruptions and sharp price fluctuations: rare earth oxide prices rose by over 20% year-on-year, squeezing margins for smaller and mid-tier suppliers that lacked hedging mechanisms or long-term contracts. This volatility delayed several planned investments in EV motor manufacturing lines and prompted OEMs to absorb cost increases rather than pass them fully to consumers, marginally affecting EV affordability and adoption rates.

Chinas decision to curb exports of rare earth minerals?€”a move that began in late 2024?€”has reverberated sharply through Indias auto-component industry. In response, companies have accelerated efforts to secure alternative sources?€”signing memorandum of understanding with Australias companies and exploring pilot projects in Indias nascent Odisha deposits?€”while government incentives under the Strategic Minerals Policy and PLI Scheme for Auto Components aim to catalyze domestic processing capacity. Although these initiatives should begin to ease supply constraints by late FY 2025-26, the interim period remains challenging: higher raw- material costs will continue to test manufacturers cost-management strategies and could modestly temper the pace of Indias EV adoption and auto-component export growth.

Geopolitical conflicts?€”such as the Russia-Ukraine war and the Israel- Hamas crisis?€”have disrupted global supply chains, impacting component availability, oil flows, and logistics, thereby slowing automotive production worldwide. Russias car industry, once reliant on Western imports, collapsed after sanctions and corporate exits. The semiconductor shortage, exacerbated by instability in chip-producing regions like Israel, further strained output. In response, automakers are diversifying suppliers and boosting local manufacturing, though often at higher costs.

OUTLOOK

Indias automobile and auto-component sectors enter FY 2025-26 buoyed by robust domestic demand, expanding export opportunities, and targeted policy support, yet they face navigable headwinds from global uncertainty and raw-material dynamics.

Continued urbanization, rising middle-class incomes, and strong rural consumption are expected to sustain 7%-9% growth in passenger-vehicle sales and 8%-10% growth in two-wheeler volumes, while commercial vehicles should rebound by 5%-7% as infrastructure projects and logistics modernization gain pace. Having achieved nearly 20% export growth in FY 2024-25, manufacturers now target a further 12%-15% increase by leveraging free-trade agreements and deeper OEM partnerships in ASEAN, Africa, and Latin America. Policy catalysts such as the 1 25,938 crore PLI

Further, the rapid expansion of Indias electric vehicle (EV) sector is energizing the domestic manufacturing ecosystem. EV sales in FY/ 2024 25 reached 1.97 million units compared to 1.68 million units last year, posting a growth of 16.9%, with electric two-wheelers and three-wheelers growth of 21.2% & 10.5% respectively.

The Government of India launched the Electric Mobility Promotion Scheme (EMPS) 2024 on April 1, 2024, to promote the adoption of electric two- wheelers and three-wheelers through demand incentives while driving the development of an electric vehicle (EV) manufacturing ecosystem in the country. The EMPS 2024 is expected to boost EV penetration in Tier II and Tier III cities, support the development of the local EV ecosystem, and catalyse investments in battery technology and charging infrastructure. It also aligns with the governments long-term vision to reduce oil imports, lower carbon emissions, and build India as a global EV manufacturing hub.

The China+1 strategy, adopted by global corporations to diversify their supply chains beyond China, has significantly benefited India. Amid rising geopolitical tensions, trade restrictions, and increasing manufacturing costs in China, multinational companies are seeking alternative destinations that offer political stability, skilled labour, and a robust infrastructure framework. India has emerged as a key beneficiary of this shift due to its large domestic market, improving ease of doing business, government-led incentives under schemes like Production Linked Incentives (PLI), and a strong push for self-reliance through initiatives such as "Make in India" and "Atmanirbhar Bharat."

As a result, sectors like electronics, pharmaceuticals, automotive, and textiles have seen increased foreign investment and capacity expansion, reinforcing Indias position as a strategic manufacturing hub in the global value chain There are, several factors expected to have a positive impact on Indian auto component suppliers in the medium to long term. These include increased supplies to new platforms, higher value addition, and potential growth in aftermarket demand in international markets.

RISKS AND CONCERNS IN AUTOMOBILE AND AUTO COMPONENT SEGMENT

scheme for auto components are projected to unlock over 2.3 lakh crore of investment?€”particularly in EV, hydrogen fuel-cell, and semiconductor assemblies?€”while FAME II and PM E-DRIVE outlays, along with state- level subsidies, aim to raise EV penetration to 10-12 percent of total vehicle sales by March 2026.

The accelerated rollout of charging networks, smart highways, and 5G connectivity will further drive demand for telematics and vehicle-electronics components. Nonetheless, fluctuating prices of steel, aluminum, and rare- earth minerals underscore the need for hedging and strategic sourcing, while rapid technological shifts toward electrification and advanced driver- assistance systems demand sustained R&D and skill-development partnerships.

Upcoming Bharat Stage emission upgrades and safety-norm revisions will require agile compliance strategies, even as phased government timelines and compliance credits help mitigate implementation costs. In sum, with aligned demand tailwinds, fiscal incentives, and infrastructure investments?€”coupled with a resilient export strategy?€”Indias automotive ecosystem is poised for double-digit component growth and mid-singledigit vehicle volume expansion, reinforcing its global competitiveness and supporting Indias USD 5-trillion economy ambition.

We remain confident in aligning our growth with evolving market needs by leveraging our robust capabilities in New Product Development (NPD) across multiple platforms. Our focus on optimizing capacity utilization, reducing raw material costs, and implementing Total Productive Maintenance (TPM) is enhancing operational efficiency and resource optimization. Our key objective is to drive market share growth through innovation, while maintaining a strong commitment to cost competitiveness, productivity, and quality.

Looking ahead, while challenges such as rising interest rates and stricter emission and safety regulations may create near-term pressures, the industrys long-term outlook remains positive. The implementation of the vehicle scrappage policy is expected to spur demand, while the EV segment is gaining strong momentum?€”propelled by cost parity improvements, policy support, expanding infrastructure, and consumer preference for sustainable mobility.

OPPORTUNITIES, THREATS AND MITIGATION SRATEGIES OPPORTUNITIES:

Indias manufacturing sector stands at the cusp of significant transformation, driven by a convergence of favourable factors. The China+1 strategy has positioned India as an attractive alternative for global supply chains, especially in electronics, pharmaceuticals, and textiles. Government initiatives such as Make in India, PLI (Production-Linked Incentive) schemes, and National Logistics Policy are boosting domestic production, attracting FDI, and enhancing export competitiveness.

Additionally, digitisation, smart manufacturing (Industry 4.0), and a young, skilled workforce are enabling India to transition into a high-tech manufacturing hub. The rising global focus on sustainability and electric mobility further opens up new avenues in green manufacturing and EV components. With strategic infrastructure development and growing demand both domestically and internationally, India is well-positioned to become a global manufacturing powerhouse in the coming decade.

THREATS AND MITIGATION SRATEGIES:

Sustainability Targets and Regulatory Pressures

Sustainability remains a top priority as regulatory bodies worldwide impose stricter emission norms and climate targets. Updated regulations now demand significant reductions in CO, emissions, with several regions aiming for 100% reduction in vehicle emissions by the next decade. These evolving policies are pushing automakers to rethink traditional vehicle production and adopt more environmentally responsible practices.

To meet stricter sustainability norms, the automotive industry is ramping up investment in electric and hybrid technologies and transitioning toward zero-emission models. Emphasis is also being placed on circular economy practices through the use of recycled and eco-friendly materials. At the same time, manufacturers are actively engaging with regulators to align production strategies with long-term climate goals.

Technological Disruptions and Changing Consumer Expectations

Automotive technologies are evolving rapidly, with rising demand for electric vehicles, advanced driver-assistance systems (ADAS), and connected features. This shift brings high development costs, production complexities, and the challenge of keeping pace with fast-changing consumer expectations.

To stay competitive, automakers are balancing their product mix between internal combustion engines and electric vehicles, while adopting flexible vehicle platforms to streamline production. Strategic investments in R&D, partnerships in smart mobility, and in-house capabilities in software and electronics are helping manufacturers meet consumer demands efficiently and cost-effectively.

Labour Shortages and Skill Gaps

A growing shortage of skilled labour, especially in developed regions, is affecting the industrys ability to innovate and maintain production levels. The gap is widening as older workers retire and younger talent shifts toward other industries.

Automakers are addressing this by forming partnerships with educational institutions to develop targeted training programs, promoting reskilling initiatives, and supporting vocational education. At the same time, increased automation and robotics adoption in manufacturing is helping bridge immediate workforce gaps while reducing long-term dependency on manual labour.

Geopolitical Tensions and Supply Chain Disruptions

Ongoing geopolitical conflicts and regional instability have caused major disruptions in global supply chains, impacting everything from raw materials to semiconductor availability. These uncertainties have slowed production and increased costs across the industry.

To manage these risks, automakers are localizing supply chains, diversifying their supplier base, and investing in strategic inventory buffers. They are also adopting digital supply chain tools to improve forecasting and responsiveness, helping them better navigate geopolitical and logistical uncertainties.

BRIEF OF FINANCIAL RESULTS

During the Financial Year 2024-25, your company delivered consistent performance across all verticals. On standalone basis, total sales turnover remained steady at 6576.09 million, matching the previous year. Profit Before Tax (PBT) stood at 1 635.69 million, with Profit After Tax (PAT) at 473.78 million. Basic Earnings Per Share (EPS) for the year was 25.23.

The Company recorded an export turnover of 2197.13 million compared to 2,293.81 million during the previous year, which is decline by 4.21%. Profit After Tax (PAT) and Earnings Per Share (EPS) also decline marginally, signalling the impact of rising input costs and global uncertainties on overall profitability.

These results underscore our resilience and strategic effectiveness amidst challenging market conditions.

KEY FINANCIAL RATIOS ARE GIVEN BELOW

Particulars	Unit	2024 25	2023 24	Change over previous year	Reason for material change
Debtors Turnover	Times	5.09	5.31	-4.05%	Decrease in sales & average debtors
Inventory Turnover	Times	3.82	5.07	-24.62%	Increase in average inventory
Current Ratio	Times	1.89	1.53	22.93%	Decrease in current liability due to repayment of borrowing & better vendor payment
Debt Equity Ratio	Times	0.24	0.33	-29.17%	Repayment of borrowing
Interest Coverage Ratio	Times	7.75	5.45	42.29%	No material change
Operating Profit (EBIDTA) Margin	%	16.16	14.51	1.65%	Better operating profit by reduction in expenses despite sale decrease
Net Profit Margin	%	7.20	6.32	0.88%	Better operating profit by reduction in expenses despite sale decrease
Return on Net Worth	%	10.07	11.12	-1.05%	Decrease in return due to sale decrease

EXCELLENCE, AWARDS AND RECOGNITIONS

Our organization remains steadfast in its pursuit of world-class manufacturing excellence, a goal deeply embedded in our vision. This commitment has not only strengthened our operational capabilities but also earned us consistent recognition and trust from our esteemed customers?€”clear evidence of our quality and performance.

During the year, the Company secured new EV business from Hero MotoCorp and Dana, both of which have moved into active production. We continue to actively engage in quoting for several customers across the EV segment, further reinforcing our position in this emerging market.

In our journey toward advanced technology, we have significantly upgraded our engineering capabilities to design and manufacture high-precision components and gearboxes for next-generation applications.

Our Manesar Manufacturing Unit, now certified as an ECOFAC Plant, remains a benchmark for sustainable manufacturing. It was recently honoured with the prestigious Platinum Award by the Indian Green Building Council (IGBC), recognizing our efforts toward green practices.

By integrating environmental responsibility into our production processes, we focus on efficient resource usage and effective waste management?€” demonstrating our commitment to sustainability and operational excellence.

SEGMENT REPORTING

The Companys core business activities revolve around gears and transmission components, which are inherently interrelated and subject to similar risks and returns. As a result, these operations are treated as a single business segment in accordance with relevant accounting standards.

To provide greater insight into its global presence, the Company has adopted a geographical segmentation approach in its financial statements. The business is classified into three key regions, enabling stakeholders to better understand the Companys performance across various markets.

This segmentation strategy ensures regulatory compliance with the applicable Accounting Standard on Segment Reporting and enhances transparency. It equips investors and stakeholders with meaningful information to assess the Companys regional and overall performance more effectively.

INTERNAL CONTROLS AND THEIR ADEQUACY

The Company maintains a strong internal control framework supported by well-documented procedures that safeguard its assets, ensure operational efficiency, and promote compliance with all applicable laws and regulations. These controls are integral to strengthening financial discipline and protecting organizational resources.

To further reinforce this framework, the Company has instituted a rigorous internal audit mechanism. This includes systematic reviews conducted by the management and guided by established policies and procedures. Our internal audits are carried out by M/s. Grant Thornton Bharat LLP, one of Indias leading assurance, tax, and advisory firms. They report independently to the Audit Committee and the Board of Directors.

Together, these practices reflect our unwavering commitment to robust governance, financial integrity, and adherence to the highest industry and regulatory standards.

HUMAN RESOURCES

The Company is proud of its legacy of maintaining harmonious industrial relations since inception, upheld by a unique, people-centric work culture across all its operational locations. A strong emphasis is placed on employee well-being through a comprehensive health and safety program that includes various initiatives to safeguard and enhance the welfare of our workforce and partners.

To support continuous improvement, the Company has instituted performance evaluation systems and skill development programs across the organization, fostering both individual growth and operational excellence.

Throughout the reporting period, industrial relations remained cordial and constructive at all levels. Additional information regarding employee statistics and related matters is available in the Board Report.

Disclaimer

This report includes statements that the Company considers forwardlooking. These statements may use words such as plan, anticipate, expect, intend, aim, or similar expressions. All such statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in these forward-looking statements.

This report contains certain statements that the Company believes and may be considered as forward-looking statements. These forward-looking statements may be identified by their use of words like plan, hope, will, expect, aim or such similar words or phrases. All such statements are subject to risks and uncertainties which could cause actual results to vary materially from those contemplated by the relevant forward-looking statements.