Thejo Engineering Ltd Management Discussions

Global Environment

The global economy is experiencing uncertainty due to recent U.S. tariff policies leading to disrupted international trade, increased costs and trade tensions. Major economies such as the U.S., Japan, and the Netherlands have adjusted their growth forecasts, while factory activity in China and the UK has moderated. Small and medium-sized businesses are particularly vulnerable, with many re-evaluating their market strategies. The broader global landscape continues to be shaped by a complex mix of economic, political, and social factors, with climate change, technological disruption, geopolitical instability, and macroeconomic volatility—including in ation, policy shifts, and supply chain realignments — affecting raw material availability and cost structures. Despite challenges, the global outlook also exhibits certain positive trends, supported by growing investment in infrastructure, increased adoption of electric vehicles, and a strong push towards renewable energy. Companies with a focus on innovation, adaptive supply chains, and sustainable practices are well-positioned to navigate these dynamics and capture emerging growth opportunities.

Indias real GDP growth forecast has been revised downwards by the RBI to 6.5% for the financial year 2025-26 amid tariff hurdles. The core industries, including manufacturing, infrastructure, and energy, remain key drivers of growth. The Index of Eight Core Industries saw a steady growth of 4.4% during FY2024-25, driven by a steady growth in coal, electricity and steel. Agriculture sector is expected to perform well, due to healthy reservoir levels and strong crop production. Manufacturing activity is picking up pace, with business expectations remaining positive. Services sector continues to show resilience, contributing steadily to economic growth. Investment activity has gained traction and is expected to improve further on the back of sustained higher-capacity utilization, the governments continued focus on infrastructure spending, healthy balance sheets of banks and corporates, along with the easing of financial conditions. Merchandise exports may face pressure due to global uncertainties. Geopolitical risks pose potential obstacles to growth, making Indias economic trajectory uncertain despite strong sectoral performances.

Australias economic performance in FY2024-25 experienced modest growth amidst scal pressures. The mining sector went through a transitional phase due to unstable global commodity prices, shifting demand, and stricter regulations—particularly affecting critical minerals. Looking ahead to FY2025–26, Australias economic outlook is cautiously optimistic. The International Monetary Fund forecasts GDP growth to reach 2.1% in 2025, supported by a gradual recovery in private demand, easing monetary policy, and a rebound in dwelling construction. Despite risks of potential delay in in ation reduction and labour market adjustments, Australias economy is on a path to gradual recovery. The governments policy initiatives aim to support long-term economic resilience, but achieving scal sustainability will require careful management of public nances. The mining sector navigated a complex landscape of market fluctuations and regulatory changes and this had an adverse impact on the performance of our subsidiary Thejo Australia Pty Ltd. The industrys resilience and adaptability are expected to position it for a steady recovery and sustainable growth in future.

Saudi Arabias mining sector is expected to register significant growth in FY2025–26, driven by the Kingdoms Vision 2030 strategy to diversify its economy beyond oil. The sector is likely to make a substantial contribution to GDP, driven by significant investments in gold and phosphate projects, alongside planned expansion in lithium and copper through international collaborations. The government is incentivizing exploration while aiming to create numerous jobs. Despite environmental and workforce challenges, Saudi Arabia is positioning itself as a global mining hub by capitalizing on its vast mineral reserves and strategic collaborations. Thejo Hatcon Industrial Services Company is expected to capitalise on the business opportunity and enhance growth.

The outlook for the Brazilian economy is a moderate slowdown from its recent growth, with GDP growth projected to decrease to 2.2% in 2025. This is primarily due to higher interest rates, a challenging external environment, and a slowdown in household consumption. However, there are some positive factors, including potential export growth and resilience in the labour market and primary sector. Brazil is positioning itself as a key player in the global mining industry, balancing economic growth with environmental and social considerations. Despite fall in the current years performance of our subsidiary in Brazil, on the back of low base and steady establishment of our products with key clients, Thejo Brasil Comercio E Servicos Ltda, could target growth in this geography.

Chiles economy is expected to grow moderately in 2025, driven by recovering investment and strong exports, particularly in mining. However, risks remain due to volatile global trade conditions and potential impacts on investment decisions. In ation is projected to remain above the central banks target in early 2025,but is expected to ease over the medium term. With the steady establishment of our products and our brand in the market, our subsidiary in Chile, Thejo Engineering LatinoAmerica SpA, is expected to perform well in the coming years.

The UAE is forecasted to achieve strong GDP growth of 4.5% in 2025 and 5.5% in 2026, driven by vibrant non-oil sectors like tourism, real estate, and financial services. Economic diversi cation initiatives and a focus on digital transformation are attracting significant foreign investment and reinforcing the countrys global competitiveness. Featured with better logistics and connectivity to European and African markets, our subsidiary TE Global FZ-LLC at Ras Al-Khaimah targets to improve sales and pro tability through its efforts to establish robust customer base and strict cost management.

In the light of prevailing geo-political tensions and global trade disruptions, our subsidiaries remain focussed at long term growth through sustainable business practices.

As the Company primarily caters to core sector industries, especially the customers in mineral and steel industry, the fortunes of the Company are closely tied to the fortunes of these industries. Indias core industries, as measured by the Index of Eight Core Industries (ICI), showed mixed growth patterns in FY25. While overall growth was positive, the ICI reflected a mixed performance with strong gains in cement, coal, steel, fertilizers, and electricity, contrasted by declines in crude oil and natural gas. Indias iron and steel industry is projected to see strong growth, with domestic steel demand expected to increase by 8-9%. This growth is primarily driven by increasing demand in infrastructure and construction, as well as rising industrial demand. However, the industry also faces challenges like rising imports and potential pricing pressures. The countrys economic outlook will likely hinge on delicately balancing evolving trade relations and efforts to boost domestic consumer demand. The Company continues to focus on quality and value addition as key strategy to business development and optimal returns to stakeholders.

Thejo Engineering Limited is a premium engineering solution provider to mining, mineral processing and bulk material handling industries through manufacturing products and offering onsite maintenance through technical as well as operations and maintenance services. The Company serves a variety of industries like steel, mining, mineral processing, aggregates and sand, power, chemical and fertiliser, cement, ports, etc. The Products business of the Company centres around design, development, manufacture and supply of rubber and polyurethane-based engineered products for belt cleaning, spillage control, flow enhancement, impact and abrasion protection, and screening applications. Thejo Engineering is one of the few companies in the sub-continent offering manufacturing, marketing, and servicing activities under one roof.

Thejo Engineering was listed in the SME-EMERGE platform of the National Stock Exchange of India Limited (NSE) in 2012 and migrated to the Main Board (Capital Market Segment) of NSE in 2023. The Company has global presence with subsidiaries in Australia, Saudi Arabia, Brazil, Chile and Ras Al-Khaimah, UAE. The Company caters to India, Australasia, Middle East, South America, North America, Sub-Sahara and West Africa markets. The Company has manufacturing facilities and in-house R&D Centre in Chennai. The Company has distributor networks in various geographies.

The R&D Centre of the Company is focusing on developing new and innovative products, as well as bringing about continuous improvement of existing products to meet the needs of customers and tap into new markets. One of the primary functions of the centre is to spearhead innovation through researching and developing new techniques, equipment, and processes aimed at improving efffciency, reducing environmental impact, and enhancing safety in operations. The focus is on developing sustainable practices and technologies to mitigate environmental impact. The sustained efforts of the R&D Team have helped the Company to develop diverse product ranges capable of withstanding some of the hardest working conditions in core sector industries. During the year under review, the Company had applied for patents in respect of several products/inventions. As at the end of the financial year, the Company had applied for 42 product patents and three design protections, of which 27 product patents have been awarded and the balance are in process.

Collaboration with industry stakeholders, academia, and government agencies is integral to the functioning of the R&D centre. By fostering partnerships and sharing knowledge, the centre is engaging in collaborative basic research projects with academic universities.

As part of its policy of giving utmost importance to safety, the Safety Department of your Company is continuously evaluating every process at its manufacturing as well as work sites and taking necessary steps for the safety of personnel as well as of properties. The Company conducts safety reviews on regular basis and takes appropriate steps based on the ndings.

The Company has its Excellence Centre to train the technicians of the Company on safety and various technical aspects of the job. Safety, quality and speed are key to our services business.

The Company has been continually focussing on enhancing stakeholder value by exploring new opportunities and growth areas, proactively investing in capability development, expanding into emerging markets, re-skilling its workforce and launching newer services in alignment with its long-term sustainability goals. Majority of the product division output goes to steel sector and mines. The products as well as services offerings of the Company are primarily intended for the core sector industries. Government initiatives such as "Make in India," rapid urbanization, and increased infrastructure investments present significant potential to key core sector industries to modernize operations, embrace sustainable technologies, and expand capacity. These developments signal strong growth prospects for core industries and open up new avenues for the Company to pursue business opportunities.

The Company has a balanced portfolio of products and services, which helps to moderate the impact of cyclicality experienced by its customers. The Company is keen into development of newer products with focus on cost reduction and profit optimisation. Key future opportunities lie in expanding its product portfolio, broadening its client base through operational growth, entering new markets, and strengthening its global distribution network.

Services sector nds talent supply as a challenging area in terms of technical competency, culture, and efffciency. Cost cutting through multiskilled manpower and preventive maintenance through training on safety and skill upgradation could enhance quality service and sustainable, consistent growth and development in the future. International market has good potential for services sector with skilled manpower, for the Company to capitalise.

The Companys bet on Operation and Maintenance (O&M) as the mainstay for the future is yet to materialize at the scale and speed as envisaged by the Company. O&M continues to be viewed as a commodity involving talent supply with consequent price pressures. Under these circumstances, the Company intends to focus primarily on such O&M contracts that would add value to the Company as well as to the customers. The Company continues to expect good potential in O&M in the long term as and when the market matures. The Company has been offering bundled products and is taking various measures to establish its products and services in the overseas markets as well. Mill liners and pipe conveyor maintenance are other areas where the Company believes there will be enormous growth opportunities. Improved distributorship networks, sustainable operations with focus on Environment, Social and Governance (ESG) aspects are the value additions and qualitative factors that would provide competitive edge in the market in the long run.

The global economy continues to show resilience despite facing several strong headwinds, declining global trade, escalating trade tensions and fragmentation, rising financial risks, geopolitical issues on various fronts and ongoing impacts of climate change. Economic volatility, geopolitical tensions, and supply chain disruptions continue to impact cost structures and resource availability. Additionally, increasing regulatory requirements, rapid technological changes, and heightened competition—both from established players and emerging startups—pose significant risks. Cybersecurity threats and data privacy concerns are also escalating, demanding greater investment in digital resilience.

The global steel industry stands at a pivotal juncture, characterized by evolving demand patterns, policy interventions, and the interplay of raw material costs. While policy measures like safeguard duties offer protection to domestic players, global uncertainties, tariffs and raw material dynamics necessitate strategic agility.

The domestic product business is prone to cyclicality in the economy, especially the core sector. The competition from the unorganized sector is a challenge for the services business of the Company. In Operation & Maintenance, there is intense competition with manpower-based contracts being bagged by industry players at lower prices, especially during times of economic downturn.

The Company could be susceptible to strategy, innovation, and business or product portfolio related risks if there is any significant and unfavourable shift in industry trends, customer preferences, or returns on R&D investments. Thejo does have the benefit of being very well entrenched with many of its customers with years of established relationship. Therefore, client concentration related risks are mitigated to an extent. Policy changes in respect of core sector industries will have a direct impact on the business of the Company as it primarily caters to core sector industries in the domestic market.

In the backdrop of the global supply chain disruptions and fluctuations in pricing, the prices of most of the raw materials used by the Company are volatile. The Company is doing its best to address this risk of material prices by framing appropriate procurement and pricing policies aimed at ensuring stability and cost efffciency.

The future outlook remains cautiously optimistic, driven by advancements in technology, increased infrastructure investments, and supportive government policies across key sectors. As global economies gradually stabilize, demand recovery in core industries, rising urbanization, and digital transformation are expected to create new avenues for growth. However, the market will continue to navigate challenges such as geopolitical tensions, regulatory changes, global in ation, climate change and supply chain vulnerabilities. Companies that prioritize innovation, operational resilience, and sustainability will be better positioned to capitalize on emerging opportunities and maintain a competitive edge in an evolving global landscape. Sustainability management with emphasis on Environment, Social and Governance (ESG) practices will be a driver of future business strategy and long-term value creation. Digitisation driven by AI is in process of replacing manpower globally. AI-powered automation and IOT is being deployed to streamline processes, reduce operational costs, improve the quality of products and services, and enhance productivity and efffciency in various industries. As the outlook for the future is positive combined with a high degree of uncertainty and unpredictability, the Company and the Management are prepared to take swift decisions based on emerging situation, keeping the interest of all stakeholders in mind.

The financial performance of the Company during the year under review has shown good growth in terms of standalone turnover and pro tability. The turnover from Manufacturing Division has increased. The Services Division also witnessed a better performance with increase in turnover. The Company has also stepped up its Information Technology spending focussing on enhanced digitization and digitalization. With focus on digitization, corresponding increase is witnessed in related professional costs and computer maintenance expenses. Marginal increase in other costs is commensurate to the increase in operations. Exports registered a growth of about 14% compared to the previous year.

The production of moulded and extruded products was 2,533 tonnes during FY2024-25, registering a marginal dip of about 4% compared to the previous year (2,648 tonnes). The production of adhesives during the year under review was 562 tonnes, showing a growth of 28% over the previous year (438 tonnes).

Your Company has 3 segments of revenue – Manufacturing Units, Service Units and Others. Audited financial results of these segments are furnished in Note 26.3, forming part of the Financial Statements.

The Company has a Risk Management Committee in place, which was constituted by the Board of Directors at their Meeting held on 25^th May, 2023. The Company has put in place a Risk Management Policy encompassing the Enterprise Risk Management Framework for identi cation, assessment, management, monitoring and minimization of risks. It has identified potential risks under various categories like Business Dynamics, Operations, Liquidity, Market/Industry, Human Resources, Systems and Disaster Management. The Company is periodically reviewing the risks and their identi cation, assessment, monitoring and mitigation procedures. It does not perceive any major technological, operational, financial or environmental risks in the near future except for the market volatility due to prevailing trade tariff related challenges and geopolitical tensions and their impact on the global economy.

Your Company has adequate internal control systems combined with delegation of powers and periodical review of the process. The control system is also supported by internal audits and management reviews of documented policies and procedures.

The Company continues to look at, identify, create and execute initiatives that enhance productivity and efffciency. To enthuse the employee base and increase the linear relationship between performance and reward, increments/incentives and stock options are being provided based on performance.

The Company will invest as hitherto in people through various initiatives which enable the workforce to meet the production and service expectations and challenges related thereto and to infuse positive enthusiasm towards the organisation, with keen focus on the training and safety of the employees.

During the Financial Year 2024-25, the Company registered good growth in product and services revenue, resulting in better pro tability. As a result, the pro tability of the Company stood at 5,000.57 lakhs during FY25 as against 3,805.04 lakhs in the previous year. With focus on working capital management, the Company was able to pre-close its term loans and did not have any outstanding as on 31^st March 2025 in respect of the fund-based limits sanctioned by the banks.

As a result of the above factors, the Return on equity increased to 20.73% in FY25 compared to 19.17% in FY24 and there was significant change in the following key financial ratios: Interest coverage ratio increased from 12.59 times to 19.35 times Debt-Equity Ratio decreased from 0.14 times to 0.08 times

Certain statements in the Management Discussion and Analysis, describing the Companys views about the industry, objectives and expectations, etc. may be considered as ‘forward looking statements. The Company has tried to identify such statements by using words such as ‘expect, ‘anticipate, ‘hope, ‘likely, ‘plan, ‘projected, ‘believe, ‘estimated, etc. While making these statements, the Management has made certain assumptions which it believes are prudent. There is no guarantee that the assumptions would prove to be accurate. Actual results may differ substantially or materially from those expressed or implied in the statements. The Company undertakes no obligation to update any of the statements, whether as a result of any future events, change in assumptions or for any other reason, whatsoever. These statements are purely intended to put certain things in perspective based on the assumptions and estimates of the Management and in no way solicit investment or guarantee any performance or returns. Members and others are requested to make their own judgment before taking any decision to invest in the shares of the Company.