Vamshi Rubber Ltd Management Discussions

ECONOMIC OVERVIEW

The global industrial rubber market has grown strongly in recent years. The expansion observed in the historical period is linked to factors such as industrialization, the surge in the automotive sector, a boom in construction activities, advancements in material science, and increased demands for safety and enhanced performance standards.

The global industrial rubber market is expected to see strong growth in the next few years. It is projected to grow from $11.48 billion in 2025to $14.90 billion by 2030 at a compound annual growth rate (CAGR) of 5.4%. Anticipated growth in the upcoming period can be credited to customization and innovation, supply chain streamlining, advancements within the healthcare and medical sectors, integration with Industry 4.0, and the continual evolution of material science. Key trends expected in this forecasted phase encompass compliance with regulatory benchmarks, strategic partnerships, ongoing product advancements, and the adoption of cutting-edge material technologies.

Anticipated growth in the automotive industry is set to be a driving force for the industrial rubber markets expansion. This sector encompasses the manufacturing, wholesale, retail, and repair of automobiles. Factors like improved living standards, economic growth, and the aftermath of COVID-19 have significantly impacted purchasing power, fostering a surge in demand for personal mobility globally. Additionally, the global shift towards emission-free transportation, driven by climate concerns and the pursuit of net-zero emissions, has led to increased production of electric and hybrid vehicles. This heightened demand within the automotive sector has consequently surged the need for industrial rubber used extensively in vehicle interiors and exteriors. For instance, in April 2022, the European Automobile Manufacturers Association reported a global production of 79.1 million motor vehicles in 2021, signaling a remarkable influence on the industrial rubber markets growth trajectory.

The escalating demand within the building and construction industry is poised to fuel growth in the industrial rubber market. This industry encompasses the planning, design, construction, and maintenance of structures and infrastructure. Industrial rubber finds widespread use in this sector due to its contributions such as durability, weather resistance, waterproofing, sealing, insulation, sound damping, and vibration isolation. Notably, projections by Oxford Economics in September 2021 indicated a significant surge in global construction output by 2030, expected to reach USD 15.2 trillion, marking a 42% increase of $4.5 trillion. This burgeoning demand within the building and construction industry acts as a significant catalyst for the growth of the industrial rubber market.

INDIAN ECONOMIC REVIEW

India continued its strong growth trajectory, recording an estimated GDP growth between 6.4% and 6.7% in FY2025- 26, closely aligning with the 6.5% growth recorded in FY2024-25. This performance reinforced Indias position as the second-fastest-growing economy among the G20 nations. The countrys economic resilience was supported by robust domestic demand, increased government spending, and continued structural reforms.

In FY 2023-24, the Indian governments focus on capital expenditure played a critical role in driving economic activity. Government receipts (excluding borrowings) exceeded budget estimates by 6.5%, and the tax-to-GDP ratio improved by 11.1% year-on-year. The gross tax collections for FY 2023-24 reached %20.10 lakh crore, a 22% increase from the previous year. The Goods and Services Tax (GST) collections also reached new highs, with March 2025 recording the highest-ever monthly collection at 1.7 lakh crore.

Per capita income rose to 240,000 during the year, reflecting a 9.3% increase from the previous year. Indias GDP per capita reached USD 2,880 in 2025, a critical threshold where consumption typically accelerates.

Looking ahead, India is expected to grow at around 6.5% in FY 2025-26, driven by continued government investment in infrastructure, broad-based credit expansion, and a recovery in private sector investment. The moderation of inflation and improving capacity utilization across industries are expected to further support growth.

1. FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements based on certain assumptions and expectations of future events. The Company, therefore, cannot guarantee that these assumptions and expectations are accurate or will be authorize. The Companys actual results, performance or achievements can thus differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent developments, information or events.

INDUSTRY STRUCTURES & DEVELOPMENTS

As natural resources are limited, recycling has gained attention worldwide. Now companies are articulating a vision of using greater portion of recycled material in their products and formulations. The rubber industry is not an exception to this. End of life tires are an important source of recycled rubber worldwide and its status has changed from waste to resource. The reclaim rubber industry has been developed around this reality.

A show-case project of benefits of circular economy. Actively promotes re-use of products derived from end-life- tires (ELTs) into new tires, conveyor belts, road construction etc.

OPPORTUNITIES & THREATS:

Opportunities

In light of the integrated recycling companys current position, it has the unique opportunity to capitalize on its robust supply chain capability and technological advancements. By leveraging a shared infrastructure, the company can effectively expand its operations while maximizing efficiencies. Furthermore, the potential to utilize customer approvals as a confidence-building tool will play a pivotal role in its expansion across various value chains.

The companys strategic focus on establishing a sustainability footprint within aligned sectors positions it favorably in the market. Notably, the company has demonstrated commendable achievement s Infrastructure and other sectors.

A crucial catalyst for the success of such integrated players in the recycling industry has been the introduction of the Extended Producer Responsibility (EPR) regulations by the Government of India (GOI). The incorporation of EPR for Tyres and Plastics, as well as nine other sectors of the economy, has incentivized brand owners and material manufacturers to invest in collaboration with material recovery and recycling companies. This collective effort aims to enhance value addition throughout the recycling process.

In conclusion, the integrated recycling company possesses a strong foundation for future growth and success, bolstered by its ability to leverage supply chain capabilities, technological advancements, and customer approvals. With a steadfast commitment to sustainability and a track record of excellence in tyre and plastic recycling, the company is well-poised to make further strides in the market, guided by the supportive framework of the GOIs EPR regulations.

- There are opportunities to reduce costs, with increased efficiency and economies of scale.

- There is strong export demand for Crumb Rubber and Reclaim Rubber Compound and the same is being actively explored, besides the existing exports.

Threats

End of life / Waste tyres are among the most problematic source of waste in the world. Incorrect disposal of old tyres can create all kinds of environmental and health hazards.

Itis estimated that by recycling a kilo of rubber translates into saving 2 kilograms of greenhouse gases (INAE 2015). If not recycled, tyres are an enormous global problem because of their nonbiodegradability, lammability and chemical composition.

Cost of the debt continue to be the key issue. Any increase in the interest rate will have negative impact on the portability of the Company

Invent of other better alternative product, in a fast-changing global environment. e Anyincrease in taxes and change in Government policies may have negative impact on the Company SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The Companys 87.5% of revenue is derived from manufacturing Precured Tread Rubber which is the main segment of the Company.

OUTLOOK:

In order to meet the changing market realities, your Company has been following the philosophy of providing the highest quality products and services at the lowest possible prices. All endeavours are made to achieve possible cost reduction in every area of operations. Your Companys philosophy to provide high class quality products i.e. full value for money, to consumers would greatly benefit in the long run. In the otherwise increasing cost arena, every expense, whether capital or revenue is minutely reviewed to achieve all possible savings.

RISKS AND CONCERNS:

As our products are used for replacement of new tyres, we do not foresee any major threat from any change in the technology innovation by transportation industry. The company is obtaining adequate insurance coverage for the assets of the Plant and Field locations. Since, oil is a key raw material used for tire retreading; any fluctuations in oil prices are capable of causing fluctuations in retread tire market growth.

The Company has no foreign exchange risk coverage due to its limited exposure. Compliance of safety requirements and norms placed by different Govemment agencies is a top priority of your management.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate systems of internal controls in order to ensure that all assets are safeguarded against loss from unauthorized use of disposition and that all transactions are authorized recorded and reported correctly. An Audit Committee headed by a non-executive independent Director is in place to review various areas of the control systems.

DISCUSSION OF FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Account and other financial statements etc. appearing separately. Highlights for the year 2024-25 are as under:

(Amount in Lakhs)

The financial performance of the Company has been explained in the Directors Report of the Company for the year 2024-25 appearing separately.

HUMAN RESOURCES:

During the year under review, the Company has undertaken extensive steps in optimizing the man power at the Plant, corporate office and Field locations. Employee/employer relations were cordial throughout the year. Measures for safety of the employees, training and development continued to receive top priorities.

. CAUTIONARY STATEMENT:

Certain statements in the Management Discussion and Analysis describing the Companys views about the industry, expectations/predictions, objectives etc, may be forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Companys operations may inter-alia affect with the supply and demand situations, input prices and their availability, changes in Govemment regulations, tax laws and other factors such as Industrial relations and economic developments etc. Investors should bear the above in mind.