Vesuvius India Ltd Management Discussions

Macroeconomic Environment

India closed FY 2024-25 with GDP growth of 6.5%, moderating from 8.2% in FY 2023-24, yet remaining the fastest-growing major economy. The deceleration largely reflected base- effect normalisation. Growth momentum was supported by resilient consumption, strong public capital expenditure, and robust services performance, even as manufacturing softened amid weak global trade and tariff pressures.

Growth expectations for FY 2025-26 have strengthened, with consensus estimates in the 6.5-7.0% range. Domestic indicators, including investment trends and high-frequency data, suggest a mild upside bias despite external headwinds from global trade tensions, tariff escalation, and subdued global demand.

Inflation eased materially through 2025, prompting the RBI to lower its FY 2025-26 inflation projection to 2.6%. Core inflation remains at multi-year lows, although food inflation risks persist due to potential supply disruptions. With inflation comfortably within the target band, the RBI maintained a neutral stance for most of the year before delivering a 25-bps rate cut that brought the repo rate to 5.25%, while retaining policy flexibility amid evolving conditions.

Indias external position remains robust. The current account deficit narrowed to 0.2% of GDP in Q1 FY 2025-26, supported by strong export services, steady remittances, and moderated imports. Foreign exchange reserves remain elevated, providing a solid buffer against global volatility.

2024

2025

Growth %

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2024	12.8	11.9	12.9	12.2	12.3	12.0	12.3	12.4	12.0	12.8	12.4	13.4
2025	13.7	12.6	14.0	13.3	13.7	13.5	13.9	14.0	13.6	14.0	13.8	14.8
Growth %	7%	6%	9%	9%	11%	12%	14%	13%	14%	9%	11%	10%

The Union Budget FY 2025-26 reinforced growth-aligned fiscal consolidation, with a fiscal deficit target of 4.4% of GDP. Capital expenditure of 11.21 lakh crore, approximately 3.1% of GDP, extends the multi-year infrastructure push, with continued emphasis on logistics, connectivity, and manufacturing ecosystems.

Industrial policy adjustments, including selective customs duty changes through AIDC, aim to strengthen domestic manufacturing, enhance supply-chain resilience, and promote import substitution. Public capex continues to underpin demand for steel, cement, and refractories, while tariff changes in stainless steel may influence competitive dynamics.

Key risks remain externally driven, including trade tensions, geopolitical shocks affecting commodity markets, and uneven global disinflation. These are partly offset by Indias strong domestic demand base, policy agility, and a stable macroeconomic framework.

Overall, India enters FY 2025-26 with a resilient macroeconomic foundation characterised by steady growth, benign inflation, stable external balances, and a disciplined fiscal strategy. Infrastructure-led investments and ongoing structural reforms position the country to continue outperforming major global economies in the year ahead.

Indian Steel Industry

With supportive policy measures, rising domestic demand, ongoing capacity expansion, and strategic investments, Indias steel industry is positioned for sustained long-term growth.

Domestic steel demand is projected to grow by 9-10% in 2025, according to ICRA, reflecting -continued strength in core end- user sectors.

Government-led infrastructure programmes, including Gati Shakti, Smart Cities, affordable housing initiatives, dedicated rail corridors, and logistics modernisation, continue to drive structural steel demand and create long-visibility order pipelines.

Indias steel industry is therefore poised to strengthen its position as a global steel powerhouse, progressing steadily toward higher-value production, enhanced self-sufficiency, and a greener, more efficient manufacturing ecosystem.

Steel production and consumption trends

In 2025, global crude steel production declined by 2.0%, settling at 1,803.8 million tons (MT). In contrast, Indias crude steel production grew by 10.4% to 164.9 MT, highlighting the sectors expansion and resilience.

Indias per capita steel consumption rose to approximately 110 kg, up from 106 kg in 2024. This steady increase is driven by rising infrastructure development and industrial growth and moving toward the National Steel Policys long-term target of 160 kg by FY31

Indias Crude steel capacity rose to 200-205 MT in FY25, marking a more than 10% increase year-on-year and nearly doubling over the past decade

Steel imports and exports

Indias steel trade dynamics strengthened significantly during April-December 2025. Imports declined sharply to 4.649 MT, a contraction of 37.4%, reflecting lower inflows amid improved domestic availability and competitive domestic production. In contrast, steel exports surged to 4.799 MT, rising 33.3%, driven by stronger overseas demand and improved export competitiveness.

Domestic fundamentals remained robust, with steel consumption reaching 119.574 MT, marking a healthy 7.0% year-on-year increase. This solid consumption growth underscores continued momentum in infrastructure, construction, and industrial activity

Policy and growth initiatives

Indias long-term policy framework continues to anchor industry expansion. Under the National Steel Policy (NSP) 2017, India targets 300 MT of crude steel capacity by 203031, with envisaged production of 255 MT of crude steel and 230 MT of finished steel. Complementing this, the Production Linked Incentive (PLI) Scheme for Specialty Steel aims to add approximately 25 MT of specialty steel capacity, with committed investments exceeding 27,000 crore as of early 2025 and a total scheme outlay of 6,322 crore focused on high-value categories. Together, these initiatives seek to expand value-added steel output, reduce import dependency, and strengthen Indias position in global supply chains.

Indian Cement Industry

The Indian cement industry, the second largest globally, remains a critical enabler of infrastructure development, housing expansion, and industrial growth, with demand closely

aligned to public capital expenditure and urbanisation trends. According to Mordor Intelligence, the market is expected to record steady growth over the coming years. The industry exhibits medium market concentration, with consolidation among leading players strengthening scale advantages and improving cost efficiencies.

Key Infrastructure Initiatives Supporting Cement Demand

- National Infrastructure Pipeline (NIP): A longterm investment pipeline of approximately 111 lakh crore, spanning roads, railways, urban infrastructure, and energy, providing multi-year visibility to construction activity.

- Bharatmala & Sagarmala: Continued expansion of national highways and port infrastructure to strengthen logistics efficiency and trade connectivity.

- PM GatiShakti National Master Plan: Integrated planning framework covering 44 ministries, aimed at accelerating multimodal connectivity, industrial corridors, and logistics parks.

- Smart Cities Mission: Ongoing urban transformation initiatives focused on transport systems, housing, utilities, and digital infrastructure.

- Jal Jeevan Mission: Expansion of piped water supply networks in rural India, supporting distributed construction activity across districts.

Infrastructure Expansion Across Sectors

- State Government Capex: Combined state capital expenditure remains elevated, estimated at over 8-9 lakh crore, sustaining decentralised infrastructure spending momentum.

- National Highways: Continued highway expansion, with construction pace maintained at high levels under Bharatmala and economic corridor programmes.

- Railways: Record allocation supporting electrification, station redevelopment, Dedicated Freight Corridors, and rolling stock expansion.

- Airports: Expansion of airport capacity under the UDAN scheme and private-sector participation in greenfield airport projects.

- Power & Renewable Energy: Continued push toward renewable energy capacity addition and grid modernisation to support Indias energy transition targets.

With sustained public investment, ongoing industry consolidation, and rising urbanisation, Indias cement industry remains structurally well-positioned. While regional

oversupply and input cost volatility persist, improving capacity utilisation, scale-driven efficiencies, and diversified end-use demand are expected to support steady expansion. Cement demand is likely to remain robust over the medium term, reinforcing the sectors critical role in Indias infrastructure and economic development.

Indian Aluminium Sector

Indias aluminium sector continues to play a strategic role in the countrys industrial and energy-transition ecosystem, supporting demand across power transmission, transportation, construction, packaging, renewable energy, and consumer durables. India remains the second-largest producer of primary aluminium globally, backed by abundant bauxite reserves, strong vertical integration, and a steadily expanding domestic consumption base.

The domestic aluminium market is poised for steady growth through the end of the decade, driven by infrastructure investment, rapid electrification, transportation lightweighting, and renewable energy deployment. Growth momentum is expected to remain primarily domestic, with downstream consumption expanding at a faster pace than exports.

The industrys end-to-end integration, spanning bauxite mining and alumina refining to smelting and downstream fabrication, provides structural cost advantages and supply stability, particularly amid global commodity price volatility.

Aluminium consumption in India remains sector-driven, with the Electrical sector accounting for 48% of total demand, followed by:

Automobile & Transport -	15%
Construction -	13%
Consumer Durables -	7%
Machinery & Equipment -	7%
Packaging -	4%
Other applications -	6%

Demand growth continues to be supported by expansion in transmission and distribution networks, renewable energy evacuation infrastructure, and increasing use of aluminium in solar modules, wind-energy components, and conductors. Rising aluminium intensity in railways, metro projects, automotive lightweighting, and electric vehicles is contributing to incremental volume growth aligned with energy-efficiency and emissions-reduction objectives. Urbanisation and commercial development are driving greater adoption of aluminium in fagades, windows, cladding, and structural applications, while growing preference for lightweight and recyclable aluminium packaging across food, beverage, and pharmaceutical segments is supporting steady downstream demand.

At the same time, the sector remains exposed to certain structural risks. Aluminium smelting is energy-intensive, with power accounting for a significant share of production costs. Although captive power arrangements provide partial insulation, the industry remains sensitive to energy price volatility, coal availability, and logistics constraints. Global pricing dynamics also influence profitability, with moderating global growth, elevated energy costs, and surplus capacity in certain regions potentially exerting pressure on realisations. In addition, the implementation of the Carbon Border Adjustment Mechanism (CBAM) from 1 January 2026 introduces a carbon levy on aluminium exports to the European Union, increasing compliance requirements and potentially affecting competitiveness for carbon-intensive primary producers.

Overall, the Indian aluminium sector remains structurally well positioned, supported by strong domestic demand drivers, increasing downstream value addition, and policy emphasis on infrastructure and energy transition. While short-term volatility in prices and input costs may persist, aluminium is expected to play a critical role in Indias infrastructure expansion, renewable energy deployment, and manufacturing growth, supporting sustainable and competitive sector development over the medium to long term.

Refractory Industry Structure and Developments

Refractories and flow-control solutions are critical engineered materials and systems that enable high-temperature industrial processes, particularly in steel production and casting operations. Refractory materials are non-metallic, heat-resistant products that retain strength and stability under extreme thermal and chemical conditions, making them indispensable for furnace linings, ladles, kilns, and other vessels used in steelmaking and downstream processes. Collectively, refractories form a foundational component of the steel, cement, glass, and non-ferrous metal industries.

The Indian refractories market represents a steadily expanding segment within the countrys industrial materials landscape, closely aligned with growth in core manufacturing and infrastructure sectors. Supported by steel capacity additions, rising industrial output, and increasing process sophistication, the sector is expected to witness sustained medium- to long-term growth. Demand is progressively shifting toward higher-performance, value-added refractory and flow-control solutions, reflecting stronger emphasis on operational efficiency, quality, and total cost of ownership.

From an end-use perspective, iron & steel remains the largest revenue-generating segment, reflecting the refractoryintensive nature of steelmaking and continuous casting. Glass & ceramics is among the faster-growing segments, driven by capacity expansion and tighter quality specifications. Other key segments include cement & lime and non-ferrous metals, contributing to a diversified demand base.

Sector-wise refractory consumption

- 70% in the steel industry

- 7% in the cement industry

- 6% in non-ferrous industries

- 17% across other high-temperature applications

India accounted for approximately 6.3% of global refractories market revenue in 2025, underscoring its rising importance within the global ecosystem. While China continues to lead the global and Asia-Pacific markets by revenue, India remains one of the fastest-growing markets in the region, supported by structural expansion in steel and infrastructure- linked industries.

Despite challenges related to raw-material price volatility and energy costs, long-term fundamentals remain strong. Growth is expected to be anchored in sustained steel expansion, downstream value addition, and increasing metallurgical sophistication. The industry is transitioning from volume- led supply models to high-performance, value-added refractory and flow-control solutions, driven by customer focus on productivity and cost efficiency. Supported by strong industrial demand, localisation, and investment in advanced materials, the Indian refractories market is well positioned for durable, long-term growth.

Demand Drivers

Growth in steel production and capacity expansion

The steel sector is the largest consumer of refractories, accounting for the majority of demand. Indias position as the second-largest crude steel producer globally and continued capacity additions, higher utilisation, and greater adoption of continuous casting directly support sustained refractory demand.

Shift toward value-added and higher-grade steel products

Rising production of automotive, electrical, and specialty steels requires higher-performance refractories and flow- control systems to meet tighter quality, yield, and consistency requirements, increasing value per tonne of steel produced.

Rapid growth in glass & ceramics segment

Glass & ceramics is expected to be the fastest-growing end- use segment for refractories in India, driven by new capacity additions, quality upgrades, and demand from construction, consumer goods, and electronics.

Expansion in cement and non-ferrous metals

Capacity expansion and modernisation in cement and non-ferrous metals (including aluminium) are supporting diversification of refractory demand beyond steel, particularly for kiln linings, furnaces, and high-temperature processing units.

Transition toward performance-led procurement

End-users are increasingly focused on total cost of ownership, prioritising refractory solutions that improve campaign life, reduce downtime, and enhance productivity. This is driving a shift from commoditised products to engineered, value- added refractories and integrated flow-control solutions.

Risks and Challenges

High dependence on steel industry cycles

Given the strong linkage between refractories and steel production, any slowdown in steel demand, delay in capacity commissioning, or reduction in utilisation levels can directly impact refractory volumes.

Raw-material price volatility

Key inputs such as alumina, magnesia, graphite, and specialty minerals are exposed to global supply constraints and price volatility, which can affect margins, particularly under fixed- price or long-term supply contracts.

Energy intensity and cost pressures

Refractory manufacturing is energy-intensive, making producers sensitive to power and fuel cost fluctuations. Sustained increases in energy prices can adversely impact operating profitability.

Pricing pressure from large end-users

Steel and cement producers continue to focus on cost optimisation, leading to pricing pressure, longer contract tenures, and higher performance expectations, requiring continuous investment in R&D and application engineering.

Environmental and regulatory compliance

Stricter norms related to emissions, waste handling, and energy efficiency are increasing compliance requirements, potentially leading to higher capital and operating costs for refractory manufacturers.

Financial & Operational Performance

The financial and operational performance of the Company is discussed in detail in the Corporate Overview section of this Annual Report.

In accordance with Regulation 34(3) read with Schedule V (Clause B) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the key financial ratios are presented below:

Key Ratios	2025	2024
Debtors Turnover Ratio	75.37	69.20
Inventory Turnover Ratio	47.09	49.09
Interest Coverage Ratio	296	297
Current Ratio	3.21	3.12
Debt-Equity Ratio	0.01	0.01
Operating Profit Margin (%)	16.99%	18.73%
Net Profit Margin (%)	12.55%	14.16%
Return on Net Worth (%)	21.49%	24.46%

Details of significant change(s) in the Key Financial Ratios

All percentage changes in the ratios mentioned above are below 25%, hence no explanation is required to be given.

Outlook

The Company enters its next phase of growth with a strengthened operating platform, expanded manufacturing footprint, and deeper customer integration. Its positioning in refractories and molten metal flow engineering, supported by growing domestic capabilities and proximity to customers, aligns closely with the evolving needs of Indias steel and high- temperature industrial ecosystem.

As India advances toward higher capacity and greater process sophistication, customers are placing sharper emphasis on productivity, quality, safety, and sustainability. This is expected to accelerate demand for engineered, high-performance refractory and integrated flow-control solutions-areas where the Company has steadily enhanced its technical depth and solution portfolio.

Investments in scale and localisation, including new capacities at the Visakha Industrial Complex and process upgrades across existing plants, have strengthened supply resilience, reduced import dependence, and improved responsiveness. These initiatives reinforce the Companys role as a long-term partner to large industrial ecosystems.

Operational priorities remain focused on disciplined execution, cost efficiency, working capital optimisation, and safety-led performance. A low-leverage balance sheet, strong liquidity, and robust governance provide the flexibility to navigate input cost volatility while continuing selective investments in technology and talent.

Sustainability remains integral to the growth agenda. By embedding energy efficiency, resource optimisation, and environmentally aligned product innovation into operations and customer solutions, the Company is positioned to support decarbonisation goals while enhancing longterm competitiveness.

Despite macroeconomic and commodity-related uncertainties, the Companys diversified end-market presence, technology-led portfolio, and partnership-driven model provide structural resilience. Management remains cautiously optimistic, focused on sustainable, value-led growth anchored in global expertise and locally engineered execution.

Human Resources

At Vesuvius India, the People and Culture strategy is focused on building a high-performing, future-ready organisation by ensuring the availability of the right talent, skills, and capabilities to support the Companys long-term vision. The approach emphasises fostering a dynamic, inclusive, and performance-oriented work environment, where diversity, innovation, and continuous learning contribute to sustainable business excellence.

The Company places strong emphasis on employee value creation and experience, supported by structured talent development initiatives, leadership development programmes, and clearly defined career progression pathways. These initiatives are designed to equip employees with the capabilities required to address evolving industry and business challenges.

During 2025, the Companys employee strength increased from 612 in 2024 to 652, reflecting continued investments in capability building across operational, technical, and managerial roles. Notably, 8% of new recruits were women, reinforcing the Companys commitment to workplace diversity and inclusion.

The workforce remains a critical asset, and the Company continues to invest in employee engagement, well-being, skill development, and performance management, strengthening organisational resilience and readiness for future growth.

Industrial relations during the year remained harmonious, supported by proactive engagement, transparent communication, and a strong focus on employee welfare. Structured HR policies and collaborative practices have contributed to a positive work environment, enabling productivity and alignment with organisational objectives.

Looking ahead, the Company remains focused on enhancing workforce capabilities, strengthening leadership pipelines, and embedding a culture of high performance and continuous improvement, supporting sustained growth and long-term organisational success.

Internal Control Systems and Their Adequacy

The Company has established internal control framework commensurate with the scale and complexity of its operations, aimed at ensuring financial integrity, operational efficiency, effective risk management, and regulatory compliance.

Comprehensive internal financial controls are in place to ensure the accuracy and reliability of financial reporting and the integrity of financial statement preparation. These controls operate through a structured framework of policies, procedures, authorisations, and certifications, reinforcing strong governance and accountability.

The Board, in consultation with the Internal Auditors, periodically reviews the effectiveness of internal controls and compliance systems, financial and operational risks, risk assessment and management frameworks, and related party transactions, ensuring adherence to applicable laws, rules, and regulations.

Internal audits are conducted by the Internal Auditors of the Vesuvius Group, providing independent assurance on the adequacy and effectiveness of internal controls. The Companys Policies, Code of Conduct, and CORE Values and Behaviours apply to Directors and all employees and were complied with during the year. These policies are available on the Companys website at www.vesuviusindia.in . with direct web links provided elsewhere in this Report.

The Company has adequate internal financial controls with reference to its financial statements, designed to safeguard assets, prevent and detect frauds and errors, maintain accurate and complete accounting records, and ensure timely preparation of reliable financial information. These controls were reviewed during the year, and no reportable material weaknesses were identified.

The Statutory Auditors have also carried out independent evaluations of systems and processes and have confirmed the adequacy and operating effectiveness of the internal financial controls over financial reporting. This reinforces the Companys commitment to strong corporate governance, financial transparency, and operational excellence.

Cautionary Statement

There are certain statements which have been made in the Management Discussion and Analysis Report describing the estimates, expectations or predictions, may be read as forward-looking statements within the meaning of applicable laws and regulations. The actual results may differ materially from those expressed or implied. The important factors that would make a difference to your Companys operations include demand-supply conditions, raw material prices, changes in Government Policies, Governing Laws, Tax regimes, Global Economic Developments and other factors such as litigation and labour negotiations.