Vilas Transcore Ltd Management Discussions

@ GLOBAL AND INDIAN ECONOMIC OUTLOOK

The global economy is navigating a period of moderated yet stable growth amid evolving geopolitical tensions, tightening monetary policies, and structuralenergy transitions. According to the IMF, global GDP is projected to grow at 3.3% annually in 2025 and 2026—below the historical average of 3.7%, but indicative of a broadly resilient recovery trajectory. While advanced economies are seeing gradual recoveries, the momentum is being led by emerging markets, particularly in Asia and parts of Africa, where infrastructure development, digitalization, and industrialization are accelerating.

Global infrastructure investment remains a cornerstone of economic growth, with an estimated $94 trillion required by 2040 to meet energy, transport, and urbanization needs. Power infrastructure forms a significant portion of this, driven by rising electricity demand, the transition to renewable energy, and greater electrification of sectors like mobility and manufacturing. Clean energy deployment is expanding rapidly, with renewables expected to account for nearly all incremental electricity demand globally through the rest of the decade.

India continues to outperform global peers and remains one of the fastest-growing major economies in the world. The IMF and World Bank project Indias GDP to grow at 6.5%-6.7% in FY26 and FY27, supported by strong domestic demand, policy reforms, infrastructure push, and a vibrant services and manufacturing base. Government-led capital expenditure programs, including those in power transmission, renewable energy, and transportation, are driving industrial activity and improving long-term productivity.

The growing focus on green energy, improved electricity access, urbanization, and EV adoption is expected to result in sustained demand for electrical equipment and components. Indias transformer market, currently valued at approximately USD 5.1 billion, is projected to reach USD 7.4 billion by 2029, growing at a CAGR of ~8%. This expanding base offers strong opportunities for companies like Vilas Transcore that operate at the intersection of power infrastructure and advanced material technologies.

(Source: IMF, PIB)

@ INDUSTRY OVERVIEW

The transformer industry plays a foundational role in enabling efficient and reliable electricity transmission and distribution across sectors such as utilities, infrastructure, railways, renewables, and industrial manufacturing. The ongoing expansion of Indias power grid, coupled with rising peak electricity demand, electrification of rail and metro systems, and the rollout of advanced metering infrastructure (AMI), continues to fuel steady demand for power and distribution transformers.

This expansion is being supported by a policy framework that includes initiatives such as Make in India, the Production Linked Incentive (PLI) scheme for electrical equipment, and the Revamped Distribution Sector Scheme (RDSS), all of which prioritize domestic value addition, grid modernization, and decarbonization of the power system.

A defining trend in the transformer industry is the accelerating shift toward energy-efficient, low-loss transformer designs. Regulatory bodies such as the Bureau of Indian Standards (BIS) and Bureau of Energy Efficiency (BEE) have progressively tightened norms around transformer efficiency and loss levels, particularly in the transmission and distribution segments. Further tightening of these norms is expected in FY26, placing increasing emphasis on the quality and performance of transformer cores.

Like any industry, the qualitative output in transformer industry is dependent on the quality of the main inputs. CRGO (Cold Rolled Grain Oriented) laminations form the magnetic core of transformers and are crucial to achieving the required electrical performance. Precision-cut, thin- gauge laminations help minimize core losses, reduce noise, and enable compact transformer designs that are essential for space-constrained urban applications, renewable energy systems, and electric mobility infrastructure. The growing use of high-grade and laser-processed laminations reflects the rising demand for tighter tolerances and improved energy performance.

India currently has no domestic manufacturing of CRGO steel and remains entirely dependent on a limited group of global suppliers. CRGO coils are sourced from international mills, such as those in Japan, South Korea, and Europe, and are processed locally into transformer-ready laminations. This supply chain structure exposes the domestic ecosystem to raw material price volatility, import duties, and foreign exchange fluctuations.

Within this context, domestic CRGO processors play a vital role in bridging global supply with local demand. The processing requires highly specialized slitting, shearing, and profiling technologies to maintain the grain structure and magnetic properties of the steel. Companies like Vilas Transcore operate in this technically demanding space, delivering tightly specified laminations tailored to the requirements of transformer OEMs. As OEMs increasingly prioritize quality, turnaround time, and supply assurance, the strategic role of precision-focused lamination suppliers is becoming more central.

While the CRGO lamination processing industry in India is moderately fragmented, the capability to deliver transformer-grade, high-precision output at scale remains limited to a few specialized players. This creates an opportunity for quality-driven, technically capable processors to consolidate their position and partner with OEMs on long-term supply programs.

Looking ahead, the adoption of electric vehicles, the growth of distributed renewable energy, and smart grid upgrades are expected to further drive demand for advanced transformer components. Emerging magnetic materials— such as amorphous and nanocrystalline alloys—are also beginning to gain traction in niche, high-efficiency applications. Additionally, the integration of complementary components such as transformer radiators offers further potential for companies to scale rapidly in the current scenario.

(Source: IMARC, World Bank , KNN)

- COMPANY OVERVIEW

Vilas Transcore Limited is a precision-driven manufacturer of Cold Rolled Grain Oriented (CRGO) transformer laminations and allied components, serving as a critical link in Indias electrical infrastructure value chain. The Company specializes in processing imported CRGO coils into transformer-ready laminations through advanced slitting, shearing, and profiling technologies that preserve the materials magnetic properties and structural integrity.

Founded with a vision to support Indias growing demand for energy-efficient power systems, Vilas Transcore has steadily evolved into a trusted supplier to leading transformer OEMs across the country. The Company operates in a high- specification segment that demands consistent quality, tight dimensional tolerances, and supply reliability-attributes that have become defining strengths of its operating model.

FY25 marked a milestone year for Vilas Transcore as it pursued a major capacity expansion and broadened its product portfolio. The Company scaled its CRGO lamination processing capacity from 12,000 MTPA to 36,000 MTPA through the construction of a new manufacturing facility, which reached the trial production stage during the year and is on track for full commissioning in the second quarter of FY26.

In addition to expanding scale, the Company entered two adjacent product categories-transformer radiators and nanocrystalline cores-to support emerging customer requirements in energy-efficient and compact transformer designs. These additions position Vilas Transcore to serve a wider range of applications, including electric vehicle charging, renewable energy integration, and smart grid infrastructure.

The Company continues to operate with a net debt-free balance sheet, prudent working capital management and now has a strong foundation for scalable growth.

With a focus on disciplined execution, customer-centricity, and technical excellence, Vilas Transcore aims to become a preferred supply partner for domestic and international transformer manufacturers which in turn will fuel its sustainable growth.

? KEY DEVELOPMENTS IN FY25

FY25 was a pivotal year for Vilas Transcore - firstly achieving the expected growth in Revenue and surpassing the same in profitability - and secondly with meaningful progress in expanding capacity, entering new product segments, and improving operational efficiency — setting the stage for future growth.

A. Progress at Unit 3 - New Manufacturing Facility

Vilas Transcore advanced the development of Unit 3, a greenfield manufacturing facility that will support the Companys future scale and diversification. The unit includes:

• Expanded CRGO lamination capacity, scaled from 12,000 MTPA to 36,000 MTPA

• A new transformer radiator line with a capacity of 7,200 MTPA

• Pilot-scale nanocrystalline magnetic core production, targeting EVs, renewables, and smart grid applications

• Infrastructure to add additional products

By March 2025, machinery installation was mostly complete and trial production had begun. Full commercial operations are expected to start in Q2 FY26.

B. High Utilisation of Existing Units

The Companys Unit 1 and Unit 2 operated above their rated capacity, producing 12,069 MT against a combined limit of 12,000 MTPA. This was made possible by a favourable product mix, highlighting strong demand and efficient use of resources.

C. Strengthened Supply Chain

To prepare for expanded operations and ensure stable input availability, the Company added new global suppliers for CRGO coils. This improves raw material security and reduces risks from price or currency fluctuations.

@ OPPORTUNITIES AND CHALLENGES

Opportunities

1. Capacity-Driven Growth

With the upcoming commissioning of Unit 3, Vilas Transcore is set to triple its CRGO lamination capacity and add new product lines such as transformer radiators and nanocrystalline magnetic cores. This expansion enables the Company to tap into a wider customer base and serve a broader range of applications across the transformer ecosystem.

2. Power Infrastructure Investments

Indias continued focus on strengthening power transmission and distribution networks, including large-scale investments under RDSS, Gati Shakti, and renewable energy corridors, is driving demand for efficient transformer components. Similar capex trends are visible in emerging markets across Asia and Africa, creating export potential.

3. Push for Energy Efficiency and Quality Standards

Stricter BIS and BEE norms are accelerating the transition towards low-loss, high-efficiency transformers, which require high-grade, precisely processed CRGO laminations. This creates a long-term structural opportunity for quality-focused processors like Vilas Transcore.

4. Electrification and EV Charging Demand

The rise of electric vehicles, rail electrification, and digital infrastructure necessitates compact, efficient transformers suited for fast-growing urban and industrial hubs. Vilas Transcores entry into nanocrystalline cores aligns well with this evolution in end-use applications.

5. Emerging Export Opportunities

Supply chain realignments, global sourcing diversification, and Indias positioning as a preferred manufacturing base have opened up opportunities to serve transformer component demand from North America, Europe, and the Middle East.

Challenges

1. Dependence on Imported Raw Materials

India continues to rely on imports for CRGO steel, exposing manufacturers to global price fluctuations, logistical delays, and currency volatility. Although Vilas Transcore has built a diversified sourcing network, the industry remains sensitive to input cost movements.

2. Execution Risk in Expansion Rollout

The commissioning of Unit 3 and the ramp-up of new product lines involve execution risks related to machinery stabilization, customer approvals, and supply chain coordination. Any delays could affect near-term output or revenue contribution.

3. Product Validation for New Lines

Transformer radiator and nanocrystalline core segments require technical approvals and customer testing, which can lengthen the go-to-market cycle. Establishing scale and credibility in these new areas will require sustained engagement.

4. Competitive Intensity and Pricing Pressure

The transformer component space is witnessing increasing competition, both from domestic players scaling up and from imported alternatives. While quality and reliability remain differentiators, pricing pressure in large contracts remains a challenge.

5. Talent and Skill Availability

As the Company scales into new technologies and higher precision manufacturing, access to trained personnel in operations, quality, and R&D becomes critical. Retaining and developing such talent will be essential to sustaining growth.

- RISK MANAGEMENT

Vilas Transcore recognizes that effective risk management is essentialfor long-term value creation and business resilience. The Company has a well-established and structured risk management policy and procedures to proactively identify and manage potential risks across its operations, supply chain, financial systems, and compliance environment. The Company has in place adequate mitigation plans for the aforesaid risks and also takes various initiatives for the same. The concerned risks are reviewed from time-to-time alongwith the effectiveness of the mitigation strategies and their implementation process.

1. Raw Material Dependency and Price Volatility

CRGO coils—Vilas Transcores primary input—are sourced from both domestic and international suppliers.

While this provides sourcing flexibility, input costs remain influenced by global market trends, geopolitical factors, and logistical dynamics. Any sharp movement in prices or supply disruptions can impact margins. To address this, the Company has developed a diversified supplier base, maintains buffer inventory for key materials, and follows a disciplined procurement strategy focused on balancing cost, quality, and availability.

2. Execution Risk in Capacity Expansion

The ongoing development of Unit 3 involves coordinated efforts across civil construction, equipment commissioning, and utility integration. Delays in project execution or resource bottlenecks may impact operational timelines. Vilas Transcore mitigates this through close monitoring, phased rollout, and contingency planning. The facility entered trial production in Q4 FY25 and is expected to be fully commissioned in Q2 FY26.

3. Demand Cyclicality and Customer Concentration

The Companys performance is closely tied to investment cycles in power infrastructure, where demand can vary based on project rollout schedules and policy momentum. Additionally, a significant portion of revenue comes from a concentrated set of transformer OEMs.

To manage this, the Company is expanding its product portfolio, strengthening customer relationships, and gradually increasing its reach across diverse domestic and international markets.

4. Competitive and Technological Risk

The transformer component industry is evolving rapidly, with growing expectations for efficiency, precision, and advanced materialuse. Competition from large-scale players and technological disruption could impact market position. Vilas Transcore addresses this through continuous investment in automation, technicaltraining, and new product development, including nanocrystalline cores and radiators.

5. Regulatory and Environmental Risk

The Company operates in a regulated environment governed by BIS certifications, energy efficiency norms, and environmental clearances. Any change in standards, duties, or compliance requirements could affect operations or cost structures. To stay ahead, the Company maintains strong internal study, actively engages with consultants and regulators, and monitors policy developments across key markets.

6. Currency and Financial Risk

Given the Companys engagement in cross-border procurements, fluctuations in foreign exchange rates can impact input costs and revenue realisation. This risk is managed through prudent financial planning, diversified sourcing and sales geographies, and effective working capital management.

7. Human Resource and Talent Risk

Scaling operations requires continuous availability of skilled manpower across technical and managerial functions. Any shortage of qualified personnelcan impact operational stability and growth execution. Vilas Transcore looks to recruit the best talent with competitive salary scales and incentives as also invests in training, performance systems, and talent retention initiatives to build a strong and future- ready workforce.

- INTERNAL CONTROL SYSTEMS

Vilas Transcore has established a robust and comprehensive internal control framework designed to safeguard its assets, ensure operational efficiency, and maintain the accuracy and integrity of financial and non-financial reporting. These controls are commensurate with the scale and complexity of the Companys operations and are aligned with best practices in governance and risk mitigation.

The internal control systems are structured to support:

The Companys processes are regularly reviewed and upgraded to adapt to evolving operational needs, expansion in scale, and technology adoption. During the year, Vilas Transcore continued to improve its process automation and digital integration to enhance system-based controls.

An independent internal audit firm periodically evaluates the effectiveness of controls across all departments and business activities. The internal audit reports are reviewed by the Audit Committee of the Board, which monitors corrective actions and provides strategic oversight on control enhancements.

In addition, the Company is in the process of rolling out a comprehensive Enterprise Resource Planning (ERP) system across functions to further strengthen its internal control environment and enable a higher degree of system- based checks and controls ensuring protection of its assets and interests. This system will improve data accuracy, enable better coordination between departments, and provide real-time visibility into key performance areas.

The statutory auditors of the Company have also confirmed the adequacy and effectiveness of internal financial controls, further reinforcing stakeholder confidence in the Companys governance practices and their effectiveness and reliability.

- FINANCIAL PERFORMANCE AND KEY FINANCIAL RATIOS Financial Overview - FY25

Vilas Transcore delivered strong operational and financial performance in FY25, supported by full utilisation of its existing capacity, a favourable product mix, and disciplined cost management. Totalproduction volume stood at 12,069 metric tons, reflecting a 10% year-on-year growth over FY24. This was the highest annual output recorded by the Company to date, underscoring robust demand from transformer OEMs and strong execution by the operations team.

Key financial highlights include:

Profitability improved meaningfully due to operating leverage, better capacity utilisation, and a stronger product mix. The Company continued to operate with a net debt-free balance sheet, reinforcing its financial strength and stability

- HUMAN RESOURCES AND INDUSTRIAL RELATIONS

At Vilas Transcore, we recognize that our people are the driving force behind our sustained growth and operational excellence. FY25 was a year of capacity building not just in terms of infrastructure, but also in strengthening our human capital to support the Companys evolving scale and product diversification journey.

We continued to invest in skill development, safety training, and cross-functional learning to equip our workforce with the capabilities needed for operating new technologies and expanded manufacturing systems. Special focus was placed on training employees for our upcoming Unit 3 facility, including handling of new-age machineries for CRGO as well as new equipments related to transformer radiators and nanocrystalline cores.

The Company is committed to fostering a safe, inclusive, collaborative and performance-driven work environment. Industrial relations remained cordial throughout the year, with zero man-days lost due to industrial disputes. Regular engagement sessions and leadership development initiatives were conducted to maintain transparency and build trust across all levels of the organization. Ensuring safety and occupational health were also given high priority through planning, training, and safety drills.

We also strengthened our recruitment efforts during the year, onboarding fresh talent and experienced professionals across operations, quality control, and engineering. As of 31^st March 2025, the Companys total workforce (including contract and indirect personnel) stood at [insert updated number], up from 263 as of 31^st March, 2024, reflecting our continued focus on building organizational depth in human capital.

Looking ahead, we aim to enhance digital HR systems and further strengthen employee engagement, retention, and internal leadership development-ensuring attraction and retention of quality workforce - which remains aligned with the Companys long-term goals.

J CAUTIONARY STATEMENT

Statements made in this Management Discussion and Analysis, and any other part of the report, describing the Companys objectives, projections, estimates, expectations, or predictions may be considered forwardlooking statements within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events, many of which are beyond the Companys control.

Actual results, performance, or achievements may differ materially from those expressed or implied in such forwardlooking statements.

Important factors that could cause actual results to differ include, but are not limited to:

• Fluctuations in raw material availability and prices,

• Exchange Rate Variations

• Demand-supply dynamics in transformer and power infrastructure sectors,

• Changes in economic conditions, both domestic and international,

• Regulatory developments and policy shifts,

• Technological changes,

• Geopolitical risks, and

• Other incidental factors impacting the Companys operations or markets.

The Company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are advised to exercise their own judgment and refer to other disclosures, including the financial statements and notes thereto, for a more comprehensive view of the Companys performance.