Vishal Bearings Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

Vishal Bearings Limited operates in the anti-friction bearing industry catering primarily to Automotive OEMs, Replacement Market and Export customers. The Companys product portfolio comprises Tapered rollers, cylindrical rollers, Spherical rollers, needle roller, bearings and bearing components used in automotive and engineering applications.

The Auto Ancillary segment of the industry has established itself with global level of technology and capabilities. The opportunity to be a global supplier for components has also been possible on account of the enhancement of our capabilities. The demand for products continues to grow not only on the domestic market but also in the global market. The industry is also today aggregating product assemblies for OEMs. Many sub-assembly manufacturers supply finished units to OEMs. This is both an advantage and disadvantage. The big advantage is that many of the recognized Tier 1 suppliers are engaged in global business which gives the company an opportunity to engage with them. On the negative side there is business risks associated with such opportunities. The emission standards in India have been aligned with global standards and we see an opportunity in these markets which has started to explore the supply base from India. Your company is fully prepared to cater to the demand as per the current global standards whether it be with materials, coatings or processes which are required by the norms existing in the country. This has also provided for Global sourcing offices being set up in India to take advantage of the capabilities amongst the supply base for components from India. This has provided opportunities for your company to be a part of the supply chain exporting parts to plants outside the country. While the quality, delivery and price have to be competitive, the important requirement of Global warranty also needs to be studied in the background of Warranty clauses which are provided by the OEMs.

The Indian bearing industry continues to benefit from growth in automotive production, industrialization, infrastructure development and increasing localization initiatives. The Government programs such as Make in India and investments in infrastructure and manufacturing continue to support long-term growth.

India remains one of the fastest-growing automotive markets globally and is currently the worlds third largest vehicle market after China and the United States. The Indian automotive industry continues to attract investments from major global vehicle manufacturers, many of whom have established or are expanding manufacturing facilities in the country to serve both domestic and export markets. The automotive sector remains one of the key pillars of the Indian economy and is among the largest contributors to the countrys manufacturing output. Long-term growth prospects in personal mobility remain strong, supported by Indias large geographical spread, growing population and relatively low vehicle penetration levels. Growth in goods mobility is being driven by the increasing need for efficient supply chains connecting producers and markets, supported by continuous improvements in road and logistics infrastructure. India also continues to strengthen its position as a global manufacturing and export hub, supported by increasing localization, supply chain diversification initiatives and policy support for exports.

ECONOMIC ENVIRONMENT AND OUTLOOK

The global economy during FY 2025-26 continued to face challenges arising from geopolitical uncertainties, evolving trade policies and supply chain disruptions. The ongoing Russia-Ukraine conflict, tensions in the Middle East, including the Israel-Iran conflict, and disruptions to international shipping routes contributed to volatility in energy prices, freight costs and commodity markets, particularly steel, oil and other industrial inputs. In addition, tariff-related measures by major economies and currency fluctuations continued to create uncertainty in global trade and manufacturing supply chains.

Despite these challenges, the Indian economy continued to demonstrate resilience and remained one of the fastest-growing major economies globally. As per the RBI Monetary Policy

Updated dated 5 June 2026, the Reserve Bank of India maintained the policy repo rate at 5.25% while highlighting concerns relating to inflationary pressures, geopolitical uncertainties and their potential impact on economic growth. The RBI has revised its FY 2026-27 inflation forecast upwards to 5.1% and moderated its GDP growth projection to 6.6%. While inflationary pressures have increased due to geopolitical tensions, elevated energy prices and supply chain disruptions, Indias macroeconomic fundamentals remain strong. Rising capacity utilisation in the manufacturing sector, healthy credit growth, continued infrastructure development, GST rationalisation and resilient domestic demand are expected to support industrial production and growth across the automotive, engineering and industrial sectors. Continued policy support, infrastructure investments and private sector participation are expected to sustain growth momentum over the medium term.

The Government of India continues to promote manufacturing competitiveness through initiatives such as Make in India, Production Linked Incentive (PLI) Schemes, Automotive Mission Plan 2026, Vehicle Scrappage Policy, EV-focused incentives and investments in infrastructure, digitalization, technology and Artificial Intelligence. These initiatives are expected to strengthen domestic manufacturing capabilities and enhance Indias position in global supply chains. The automotive and industrial manufacturing sectors, which constitute key demand drivers for the bearing industry, are expected to benefit from ongoing industrial development and infrastructure spending.

The automotive sector continued to perform steadily across passenger vehicles, commercial vehicles, farm equipment and two-wheeler segments, while the industrial sector benefited from investments in railways, power, construction equipment and engineering industries. The long-term outlook for the Indian automotive and engineering sectors remains positive, supported by favourable demographics, infrastructure development and continued policy support for manufacturing.

ROLLER BEARING INDUSTRY

Roller Bearings are a type of rolling-element bearing that uses cylinders (rollers) to maintain the separation between the moving parts of the bearing (as opposed to using balls as the rolling element). The purpose of a roller bearing is to reduce rotational friction and support radial and axial loads. Compared to ball bearings, roller bearings can support heavy radial loads and limited axial loads (parallel to the shaft).

Global core Roller Bearing manufacturers include SKF, Schaeffler etc. The top 5 companies hold a share of about 60%. Europe is the largest market, with a share about 24%, followed by China and North America with the share about 23% and 19%.

The global Roller Bearing market is valued at US19220millionin2020.ThemarketsizewillreachUS19220millionin2020.ThemarketsizewillreachUS 29630 million by the end of 2027, growing at a CAGR of 5.4% during 2021-2027.

Bearings are antifriction components that help improve the mobility of components. Different types of bearings are manufactured depending on the task specificity, such as roller bearing, sensor bearings, plain bearings, ball bearings, and others. Roller bearings are equipped with cylindrical rollers with high radial load capacity. The increase in demand for roller bearings is directly related to the growth in production of high-performance industrial machinery.

Increase in usage of heavy machinery in the construction industry and high demand for application specific bearings drive the market. Rise in investment projects in mining, infrastructure development, and transport infrastructure development fuel the growth of the market. Moreover, increase in number of offshore wind farms results in greater adoption of roller bearings. However, roller bearings incur high installation costs and complex maintenance operations are few factors that are expected to hamper the growth of the market.

The global roller bearings market is segmented on the basis of product type, end-user industry, and geography. On the basis of product type, the market is classified into tapered, needle, spherical, cylindrical, and thrust. Based on the end-user industry, the market is divided into electric, automotive, agriculture, construction, energy & power, and others (general engineering, aerospace). By geography, the market is analysed North America, Asia-Pacific, Europe, and LAMEA.

The key players operating in the global roller bearings industry are NTN Corp., SKF AB, Brammer, NBI Bearings, RCB Bearing, Timken, Schaeffler AG, NSK Ltd., C&U Group, and JTEKT Corporation.

FUTURE OUTLOOK - ROLLER BEARING INDUSTRY

The future outlook for the roller bearing industry remains positive, supported by sustained growth in the automotive, industrial, infrastructure, engineering and manufacturing sectors.

• Tapered rollers are expected to benefit from continued demand from passenger vehicles, commercial vehicles, heavy-duty transportation and other automotive applications, with the automotive sector remaining one of the key demand drivers for bearings in India.
• Cylindrical rollers have a diversified industrial application base and are expected to witness increasing demand with the growth of automation, manufacturing activities, electric motors, gearboxes, industrial machinery and engineering equipment. Their ability to withstand high radial loads makes them suitable for a wide range of industrial applications.
• Spherical rollers represent an attractive growth opportunity due to their suitability for demanding applications involving heavy loads, shock loads and shaft misalignment. Growing activities in mining, steel, cement, material handling, renewable energy and heavy engineering are expected to create opportunities for higher-value spherical roller applications.
• Needle rollers are expected to benefit from the increasing adoption of compact, lightweight and high-load-bearing components across automotive and industrial applications. Their usage in transmissions, two-wheelers, agricultural equipment, industrial machinery and precision engineering is expected to support continued demand, particularly where space optimization, weight reduction and high load-carrying capacity are important considerations.

Overall, increasing industrialization, infrastructure development, automation, vehicle production, localization of component manufacturing and the growing adoption of electric and hybrid vehicle technologies are expected to provide sustainable growth opportunities across different categories of roller bearings.

OPPORTUNITIES AND THREATS

The Company operates in an evolving automotive, industrial and engineering environment, which presents several opportunities for sustainable growth. The continued growth of the Indian automotive and industrial sectors is expected to support demand for precision-engineered components. Increasing localization initiatives by OEMs and suppliers provide opportunities to strengthen domestic customer relationships and expand market share. In addition, global supply-chain diversification and the adoption of China+1 strategies may create opportunities for Indian manufacturers to increase their participation in international supply chains and expand exports. The growing adoption of hybrid and electric vehicles is also expected to generate new opportunities as component requirements evolve across new-generation vehicle platforms. Further, investments in infrastructure, railways, heavy engineering and manufacturing sectors, together with increasing automation, industrialization and adoption of advanced engineering applications, may provide opportunities for business expansion and customer diversification. The Company may also explore opportunities to enter new industrial export markets, thereby broadening its geographical presence and customer base.

At the same time, the Company faces certain risks and challenges that may impact its operations and financial performance. The industry is highly competitive and the Company may face pricing pressure from domestic as well as international manufacturers, including low-cost imports. Volatility in the prices of steel and other key raw materials may increase manufacturing costs and exert pressure on operating margins, particularly where such increases cannot be fully passed on to customers. Foreign exchange fluctuations may also affect the cost of imported inputs and the realization from export transactions. Geopolitical uncertainties, changes in international trade policies and disruptions in global supply chains may adversely impact demand, procurement and logistics. The Company is also required to continuously invest in technology, process improvements, quality systems and product development to meet evolving customer requirements and maintain its competitive position. Further, elevated energy and commodity prices, particularly due to higher oil prices and supply-chain disruptions, may result in increased logistics, freight and shipping costs and could adversely affect the Companys profitability.

SEGMENT-WISE PERFORMANCE

The Company continues to operate primarily in the roller bearings segment. Automotive OEMs remained the principal source of revenue during FY 2025-26. Export sales continued to contribute to the business mix, with increasing participation in industrial applications supporting diversification of the Companys end-use markets and customer base.

RISKS AND RISK MITIGATION

The Company is exposed to external business risks, operational risks and financial risks. The Board of Directors oversees the Risk Management process including risk identification, impact assessment, effective implementation of the mitigation plans and risk reporting.

External risks arise from market competition, fluctuations in raw material prices, changing customer demand and global economic developments. Operational risks relate to manufacturing efficiency, quality performance and supply chain reliability. Financial risks primarily include foreign exchange fluctuations, volatility in investment income and changes in financial market conditions.

Recent geopolitical developments in West Asia, volatility in energy and commodity prices, higher oil prices, fluctuations in foreign exchange markets and disruptions in global shipping routes may continue to influence input costs, export demand, supply chain efficiency, logistics and shipping costs and overall business sentiment across industries. The Company has established a structured risk management framework under the oversight of the Board of Directors and Audit Committee. Risks are periodically identified, assessed and prioritized based on probability and impact, and suitable mitigation measures are implemented.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has adequate internal control systems commensurate with the size and nature of its operations. These systems ensure reliability of financial reporting, safeguarding of assets, compliance with applicable laws and regulations and efficient utilization of resources. Independent internal audits are conducted periodically covering significant operational and financial areas. Audit findings are reviewed by management and the Audit Committee, and necessary corrective actions are implemented to strengthen business processes and controls.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

Since its inception, the Company has always regarded its employees as their greatest strength. It continues to focus on developing a superior workforce that aligns with both individual growth and organizational goals, ensuring high-quality service to customers and stakeholders.

In line with technological advancement and operational efficiency, employees in manufacturing departments have been actively engaged in various projects aimed at reducing raw material wastage, minimizing setting times, maximizing automation, optimizing energy consumption, improving packaging safety, developing new products rapidly, and increasing yield to reduce costs.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various factors including economic conditions, market developments, competitive pressures, regulatory changes and other risks beyond the Companys control. The Company assumes no obligation to publicly amend, modify or revise any forward-looking statements based on subsequent developments, information or events.

By Order of the Board of Directors

For Vishal Bearings Limited

Date: 27.08.2026

Place: Rajkot

Sd/-

Dilip G. Changela

Chairman & MD