Voltamp Transformers Ltd Management Discussions

ECONOMY / INDUSTRY OVERVIEW :

The global economy, including India, is going through heightened uncertainties as the global trade war continues. While the US has put higher reciprocal tariffs on hold for India for three months, the uncertainty on the trade policy front lingers. The reciprocal tariffs announced are much larger than anticipated, not just for India but also for other countries. This will result in global trade war aggravating, with negative consequences for global as well as Indias growth, if not resolved amicably in near future. Hopefully policy makers will find way out to resolve the issue. Amid this global turmoil, RBIs Monetary Policy Committee (MPC) has indicated the need for supporting growth. The MPC on expected lines has cut the policy rate by 25 bps and changed the stance to accommodative from neutral.

With the ongoing trade war, the RBI governor has aptly highlighted that there are several known unknowns that make quantification of the adverse impact difficult. The Central Bank has lowered Indias GDP growth projection for FY26 to 6.5% from its earlier assessment of 6.7%.

Apart from the direct impact of higher tariffs, there would be a severe indirect impact as global growth slows and capital flows to emerging economies are adversely impacted. Indias domestic investors will also get wary amid the ongoing global disruptions.

The Union Budget FY:25 lay out a comprehensive roadmap for transforming India in to a developed nation. Infrastructure development continues to be a major focus with huge allocation. Budget strategically aims to boost Indias economic landscape, emphasizing on employment generation, fiscal consolidation and infrastructure development. The focus on capacity building through higher spending on infrastructure and consequently facilitating job creation has continued. CAPEX remains unchanged at Rs.11.10 lakh crore (3.4% of GDP). Overall, the budget ensures economic stability and growth amid global uncertainties.

The recent report by the leading rating Agency on Infrastructure, read that India will spend Rs.143 trillion on infrastructure between fiscal years 2024 and 2030 more than twice the Rs.67 trillion spent in the past seven financial years from 2017. The participation of private sector in investing infrastructure projects will be encouraged through viability gap funding and other enabling policies and regulations.

During the FY:24-25, Indian corporates have navigated global uncertainties with cautious optimism. Sectors focused on the domestic market have shown resilience buoyed by steady domestic demand. The Indian economy remains well- positioned experiencing healthy growth and moderating inflation. Expected increase in the Governments capital expenditure and further pick-up in private capex will be supportive of growth.

Indias robust economic fundamentals, including projected GDP growth of 6.2% in FY26, strong domestic demand, and ongoing structural reforms, make it an attractive destination for global capital. The continued focus on infrastructure development, digital transformation and manufacturing (through initiatives like Make in India and PLI schemes) further enhances the long-term investment case. Nevertheless, while global economic conditions present challenges, Indias relative growth advantage and improving microeconomic stability provide a strong buffer that could position it for sustained medium-term gains.

Indian economy, with low external trade exposure, is relatively better placed amidst the global trade war. However, in this intertwined world, India cannot remain unscathed from heightened global uncertain-ties. Indias GDP growth was moderating even before the trade war erupted. Wide-based consumptions pending in the economy remains elusive. The global trade war is expected to dent Indias economic growth outlook further. The silver lining amid concerns about growth is the moderation in domestic inflation.

OUTLOOK OF THE COMPANY:

The Indian heavy electrical equipment manufacturing sector is navigating a complex landscape influenced by global economic shifts, domestic policy interventions and evolving trade dynamics. The Reserve Bank of Indias accommodative monetary policy, aimed at stimulating domestic growth, is expected to support infrastructure development, thereby driving demand for capital goods. However, challenges such as high import dependency for critical components pose constraints to the industrys growth.

In the context of the ongoing U.S.-China tariff war, India has an opportunity to enhance its position in the global supply chain. The Indian Electrical & Electronics Manufacturers Association (IEEMA) has highlighted the need for strategic policy measures, including exemptions on basic customs duties for essential raw materials and the implementation of quality control orders, to bolster domestic manufacturing capabilities. With a projected industry size of $130 billion by 2030 and a significant increase in exports, the sector is poised for substantial growth, provided that these challenges are addressed and opportunities are leveraged effectively.

In the broader capital markets, investor confidence remains cautiously optimistic. The green energy transition and renewable sector are expected to attract significant attention from investors, as India moves to realize its sustainability goals. Despite global uncertainties, Indias capital markets are expected to continue their growth trajectory, driven by strong macroeconomic fundamentals and sectoral opportunities.

Based on the current macroeconomic and sectoral landscape, the Company is positioned on a stable and promising trajectory, bolstered by steady domestic demand, particularly from the green energy and infrastructure segments. The global economic environment, while facing headwinds due to geopolitical tensions, trade disruptions, and shifting monetary policies, continues to offer opportunities for agile and resilient manufacturers. With global GDP growth projected at 3.3% for 2025-26, and India maintaining a growth forecast above 6%, the domestic capital goods industry, especially in power infrastructure, is expected to benefit from increased industrial activity and government-led capital expenditure. The Reserve Bank of Indias accommodative monetary stance supports lower financing costs, further aiding infrastructure and energy projects that drive transformer demand.

Voltamps performance for the current financial year reflects this positive backdrop, with production and despatches aligning with budgeted targets. A key growth lever remains the momentum in green energy projects, data centre projects supported by consistent policy direction and investment under Indias energy transition programs. The healthy enquiry pipeline underscores continued interest and order visibility. Import-related challenges, particularly in sourcing Cold Rolled Grain Oriented (CRGO) electrical steel sheets and other critical components of import origin are compounded by geopolitical trade war. And it could affect input costs and delivery schedules, thereby pressuring operational margins.

The Company also recognizes intensifying competition in the domestic market, which is expected to normalize margins going forward. However, the long-term power sector outlook remains encouraging. As noted by the Central Electricity Authority (CEA), peak power demand in India is set to rise at a CAGR of 7% over the next five years, driven by higher industrial and economic activity. Moreover, the planned National Electricity Plan (NEP) for the distribution sector signals a holistic and integrated approach to electricity infrastructure, translating into sustained demand for transformers across generation, transmission, and distribution segments.

In this evolving scenario, Voltamps strategic focus on selective order booking, full capacity utilization, and prudent delivery timelines is prudent and risk averse. By avoiding long-duration order commitments beyond nine months, the Company effectively mitigates margin erosion risks stemming from uncertain supply chain dynamics. The overall business outlook remains stable and cautiously optimistic, grounded in structural demand growth, policy support, and the Companys disciplined approach to execution and cost control. Voltamp is well-positioned to leverage both domestic and selective international opportunities, provided supply chain risks are navigated with foresight and agility.

FINANCIAL PERFORMANCE OVERVIEW :

The financial performance of the Company over the past five years reflects a consistent and positive trajectory in terms of revenue generation, profitability, and overall financial health. Focusing on the most recent fiscal year, the Company has demonstrated robust growth across key financial parameters:

1. Net Sales and Service Revenue

• In the current financial year, the Company achieved net sales and service revenue of 1,934.23 crores, registering a growth of 19.67% over the previous years revenue of 1,616.22 crores.

• This significant increase reflects the Companys strong market presence, successful execution of strategic initiatives, and expanding customer base.

• The double-digit growth also indicates effective product and service delivery, market penetration, and possibly an improvement in pricing strategies or volume increases.

2. Profit Before Tax (PBT)

• Profit Before Tax rose to 436.30 crores, up from 397.88 crores in the previous year, representing a growth of 9.65%.

• This improvement is a testament to the Companys ability to manage costs effectively while scaling up its operations.

• The steady rise in PBT demonstrates operational efficiency and a strong control over administrative and other indirect expenses.

3. Profit After Tax (PAT)

• Profit After Tax increased to ^325.41 crores, compared to ^307.36 crores in the previous year, showing a growth of 5.86%.

• The PAT growth, although slightly moderated compared to revenue and PBT, indicates healthy bottom-line sustainability despite potential tax rate adjustments or extraordinary expenses.

• This reflects the Companys capacity to convert its operating profits into shareholder value, which is crucial for long-term financial stability.

Overall Growth Trend

Over the last five years, the Company has consistently improved its financial performance. The most recent year marks a continuation of this upward trend, with:

• Strong double-digit growth in revenue, indicating increasing demand and effective delivery.

• Healthy profit margins, reflecting efficiency in operations and cost control.

• Sustainable PAT growth, ensuring value creation for stakeholders.

Such performance underscores the Companys strategic resilience, robust business model, and adaptability in a dynamic market environment. Going forward, maintaining this momentum will depend on continued innovation, customer engagement, operational efficiency, and prudent financial management.

FACTORS AFFECTING OUR FUTURE RESULTS OF OPERATIONS:

The future financial performance of the Company will be shaped significantly by an evolving global economic environment, characterized by moderate global growth, protectionist trade policies, and ongoing geopolitical tensions. The resurgence of tariff wars, particularly between the U.S. and China, has disrupted global supply chains, contributing to rising raw material costs and delivery delays. For the Company, which is reliant on critical components imports such as CRGO electrical steel, this poses a risk of input cost volatility.

Domestically, India remains a bright spot with a projected GDP growth of 6.2% in FY26, supported by robust infrastructure investment, digitalization, and manufacturing expansion. This provides a favorable environment for the Company, particularly with increasing demand from power and green energy sectors, spurred by government-led capital expenditure and the PLI scheme. However, the Company must navigate intensifying competition—both local and international — amidst huge capacity expansion plans announced by organised players in transformer industry and aggressive pricing trends that could pressure margins. The Reserve Bank of Indias accommodative stance, with reduced repo rates, supports lower borrowing costs and may aid project financing. Nevertheless, factors such as the availability of imported materials at budgeted costs, product pricing strategy adopted by small and mid sized transformer manufacturing delays in decision-making due to commodity price volatility, and shifts in government policy on power and infrastructure remain critical variables. Strategic focus on operational efficiency, selective order booking, and agile supply chain management will be key to maintaining growth and profitability in this complex landscape.

HUMAN RESOURCES/ INDUSTRIAL RELATIONS:

The Company continue its focus on development of human resources. The Company is a firm believer that its employee are its strength and the Company therefore respects individual rights and dignity of all its employees. The relations of the management with employees during the year continued to be cordial. Learning and development has been strengthened to bring value addition in the employee and to enhance team building leading towards success. The Company focuses on providing the employees, employee - friendly environment and culture and career growth opportunities.

INTERNAL CONTROL SYSTEMS:

The Company has in place, commensurate with the size and complexity of Companys business operation, effective internal control systems and policies for compliance of laws and to safeguard the interest of the Company. The Company maintains a system of internal controls designed to provide reasonable assurance regarding the efficiency and reliability of operations and for safeguarding the assets of the Company and for ensuring appropriate recording and reporting of financial information for ensuring reliability of financial controls and for ensuring compliance of applicable laws and regulations.

The internal financial controls are adequate and are operating effectively and there are proper systems in place to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

The internal audit covers a wide variety of operational matters and ensures compliance with specific standards with regard to reliability and suitability of policies and procedures.

The internal auditors report to the top management through CFO and continuously monitor adherence to laid down systems and policies. Services of internal auditors are being outsourced through established audit firm. The systems are regularly reviewed and modified for changes in operating and regulatory requirements.

The Audit Committee reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening the same from time to time.

RISKS & CONCERNS:

We are currently operating in an environment marked by heightened geo-political instability, global trade disruptions, and persistent supply chain vulnerabilities, all of which pose substantial risks to its business operations. The ongoing U.S.- China trade tensions and regional conflicts, particularly in West Asia, have led to supply shortages and cost escalations in critical raw materials like CRGO electrical steel, copper, and transformer oil—most of which are import-dependent. These disruptions are further compounded by the increasing volatility in global commodity prices, making it increasingly difficult to forecast material costs accurately over long project durations. For a capital goods manufacturer dealing with fixed-price contracts, such cost unpredictability puts pressure on operational margins and can significantly erode profitability if not effectively hedged or absorbed.

Currency fluctuation is another major concern, especially the wide swings of the Indian rupee against the U.S. dollar, which directly impact import costs of essential raw materials. Since the pricing of key inputs like copper and specialty steels is largely dollar-denominated, any depreciation in the rupee inflates procurement costs, thereby compressing margins unless contract terms account for price variation clauses—something not always feasible in competitive bidding environments. Furthermore, the intensifying competition in the domestic market from both local and newly entered international /local players is expected to normalize pricing. As the Company navigates these challenges, its focus on selective order booking, prudent cost control, and supply chain diversification will be critical to mitigating these risks and ensuring long-term sustainability.

STRENGTHS:

On the operational front, Voltamp enjoys diversification advantages, both in its client base and order inflow, minimizing dependency on any single industry, customer, or region. This diversified exposure insulates the Company from sector-specific downturns and regional economic slowdowns, enhancing revenue stability. Furthermore, the continuity of its senior leadership team, with many executives serving long tenures, is a major intangible asset. This stability fosters institutional knowledge retention, efficient decision-making, and the ability to scale operations smoothly while maintaining quality and compliance standards. The experienced leadership also plays a pivotal role in navigating complex project environments, managing customer relationships, and responding proactively to market shifts—all of which are essential as the Company prepares to meet increasing demand in infrastructure, energy, and green technology sectors.

Voltamps financial resilience is one of its core strengths, underpinned by a debt-free balance sheet and a strategically managed investment portfolio. The Companys prudent approach to capital allocation is reflected in the effective deployment of surplus funds across a diversified mix of asset classes, including debt and equity mutual funds, bonds, debentures, and tax-free instruments. This disciplined investment strategy ensures consistent income from nonoperational sources, strengthens liquidity buffers, and enhances overall financial stability, even during periods of market volatility. In addition, the Companys efficient working capital management—marked by tight control over receivables, inventory, and payables—provides strong operational cash flows, enabling the Company to self-finance growth initiatives and weather economic disruptions without external borrowings.

SEGMENT PERFORMANCE OVERVIEW :

The Company has demonstrated robust growth across its key business segments, driven by strategic investments, operational efficiencies, and favorable market conditions. The Companys diverse product portfolio, encompassing oil- filled power and distribution transformers, resin- impregnated dry-type transformers, and cast resin dry-type transformers, has positioned it well to capitalize on the expanding infrastructure and green energy sectors.

Looking ahead, Voltamps order book remains robust, with a healthy mix of domestic and international projects. This positions Voltamp to leverage upcoming business opportunities, ensuring healthy volume and value creation for its stakeholders.

PAN INDIA PRESENCE AND CUSTOMER OUTREACH:

With a focused approach to client servicing and market development, the Company has successfully built a robust and loyal customer base across India. Our Pan India outreach enables us to deliver customized solutions, prompt service, and continuous support, leading to enhanced customer satisfaction and trust. The wide presence also supports a resilient and adaptive sales strategy, making the Company well-positioned to cater to emerging market demands while sustaining long-term relationships with our clients.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018)(Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios.

KEY FINANCIAL RATIOS:

LAST 10 YEARS FINANCIAL HIGHLIGHTS

CAUTIONARY STATEMENT

Statements in this report on Management Discussion and Analysis relating to the Companys objectives, projections, estimates, expectations or prediction may be forward looking within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. By their nature, forward-looking statements require the company to make assumptions and are subject to change based on risks and uncertainties. Actual results might differ materially from those expressed or implied depending upon factors such as climatic conditions, global and domestic demand-supply conditions, finished goods prices, raw materials cost and availability, foreign exchange market movements, changes in Government regulations and tax structure, economic and political developments within India and the countries with which the Company has business and other factors such as litigation and industrial relations. The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.