Yuken India Ltd Management Discussions

A. Global Economic Overview

The global economy recorded moderate growth during FY 2025–26, with GDP expanding by around 3.1%–3.2%, reflecting resilience amid a challenging macroeconomic environment.

The year was marked by heightened trade fragmentation, driven by tariff measures and retaliatory actions among major economies, which disrupted global trade flows and increased supply chain costs. Businesses responded by accelerating supply chain diversification and regionalisation strategies, including China+1 approaches.

Inflation moderated during the year to approximately 4.2%–4.4%, supported by easing commodity prices, though core inflation remained elevated due to persistent services demand and wage pressures. Central banks adopted a cautious monetary stance, with limited rate cuts, resulting in relatively tight financial conditions.

Geopolitical tensions and energy market volatility continued to impact investor sentiment and global stability, prompting countries to prioritise domestic resilience over multilateral cooperation.

Overall, FY 2025–26 reflected stable but subdued global growth, with ongoing challenges arising from trade disruptions, policy uncertainty, and geopolitical risks.

B. Indian Economic Overview

The Indian economy recorded strong growth during FY 2025–26, with GDP expanding by around 6.5%–7.0%, supported by robust domestic demand and sustained government capital expenditure.

Investment activity remained healthy, driven by infrastructure development, manufacturing expansion, and policy initiatives such as the Production Linked Incentive (PLI) schemes. India also benefited from global supply chain realignments, strengthening its position as a preferred manufacturing destination.

Inflation remained broadly under control, averaging within the 4.5%–5.5% range, though food price volatility persisted intermittently. The monetary policy environment remained balanced, supporting growth while maintaining price stability. The banking sector remained stable, with improved asset quality and steady credit growth. While merchandise exports faced moderate pressure due to global trade challenges, services exports continued to perform well.

Overall, India remained one of the fastest-growing major economies, supported by strong macroeconomic fundamentals, policy support, and resilient domestic consumption, despite external headwinds.

C. Industry Structure and Developments

Company operates within the hydraulics / fluid power segment of the capital goods industry, catering to sectors such as steel, power, construction, machine tools, plastics, and heavy engineering.

During FY 2025–26, the industry witnessed moderate growth with uneven demand trends. Domestic demand remained supported by government-led capital expenditure, infrastructure development, and manufacturing activity, particularly in core sectors such as steel, energy, and heavy engineering. However, global trade disruptions and industrial slowdown in certain export markets led to volatility in order flows.

The sector continued to undergo structural transformation, driven by:

Increasing adoption of automation, digitalisation, and energy-efficient hydraulic systems

Growing emphasis on cost optimisation and performance enhancement

Shift towards localisation and supply chain diversification, benefiting domestic manufacturers At the same time, the industry faced margin pressures due to rising input costs and competitive intensity, with both domestic players and global entrants expanding their presence.

From a performance standpoint, companies in the hydraulics segment, including Yuken India, experienced mixed financial trends during the year, with fluctuations in revenues and profitability across quarters, reflecting demand variability and cost pressures.

Overall, FY 2025–26 was characterised by stable but cautious growth in the hydraulics industry, supported by domestic investment activity, while being impacted by external headwinds, pricing pressures, and evolving technological requirements.

D. OpportunitiesandThreats

Opportunities

Infrastructure and Capex Push: Continued government focus on infrastructure, railways, defence, and core sectors is driving demand for hydraulic systems and components.

Manufacturing Growth: Expansion in domestic manufacturing and initiatives such as PLI are creating sustained demand across engineering industries.

Supply Chain Realignment: Global China+1 strategy presents opportunities for increased localisation and export potential.

Automation & Efficiency: Rising adoption of automation and energy-efficient systems is opening avenues for advanced hydraulic solutions.

Aftermarket Services: Growing installed base of equipment is supporting steady demand for spares, servicing, and refurbishment.

Threats

Cyclical End-User Industries: Dependence on sectors like steel, construction, and capital goods exposes the business to demand volatility.

Global Uncertainties: Trade disruptions and geopolitical tensions may impact exports and supply chains.

Raw Material Price Volatility: Fluctuations in steel and input costs can exert pressure on margins.

Competitive Intensity: Presence of global and domestic players leads to pricing pressure and margin constraints. Technological Substitution: Increasing shift towards electromechanical and alternative motion control technologies may impact traditional hydraulics demand.

E. Segment–wise / Product–wise Performance i. Overview of Business Mix

The FY 2025–26 sales profile reflects a highly concentrated industrial portfolio, with strong dependence on core engineering-linked sectors such as Machine Tools and Steel, while emerging and niche sectors contribute a relatively smaller share. Total Sales: Rs.39,729.17 Lakhs

ii. Segment-wise Sales Performance

Segment	Sales ( Rs. in Lakhs)	Share (%)	Key Observation
Machine Tools	18,874	47.4%	Core growth driver, highly dominant
Steel	5,388	13.5%	Strong cyclical industrial linkage
Plastics	3,747	9.5%	Stable mid-tier contributor
Others	11,720	29.6%	Diversified small accounts

iii. Key Insights – Segment Performance

a) High Dependence on Core Engineering Segment

Machine Tools (~47%) is the dominant revenue driver.

Indicates strong linkage to industrial capital expenditure cycles.

Business performance is therefore sensitive to manufacturing investment cycles

b) Industrial Base Segments Provide Stability

Steel, Plastics, and Construction together contribute ~27%.

These segments ensure a stable baseline revenue stream across cycles.

c) Emerging Strategic Segments

Defence, Exports, Power (Hydro/Thermal), and Automotive collectively form a small but strategically important base (~10%).

These segments offer long-term diversification potential, especially Defence and Exports.

d) Under-penetrated High-Growth Areas

Agriculture, Material Handling, Mining, and Mobile segments remain low contributor (<1% each).

These represent future expansion opportunities through product customization and market development.

iv. Product-wise Performance Analysis

Based on Companys hydraulic and engineering product portfolio, the segment-wise sales reflect demand across the following product groups:

a) Hydraulic Systems & Power Units

Strong demand from Machine Tools, Steel, Presses, and HPU Builders.

Core product line includes:

Hydraulic power packs

Directional control valves

Variable displacement pumps

This remains the backbone of revenue generation.

v. Industrial Automation & Motion Control Products

Driven by Machine Tools and Automotive sectors.

Includes:

Electro-hydraulic systems

Servo and proportional control solutions

Supports precision manufacturing applications.

vi. Infrastructure & Heavy Engineering Solutions

Power (Hydro & Thermal) segments.

Products include:

Large-scale hydraulic actuation systems

Turbine-related hydraulic controls

Provides steady but project-linked revenue stream.

vii. Emerging & Specialized Applications

Defence, Export, Agriculture, and Mobile applications.

Focus on:

Customized hydraulic systems

High-reliability components for strategic sectors

Represents future growth diversification potential.

F. Outlook

Yuken India Limited is expected to operate in an environment of gradual but uneven industrial recovery, supported by sustained domestic capital expenditure and continued focus on manufacturing-led growth in India.

The outlook for the hydraulics and fluid power industry remains stable with moderate growth potential, driven by infrastructure development, expansion in core sectors such as steel, power, railways, and defence, and increasing automation across manufacturing processes. The ongoing China+1 supply chain realignment is also expected to create additional opportunities for domestic players in engineering and precision components. Demand for standard hydraulic products and aftermarket services is likely to remain steady, supported by a growing installed base and recurring maintenance requirements. The systems and project-based segment is expected to improve gradually, in line with revival in capital-intensive projects and improved execution cycles.

However, the operating environment may continue to be influenced by global uncertainties, input cost fluctuations, and competitive pressures, which could impact margins and order visibility in the short term. Increasing emphasis on energy efficiency, automation, and technologically advanced hydraulic solutions will require continuous investment in product development and innovation.

Overall, the Company is well-positioned to benefit from long-term structural growth in Indias industrial and infrastructure sectors, while maintaining focus on operational efficiency, customer diversification, and product enhancement.

G. Risks and Concerns

Yuken India Limited operates in the hydraulics and fluid power industry, which is inherently linked to industrial and capital expenditure cycles. The Company remains exposed to certain risks and uncertainties as outlined below:

Cyclical Demand Risk: The business is dependent on core sectors such as steel, construction, machine tools, and infrastructure, which are cyclical in nature. Any slowdown in capital investment or industrial activity may impact demand for hydraulic products and systems.

Global Economic and Trade Risks: Ongoing geopolitical tensions, trade restrictions, and supply chain realignments continue to creat euncertainty in global markets, potentially affecting export opportunities and input availability.

Input Cost Volatility: Fluctuations in prices of steel, castings, and other raw materials can impact cost structures and put pressure on margins if not fully passed on to customers.

Intense Competition: The industry is characterised by competition from both domestic and international players, leading to pricing pressures and the need for continuous product innovation and efficiency improvement.

Technological Evolution: Increasing adoption of alternative technologies such as electro-mechanical systems and advanced automation solutions may gradually influence demand patterns in traditional hydraulic applications.

Execution and Project Risk: A portion of revenues is derived from project-based systems, which are subject to delays in execution, extended approval cycles, and variability in customer spending timelines.

Regulatory and Compliance Risk: Changes in industrial, environmental, or safety regulations may require continuous adaptation in product design and manufacturing processes.

H. Internal Control Systems and Their Adequacy

A robust internal control system has been established by the Company, commensurate with its scale of operations and business requirements. These controls are designed to ensure the accuracy, reliability, and effectiveness of key operational and financial processes, while also supporting operational efficiency and compliance.

The internal control framework is periodically reviewed and strengthened through ongoing management evaluations and process improvements. Audit observations and recommendations are reviewed on a continuous basis, and appropriate corrective and preventive actions are promptly implemented by the finance and operational teams.

Significant findings, along with the status of remedial measures, are regularly reported to the Audit Committee for its review and guidance. The Company continues to focus on further enhancing its internal control environment to support sustainable growth and governance standards.

I. Discussion on financial performance with respect to operational performance.

FINANCIAL PERFORMANCE

Results of Operations and State of Affairs

(Amount in lakhs)

Particulars	Consolidated		Standalone
	31.03. 2026	31.03.2025	31.03.2026	31.03.2025
Revenue from operations	46,217.32	45,735.63	39,729.17	39,246.34
Other income	401.15	373.75	522.44	446.69
Total income (I + II)	46,618.47	46,109.38	40,251.61	39,693.03
EXPENSES
Cost of materials consumed	19,663.66	19,435.10	20,412.12	19,576.83
Purchases of stock-in-trade	1,740.53	2,004.05	1,740.53	2,004.05
Changes in stock of finished goods, work-in- progress and stock-in-trade	(141.68)	(482.65)	(503.31))	221.19
Employee benefits expense	6,660.99	6,326.96	5,313.19	5,124.53
Finance costs	1,076.21	1,039.89	639.62	711.43
Depreciation and amortisation expense	2,133.60	1,718.81	1,419.37	1,246.65
Other expenses	13,241.81	12,965.43	9,411.00	9,011.45
Total expenses	44,375.12	43,007.59	38,432.52	37,896.13
Profit before tax, share of profit/(loss) of associates	2,243.35	3,101.79	1,819.09	1,796.90
Share of profit /(loss) of associates	(30.96)	65.12	-	-
Profit before tax	2,212.39	3,166.91	1,819.09	1,796.90
Total Tax expense/(benefit)	773.36	706.75	483.47	412.90
Profit after tax from operations	1,439.03	2,460.16	1,335.62	1,384.00
Total comprehensive income for the period	1,400.87	2,357.81	1,290.12	1,289.61

(Amount in lakhs)

Particulars	Consolidated		Standalone
	31.03. 2026	31.03.2025	31.03.2026	31.03.2025
Paid up equity share capital	1,358.40	1,300.00	1,358.40	1,300.00
Other equity	35,954.07	28,815.23	34,344.76	27,324.96
Earnings per equity share
I. Basic	10.81	18.94	9.98	10.65
II. Diluted	10.81	18.94	9.98	10.65

h) Consolidated Performance

During FY 2025-26, the Companys consolidated revenue from operations increased marginally by 1.05% to Rs.46,217.32 lakhs from Rs.45,735.63 lakhs in the previous year. Total income grew to Rs.46,618.47 lakhs as against Rs.46,109.38 lakhs in FY 2024-25.

Total expenses increased by 3.18% to Rs.44,375.12 lakhs from Rs.43,007.59 lakhs, primarily on account of higher employee benefit costs, depreciation and other operating expenses. Employee benefit expenses increased by 5.28% to Rs.6,660.99 lakhs, reflecting continued investment in human resources, while depreciation and amortisation expenses increased by 24.13% to Rs.2,133.60 lakhs due to capital expenditure undertaken during the year.

Consequently, Profit Before Tax (PBT) stood at Rs.2,212.39 lakhs as compared to Rs.3,166.91 lakhs in the previous year. Profit After Tax (PAT) declined to Rs.1,439.03 lakhs from Rs.2,460.16 lakhs in FY 2024-25. Total Comprehensive Income for the year was Rs.1,400.87 lakhs against Rs.2,357.81 lakhs in the previous year.

The consolidated net worth strengthened during the year, with other equity increasing to Rs.35,954.07 lakhs from Rs.28,815.23 lakhs. Earnings Per Share (EPS) stood at Rs.10.81 as against Rs.18.94 in the previous year.

i) Standalone Performance

On a standalone basis, revenue from operations increased by 1.23% to Rs.39,729.17 lakhs from Rs.39,246.34 lakhs in FY 2024-25. Total income stood at Rs.40,251.61 lakhs compared to Rs.39,693.03 lakhs in the previous year.

Total expenses increased by 1.42% to Rs.38,432.52 lakhs from Rs.37,896.13 lakhs, mainly due to higher employee costs and depreciation charges. Employee benefit expenses increased by 3.68% to Rs.5,313.19 lakhs, while depreciation and amortisation expenses increased by 13.85% to Rs.1,419.37 lakhs.

Profit Before Tax improved marginally to Rs.1,819.09 lakhs as against Rs.1,796.90 lakhs in FY 2024-25. Profit After Tax stood at Rs.1,335.62 lakhs compared to Rs.1,384.00 lakhs in the previous year. Total Comprehensive Income remained stable at Rs.1,290.12 lakhs as against Rs.1,289.61 lakhs in FY 2024-25.

The Companys standalone financial position remained strong, with other equity increasing to Rs.34,344.76 lakhs from Rs.27,324.96 lakhs. Earnings Per Share (EPS) stood at Rs.9.98 compared to Rs.10.65 in the previous year..

J. Material developments in Human Resources / Industrial Relations front, including number of people employed.

The companys talent management strategy is focused on building a skilled, motivated, and performance-driven workforce, aligned with its long-term business objectives. Emphasis is placed on continuous learning, capability development, and fostering a culture of innovation and operational excellence.

The company provides regular training and development programmes to enhance technical and functional competencies, along with structured career development opportunities. Employee well-being is supported through a comprehensive benefits framework and initiatives aimed at improving engagement and retention.

Safety continues to remain a key priority, with well-defined protocols and practices implemented across all operational locations to ensure a safe and secure working environment. As of march 31, 2026, the companys workforce comprises 794 employees across key functional areas including engineering, operations, management, administration, and trainees, supported by contract workforce as required for operational needs.

K. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor,

There is no significant changes in any ratios during the period under review.

L. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

FY 2026	FY 2025	Reason of change
4.01%	4.50%	The decrease is mainly attributable to capital infusion by the Promoter amounting to Rs.59.91 Crores, resulting in improvement in the capital base of the Company and the operation remains unchanged compared to previous year.

For and on behalf of the Board of Directors

	Tadanori Okada	C P Rangachar
Date: May 26, 2026	Chairman of the Board	Managing Director
Place: Bengaluru, KA	DIN: 10727075	DIN: 00310893