Yuken India Ltd Management Discussions

Global economy

Overview

Global economic growth declined marginally from 3.3% in 2023 to an estimated 3.2% in 2024. This was marked by a slowdown in global manufacturing, particularly in Europe and parts of Asia coupled with supply chain disruption and weak consumer sentiment. In contrast, the services sector performed more creditably. The growth in advanced economies remained steady at 1.7% from 2023 to

2024 as the emerging cum developing economies witnessed a growth decline at 4.2% in 2024 (4.4% in 2023).

On the positive side, global inflation was expected to decline from 4.5% in 2024 to 3.5% and 3.2% in 2025 and 2026 respectively. This decline was attributed to the declining impact of erstwhile economic shocks, and labour supply improvements. The monetary policies announced by governments the world over helped keep inflation in check as well.

The end of the calendar year was marked by the new US government threatening to impose tariffs on countries exporting to the US unless those countries lowered tariffs for the US to export to their countries. This enhanced global trade and markets uncertainty and is emerging as the largest singular uncertainty for the coming years .

Regional growth (%)	2024	2023
World output	3.2	3.3
Advanced economies	1.7	1.7
Emerging and developing economies	4.2	4.4

(Source: IMF, KPMG, Press Information Bureau, BBC, India Today)

Outlook

The global economy has entered a period of uncertainty following the imposition of tariffs of products imported into the USA and some countries announcing reciprocal tariffs on US exports to their countries. This is likely to stagger global economic growth, the full outcome of which cannot be currently estimated. This risk is supplemented by risks related to conflicts, geopolitical tensions, trade restrictions and climate risks. In view of this, World Bank projected global economic growth at 2.7% for 2025 and 2026, factoring the various economic uncertainties. (Source: IMF, United Nations)

Indian economy

Overview

The Indian economy grew at 6.5% in FY 2024-25, compared to a revised 9.2% in FY 2023-24. This represented a four-year low due to a moderate slowdown within the Indian economy (marked by slower manufacturing growth and a decline in net investments). Despite the slowdown, India retained its position as the worlds fifth-largest economy.

Indias nominal GDP (at current prices) was Rs. 330.68 trillion in FY 2024-25 (Rs. 301.23 trillion in FY 2023-24). The nominal GDP per capita increased from Rs. 2,15,936 in FY 2023-24 to Rs. 2,35,108 in FY 2024-25, reflecting the impact of an economic expansion.

Inflationary pressures eased, with CPI inflation averaging 4.63% in FY 2024-25, driven by moderating food inflation and stable global commodity prices. Retail inflation at 4.6% in FY 2024-25, was the lowest since the pandemic, catalysing savings creation. Indias foreign exchange reserves stood at a high of USD 676 billion as of April 4, 2025.

Gross foreign direct investment (FDI) into India rose 13.6% to USD 81 billion during the last financial year, the fastest pace of expansion since 2019-20.

Growth of the Indian economy

	FY22	FY23	FY24	FY25
Real GDP growth (%)	8.7	7.2	9.2	6.5

(Source: MoSPI, Financial Express

The banking sector continued its improvement, with gross non-performing assets (NPA) for scheduled commercial banks (SCBs) declining to 2.6% as of September 2024, down from 2.7% in March 2024. Indias exports of goods and services reached USD 824.9 billion in FY 2024-25, up from USD 778 billion in the previous fiscal year. Indias net GST collections increased 8.6%, totalling Rs. 19.56 lakh crore in FY 2024-25. Gross GST collections in FY 2024-25 stood at Rs. 22.08 lakh crore, a 9.4% increase YoY. On the supply side, real gross value added (GVA) was estimated to expand 6.4% in FY 2024-25. The industrial sector grew by 6.5%, supported by growth in construction activities, electricity, gas, water supply and other utility services.

Indias services sector grew at 8.9% in FY25 (9.0% in FY24), driven by public administration, defence and other services (expanded at 8.8% as in the previous year). In the infrastructure and utilities sector, electricity, gas, water supply and other utility services grew a projected 6.0% in FY25, compared to 8.6% in FY24. Meanwhile, the construction sector expanded at 9.4% in FY25, slowing from 10.4% in the previous year.

Manufacturing activity was subdued in FY25, with growth at 4.5%, which was lower than 12.3% in FY24. Moreover, due to lower public spending in the early part of the year, government final consumption expenditure (GFCE) is anticipated to have slowed to 3.8% in FY25, compared to 8.1% in FY24.

The agriculture sector grew at 4.6% in 2024-25 (1.4% in 2023-24). Trade, hotel, transport, communication and services related to broadcasting segment were estimated to grow at 6.4% in 2024- 25 (6.3% in 2023-24).

From a demand perspective, the private final consumption expenditure (PFCE) exhibited robust growth, achieving 7.2% in FY 2024-25, surpassing the previous financial years rate of 5.6%.

Outlook

India is expected to remain the fastest-growing major economy. Initial Reserve Bank of India estimates have forecast Indias GDP growth downwards from 6.7% to 6.5% based on risks arising from US tariff levies on India and other countries. The following are some key growth catalysts for India in FY26.

Tari_-based competitiveness: India identified at least 10 sectors such as apparel and clothing accessories, chemicals, plastics and rubber where the US high tariffs give New Delhi a competitive advantage in the American market over other suppliers. While India faced a 10% tariff after the US suspended the 26% additional duties for 90 days, the levy remained at 145% on China, the biggest exporter to the US. Chinas share of apparel imports into the US was 25%, compared with Indias 3.8%, a large opportunity to address differential (Source: Niti Aayog).

Union Budget FY 2024-25: The Union Budget 2025-26 laid a strong foundation for Indias economic trajectory, emphasising agriculture, MSMEs, investment, and exports as the four primary growth engines. With a fiscal deficit target of 4.4% of GDP, the government reinforced fiscal prudence while allocating Rs. 11.21 lakh crore for capital expenditure (3.1% of GDP) to drive infrastructure development. The February 2025 Budget marked a shift in approach, with the government proposing substantial personal tax cuts. Economists estimate that the resulting Rs. 1 lakh crore in tax savings could boost consumption by Rs. 3-3.5 lakh crore, potentially increasing the nominal private final consumption expenditure (PFCE) by 1.5-2% of its current Rs. 200 lakh crore.

Free trade agreement: In a post-Balance Sheet development, India and the United Kingdom announced a free trade agreement to boost strategic and economic ties. This could lead to a significant increase in the export competitiveness of Indian shipments in the UK across the textiles, toys, leather, marine products, footwear, and gems & jewellery sectors. About 99% of Indian exports to UK will enjoy zero-duty access tariff cuts; India will cut tariffs on 90% of tariff lines and 85% could become fully duty-free within 10 years.

Pay Commission impact: The 8th Pay Commissions awards could lead to a significant salary revision for nearly ten million central government employees. Historically, Pay Commissions have granted substantial pay hikes along with generous arrears. For instance, the 7th Pay Commission more than tripled its monthly salaries, raising the range from Rs. 7,000 to Rs. 90,000 to Rs. 18,000 to Rs. 12.5 lakh, triggering a widespread ripple effect.

Monsoons: The India Meteorological Department predicted an ‘above normal monsoon in 2025. This augurs well for the countrys farm sector and a moderated food inflation outlook.

Easing inflation: Indias consumer price index-based retail inflation in March 2025 eased to 3.34%, the lowest since August 2019, raising hopes of further repo rate cuts by the Reserve Bank of India.

Deeper rate cuts: In its February 2025 meeting, the Monetary Policy Committee (MPC) reduced policy rates by 25 basis points, reducing it to 6% in its first meeting of FY 2025-26. Besides, Indias CPI inflation is forecasted at 4% for the fiscal year 2025-26.

Lifting credit restrictions: In November 2023, the RBI increased risk weights on bank loans to retail borrowers and NBFCs, significantly tightening credit availability. This led to a sharp slowdown in retail credit growth from 20-30% to 9-13% between September 2023 and 2024. However, under its new leadership, the RBI has prioritised restoring credit flow. Recent policy shifts have removed restrictions on consumer credit, postponed higher liquidity requirements for banks, and are expected to rejuvenate retail lending.

(Source: CNBC, Press Information Bureau, Business Standard, Economic Times, World Gold Council, Indian Express, Ministry of External Affairs, Times of India, Business Today, Hindustan Times, Statistics Times)

Global hydraulic components industry overview

The hydraulic equipment market size has grown up significantly in recent years. Key factors driving market expansion include increasing concerns over oil leaks in hydraulic systems and the rising demand for material handling equipment, particularly in the construction and aviation industries.

The hydraulic components market is segmented by product into pumps, motors, valves, cylinders and others. Among these, the pumps segment holds the dominant share, driven by their critical role in fluid transfer and power transmission, high demand across multiple industries, ongoing technological advancements and a strong focus on energy efficiency.

Outlook

The global hydraulic components market is estimated to grow from USD 73 billion in 2024 and to of USD 106.41 billion by 2032. The growing demand for hydraulic components is driven by their increasing use in the construction and mining industries. Hydraulic equipment is essential for wheel loaders, telehandlers, concrete boom trucks and excavators, among others, promoting their widespread adoption on construction sites. The numerous advantages and functional benefits of hydraulic components make them a preferred choice across various applications.

(Source: Market data forecast)

Indian hydraulic components industry overview

Indias hydraulics market plays a vital role in industries like construction, agriculture and manufacturing, driven by growing infrastructure projects and the need for efficient machinery. Hydraulic systems, known for their power and reliability, are widely used in excavators, cranes and injection molding machines. The market includes pumps, motors, cylinders and valves, with demand rising due to expanding industrial applications and a focus on energy efficiency. However, challenges such as technology adoption, sustainability concerns and competition from alternative motion control technologies pose hurdles. Balancing cost-effective solutions with eco-friendly advancements remains a key industry focus.

(Source: 6Wresearch.com)

Growth drivers

Industrial automation: Hydraulic components are essential in automated machinery and industrial robots due to their high-power density and precise control. Integrating hydraulic systems into production lines and automated manufacturing processes ensures consistent performance, minimises downtime and reduces operational costs. As industries like automotive, aerospace and manufacturing increasingly adopt automation, the demand for hydraulic components continues to rise.

India as a manufacturing hub: Indias GDP is expected to reach USD 5 trillion by 2025, with the manufacturing sector contributing 17% of the nations GDP and employing over 27.3 million workers. To further strengthen this sector, the Indian government aims to increase manufacturings share of the economy to 25% by 2025 through various programs and policies. Global MNCs are increasing their sourcing of engineering products from India.

Foreign direct investments: In the financial year 2024, the infrastructure industries in India saw a foreign direct investment equity inflow of approximately 4.2 billion U.S. dollars. This was a significant increase compared to the previous years.

(Source: Verified market research, India briefing, IBEF, Statista.com)

Government initiatives

In the Interim Budget for 2024-25, the capital investment allocation for infrastructure has been raised by 11.1% to Rs. 11.11 lakh crore (USD 133.86 billion), representing 3.4% of GDP.

The government aims to construct 65000 kms of national highways at a cost of USD 67.17 billion. As of January 2024, the length of national highways in the country was 146,145 km.

An outlay of USD 17.30 billion is proposed for the 50-year interest-free loans to states for capital expenditure and incentives for reforms.

In 2024, India signed Bilateral Investment Treaties (BIT) with two countries, as proposed in the Interim Budget. To attract sustained foreign investment and promote the ‘first develop India approach, the current model BIT will be revamped to be more investor-friendly.

An Urban Infrastructure Development Fund (UIDF) aims to supplement efforts of the State Governments/UTs for urban infrastructure development work implemented through public and state agencies, Municipal Corporations, Urban Local Bodies in Tier-2 and Tier-3 cities by providing a stable and predictable source of financing.

(Source: IBEF, nhb.org.in)

Opportunities

Yuken India is well-positioned to capitalise on the growing opportunities in the hydraulics industry by leveraging its strengths.

A recognised and trusted brand.

A diverse range of products that cater to various client needs.

High service standards and quick delivery times.

Competitively priced products that adhere to international standards.

Ongoing investments in research to enhance product development capabilities.

A significant market share and long-lasting customer relationships.

Threats

Increasing cost of inputs.

Evolving consumer preferences and tastes. Rising costs associated with technology upgrades. An ongoing demand for new product development and innovation.

A fluctuating foreign exchange market.

Growing competition in the international market. Rising competition in the domestic market. Environmental threats.

Financial review (consolidated)

Gross revenues increased by 7.83% to Rs. 461.09 crore during FY2024-25 as compared to Rs. 427.62 crore during FY2023-24.

Operating profit EBITDA stood at Rs. 58.60 crore in FY2024-25 compared to Rs. 49.88 crore during FY2023-24.

Finance costs increased by 22.96% to Rs. 10.39 crore in FY 2024-25 from Rs. 8.45 crore during FY 2023-24.

Total expenses stood at Rs. 436.31 crore including tax expenses worth Rs. 6.23 crore and deferred tax charge/(benefit) and MAT credit entitlement worth Rs. 83.12 crore. Profit after tax, including other comprehensive income (OCI), stood at Rs. 23.58 crore as against Rs. 18.30 crore during the previous year.

Net worth stood at Rs. 301.15 crore as on 31st March, 2025 compared to Rs. 279.50 crore as on 31st March, 2024.

Property, plant and equipment and intangible assets increased by 25.28% to Rs. 232.68 crore during FY 2024-25 from Rs. 185.74 crore during FY 2023-24. Capital work-in-progress for the year decreased to Rs. 12.78 crore during FY 2024- 25 as compared to Rs. 19.75 crore during FY 2023-24.

Cash and cash equivalents stood at Rs. 2.07 crore as on 31st March, 2025 compared to Rs. 10.18 crore as on 31st March, 2024.

Key financial ratios

Particulars	2025	2024
EBITDA/turnover (%)	12.81	11.66
Net profit/turnover (%)	5.11	4.28
Debt-equity ratio	0.29	0.28
Current ratio	1.16	1.32
Interest coverage ratio	3.98	4.11
Inventory / Cost of goods sold turnover (times)	2.33	2.39
Debtors (number of days)	94	102
Return on net worth (%)	8.51	7.03
Book value per share (Rs.)	231.67	219.11
Earnings per share (Rs.)	18.94	14.75

Human resources

The company considers its people to be its most valuable competitive advantage. Our employees, with their broad multisectoral experience, technical expertise and industry knowledge, are key to our success.

Our HR culture challenges conventional practices to enhance our competitiveness. By making decisions that align with both employees professional and personal aspirations, the company promotes an ideal work-life balance and instills a deep sense of pride in being a part of the organisation. As of March 31, 2025, the company had 1,300 employees.

Risk management

Competitive risk: Increasing competition could potentially lead to reduced revenues and profit margins. Mitigation: The company provides a variety of products to cater to the diverse needs of its customers. By improving the customer experience through after-sales service and turning its products into complete solutions, the company reduces competition. This strategy has cultivated long-term client relationships, leading to a larger market share.

Service risk: Insufficient service delivery by the company may lead to equipment downtime, impacting the brands reputation.

Mitigation: The company maintains high product availability nationwide through a network of 52 dealers and has strengthened its service division to reduce equipment downtime.

Sectoral risk: The companys growth could be limited if it redirects its focus to underperforming sectors.

Mitigation: The company operates across multiple sectors like automobile, power, steel and plastic, ensuring steady profits and reducing the impact of short-term downturns in any one sector. It now seeks to diversify further by exploring renewable energy, defence and marine engineering.

Technology risk: The emergence of new and advanced technologies in the market could decrease demand for Yukens existing products, potentially impacting the companys operations. Mitigation: The demand for the companys products, such as pumps and valves, has steadily grown over the years.

Economy risk: The industrys growth is closely tied to the overall economy, making it susceptible to the countrys economic conditions and trends. Mitigation: The companys diverse range of products, sectors and geographic presence helps minimise the impact of an economic slowdown.

Internal control systems and their adequacy

Yuken India builds its organisational culture on transparency and accountability, following corporate governance practices guided by its Code of Conduct and policies that comply with SEBI (Listing Obligations and Disclosure Requirements) Regulations of 2015. To handle workplace issues,

Yuken India has a Prevention of Sexual Harassment Policy based on the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act of 2013. The Audit Committee oversees internal processes to ensure governance. Additionally, the Committee of the Board and the companys Constitution ensure that accounting policies and procedures align with Section 177 of the Companies Act of 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations of 2015.