ZF Commercial Vehicle Control System India Ltd Management Discussions

ZF Commercial Vehicle Control Systems India Ltd ("the Company") provides its customers with solutions that shape the future of mobility in commercial vehicle transportation. Our technologies and services for commercial vehicles and fleets make them more efficient, safe, connected, intelligent, and automated, wherever they operate. We partner with our clients to deliver integrated, innovative solutions that positively impact every stage of a vehicles lifecycle, - from design to decommissioning. With the broadest range of offerings in key domains such as Automated Driving, Electric Mobility, Connected Mobility, and Digitalization, the Company is Redefining Indias Mobility. Our local teams and partners are close to the customers, enabling real-time communication between trucks and trailers. Backed by extensive data from onboard systems, we provide real-time information and insights to optimize fleet operations and meet the evolving requirements of commercial vehicles.

I. Economic Overview

i. Global economy:

The global economy in the year 2025 continues to demonstrate cautious resilience against a backdrop of mounting complexity in the macroeconomic landscape. According to the April 2025 edition of the International Monetary Funds (IMF) World Economic Outlook, global GDP growth is projected to ease to 2.8% in 2025, down from 3.3% in 2024. While this represents a slowdown from pre-pandemic growth norms, it signals a period of restrained expansion rather than a downturn.

This moderated growth trajectory is influenced by a combination of persistent global trade tensions, heightened policy uncertainty across key economies, and softening consumer confidence - particularly within developed markets. Nevertheless, the global economy is exhibiting signs of steady adaptation to deeper, long-term structural transitions, maintaining a baseline of stability despite prevailing headwinds.

Outlook

As global economic uncertainty persists, international trade is undergoing a profound transformation shaped by both strategic alliances and escalating geopolitical tensions. Agreements like the Regional Comprehensive Economic Partnership (RCEP) and evolving European Union trade policies are driving stronger economic integration and enhancing supply chain resilience across the Asia-Pacific and beyond. At the same time, the outlook for global commerce is clouded by critical challenges. The deepening rare earth crisis is threatening key technological supply chains, while tariff disputes, especially between the United States and China, continue to disrupt trade flows and

fuel uncertainty for businesses worldwide. Geopolitical instability, particularly in the Middle East, is adding further strain. Disruptions in vital shipping corridors such as the Red Sea are increasing transportation and energy costs, compounding risks for global supply networks. In response, governments are ramping up efforts to diversify trade partnerships, secure essential raw materials, and invest in greener, more sustainable infrastructure. Looking forward, the future of global trade will hinge on how effectively nations can manage rising protectionism, navigate geopolitical flashpoints, and reduce dependency on vulnerable supply chains in an increasingly interconnected and volatile world.

ii. Indian economy:

Indias real GDP was placed a strong growth rate at 6.5% in FY 2024-25, underscoring the resilience and dynamism of its economic fundamentals. Despite a challenging global environment marked by persistent trade tensions and tariff- related disruptions, the Indian economy remains firmly on course. Its capacity to absorb external shocks while sustaining growth momentum reflects the adaptability and strategic orientation of its policy framework.

Indian Economy Real GDP Growth Rate (in %)

Indias services sector remains fundamental to economic expansion, poised to grow by a robust 7.2% in FY 2024-25. This momentum is fueled by vibrant activity across financial services, healthcare, hospitality, and public administration. A revival in consumer sentiment and the continued rise of domestic tourism are injecting fresh energy into key service segments.

On the industrial front, manufacturing growth is set to ease to 6.2% in FY 2024-25, following an impressive 9.5% surge the previous year. Still, sectoral indicators signal underlying strength. The Manufacturing Purchasing Managers Index (PMI) climbed to 58.4 in June 2025, the highest reading since April 2024, signaling buoyant manufacturing activity. Notably, capital goods and consumer durables led the charge, supported by rising investments and growing global appetite for Indian exports. These shifts point to a manufacturing sector that is not only resilient but steadily evolving into a more diversified and globally competitive force.

Additionally, Indias Consumer Price Index (CPI) averaged 4.6% in FY 2024-25, the lowest annual inflation reading since FY 2018-19, a clear sign of easing price pressures after several years of elevated inflation. This downward shift comes on the heels of prolonged global supply chain disruptions between CY 2021 and CY 2023, during which inflation consistently overshot the Reserve Bank of Indias target range.

Outlook

Indias economic trajectory remains closely aligned with

its long-term vision, Viksit Bharat @2047, a transformative

agenda aimed at positioning the country as a fully developed economy by the 100^th year of independence. Central to this vision is the ambitious goal of becoming a $30-trillion economy by 2047, powered by inclusive growth, rapid technological innovation, and large-scale infrastructure development.

The projected GDP growth of 6.5% for both FY 2025-26 and FY 2026-27 reflects continued macroeconomic resilience and policy stability. This growth is underpinned by strong domestic demand, accelerating digital transformation, and ongoing structural reforms. Favourable demographics, rising formalisation of the economy, and a thriving digital ecosystem further enhance Indias medium- term prospects.

Strategic investments in capital expenditure - combined with targeted reforms in logistics, taxation, and financial inclusion - are laying the foundation for productivity-led expansion. These factors are expected to fuel a virtuous cycle of consumption, investment, and job creation, ultimately elevating living standards and strengthening Indias global competitiveness.

II. Industry Structure & Developments

i. Indian Automotive Industry

The Indian automobile industry has emerged as a key pillar of the nations industrial growth and economic progress. Its transformation gained momentum in 1991, when the sector was de-licensed and allowed 100% Foreign Direct Investment (FDI) via the automatic route—a game-changing reform that opened the doors for global automotive giants and accelerated the evolution of domestic manufacturing ecosystems.

Since then, the industry has scaled new heights in both capacity and capability. Today, India stands as the worlds fourth- largest automobile market, surpassing several established economies in terms of vehicle sales and production output. It is a global frontrunner in two- and three-wheeler production and ranks among the top five manufacturers of passenger and commercial vehicles. With a contribution of approximately 7.1% to national GDP, the automotive sector plays a pivotal role in powering Indias economic engine and industrial ambition.

Segment-wise Automobile Performance in India in FY 2024-25

Category	Production			Domestic Sales			Exports
	FY 2024-25	FY 2023-24	% Change	FY 2024-25	FY 2023-24	% Change	FY 2024-25	FY 2023-24	% Change
Passenger Vehicles	50,61,164	49,01,840	3.25	43,01,848	42,18,750	1.97	7,70,364	6,72,105	14.59
Commercial Vehicles	10,32,645	10,67,504	(3.26)	9,56,671	9,68,770	(1.25)	80,986	65,818	23.00
Three-Wheelers	10,50,020	9,96,159	5.41	7,41,420	6,94,801	6.70	3,06,914	2,99,977	2.31

(Source: https://www.siam.in/statistics.aspx?mpgid=8&pgidtrail=15)

ii. Indian Commercial Vehicle Industry:

Despite a strong GDP growth of 6.5% in FY25 and an overall automotive industry expansion of 6.5%, the Commercial Vehicle industry remained stagnant at - 0.2%. This flat performance is primarily attributed to election-related disruptions, adverse weather conditions, and delays in capital expenditure (CAPEX) spending. The Heavy Commercial Vehicle (HCV) segment was particularly impacted, experiencing a degrowth of 4%.

In near term, Indias commercial vehicle sales are expected to near pre-pandemic levels of numbers, fueled by continuous infrastructure development, the increasing necessity for fleet replacement, and the supportive PM-eBus Sewa scheme. The Medium and Heavy Commercial Vehicle (M&HCV) segment, having witnessed a period of contraction, is expected to return to growth, largely propelled by ongoing Government investments in infrastructure, with a specific focus on construction, roads, and metro-rail projects.

Some of the trends that will drive the demand for commercial vehicles are:

• E-commerce will be a key driver for retail sales and is expected that about 25% of new sales will come through online channels (e-Commerce is expected to grow at a CAGR of 18% to reach USD 345 billion by FY 30 (Source IBEF)

• With CVs integrating telematics and fleet management systems for better tracking maintenance and efficiency, ZF Groups connectivity and digitalization solutions will have new opportunities and avenues for the industry

• New business models such as freight aggregators will create demand for commercial vehicles

• Rapid transitioning of Trailer industry from unorganized to organized sector with established players and a surge in Specialized Trailer types, including refrigerated units will have a positive impact

• STUs migrating from CAPEX model to PPP & GCC Models (18% as on 2023)

• Government incentives for Vehicle Scrappage, Green policies and the PM-eBus Sewa schemes all encourage replacement of older and polluting vehicles

• A well-thought-out vehicle scrappage policy with incentives will spur demand for commercial vehicles in the short term.

• The adoption of digital connectivity solutions will make fleets more efficient and cost-effective.

With more structural reforms underway in a stable

economic environment with digital technology, the

market is expected to regain the growth path. Some of

the key technologies that will drive future trends include

• Alternate Fuel Systems

• Advance Driver Assistance Systems (ADAS)

• Collision Avoidance Warning System

• Lane Departure Warning Systems

• Electric Vehicles and EV Retrofits

• E Trailer

• Higher Horsepower Engines with Electronic Diesel-Controlled System

• Auxiliary Braking Systems like Electromagnetic Retarders, Hydraulic Retarders, and Intarder in Automatic Transmission

• Speed Monitoring and Control Systems

• SMART TACHO

• Vehicle Payload Monitoring Systems

• E-Sim-Enabled Vehicles, GPRS, and GPS-Related Technologies

• Vehicle Alarm System to Detect Irregular Driving Patterns

• Infotainment Systems, IT-Enabled Navigation, Vehicle Tracking, Vehicle Productivity Analysis

• Advanced Transmissions with Electronic Integrations such as Automated Manual Transmission and Other New Technologies

• Electronic Braking System (EBS)

• Air Suspensions for Bus, Trucks and Trailers

III Opportunities & Threats

The Indian Commercial Vehicle (CV) industry has undergone a transformative shift, commencing with the implementation of BS VI emission standards. This evolution is further amplified by the subsequent introduction of Phase 2 Real Driving Emissions (RDE) norms in April 2023, representing a substantial advancement for the automotive sector. By aligning with stringent European and American regulatory frameworks, these elevated standards establish a more equitable competitive landscape for both Original Equipment Manufacturers (OEMs)

and auto component suppliers. Consequently, this regulatory convergence unlocks enhanced opportunities for increased participation in the global export market, as vehicles produced domestically, and their underlying technologies will now conform to international benchmarks.

Driven by the Governments emphasis on safety, several key measures are being implemented by OEMs. These include the mandatory Electronic Stability Control (ESC) for buses and the recent draft notification mandating Advanced Driver Assistance Systems (ADAS) in M2 and M3 category buses, as well as N2 and N3 category trucks. Demand for Trailer Anti-lock Braking Systems (TABS) and Electronic Braking Systems (TEBS) in hazardous goods carriers indicate a growing prioritization of safety by customers within the automotive industry.

The Governments focus on sustainable mobility is driving increased adoption of transitional low-emission fuels like CNG and LNG, alongside zero-emission technologies including Battery Electric Vehicle (BEV), Fuel Cell Electric Vehicle (FCEV) & H2 Internal Combustion Engine (ICE).

In CV Industry EV penetration is currently most prominent in the bus segment, primarily facilitated by their operation on fixed routes and schedules, enabling the establishment of dedicated charging infrastructure. Further accelerating this trend, the PM E-DRIVE scheme (Oct 24 - Mar 26), which is building upon the FAME initiative, is expected to significantly boost the adoption of EV buses, especially within State Transport Undertakings (STUs)

Apart from buses the similar trend is anticipated in the mining sector in near future, where the fixed operational routes within mine sites allow for the development of concentrated charging infrastructure.

The e-Light Commercial Vehicle (e-LCV) segment is also experiencing rapid growth, driven by robust B2B logistics upsurge. Increased model availability from major OEMs is contributing to this rise. Projections indicate a significant 15% market penetration for e-LCVs by 2030, highlighting the segments strong growth potential.

Our refined strategic focus on the LCV segment recognizes its significant growth potential and evolving dynamics, presenting substantial opportunities to establish and solidify market leadership.

On the other side, manufacturers are developing a wider range of electric CV models to cater to different market needs. The emphasis is on improving battery range, reducing charging times, and lowering operational costs to make electric CVs more competitive. Collaboration between energy companies and fleet operators is also emerging to address charging infrastructure challenges. This combined push from government and private players holds promise for increasing EV penetration in the Indian CV market. The Company has worked together with the OEMs and newly launched e-mobility products like electric compressor, electronic braking system and electronically controlled air suspension, successfully across all the major EV players.

The development of enhanced infrastructure, notably the expansion of express highways, is generating increased demand for commercial vehicles equipped with higher capacity engines and higher gear ratios. This evolving operational landscape presents significant opportunities for the wider adoption of Automated Manual Transmission (AMT) systems within the heavy- duty vehicle segment. Moreover, the growing road network facilitates increase in penetration of Tractor trailer, and the recent regulatory approval for allowing vehicles up to 25.25m, the Road trains is anticipated to gain considerable traction in the near term. Consequently, these trends are expected to further influence vehicle specifications, particularly concerning advanced safety features and powertrain requirements, to meet the demands of higher speeds and longer hauls.

During the year, the Company took efforts to sustain and increase revenues through the introduction of new products for OEMs, fleets, and aftermarket thus creating an increase in vehicle content, better technology penetration, and foraying into new domains for commercial vehicle technology.

The Company also has worked with OEMs as their technological solutions partner to introduce technologies like Electronic Stability Control (ESC), Tire Pressure Monitoring System (TPMS), Trailer EBS , Advanced Air Processing Units among other technologies.

As a complete system solution provider, the Company now uniquely connects truck, trailer, cargo, drivers, business partners, and fleet operators in real-time to empower the fleets and significantly enhancing safety and operational

efficiency. Today the Company works with several OEMs in the country to reduce the Total Cost of Ownership (TCO) by recommending the right value enhancers and by providing improved uptime for the fleets through its Fleet Management Solutions.

The industry shift to better emission norms and upgrade of vehicle platforms have also presented numerous digitalization opportunities in the entire fleet ecosystem with huge potential to mobilize vehicle intelligence thereby providing deep meaningful insights on vehicle performance to the end user/fleet owner. These insights when utilized effectively have the potential to transform the user experience to a whole new level.

The Company also introduced numerous products through the aftermarket channel to enhance the safety and efficiency of fleets including air suspension with ECAS technology, tandem master cylinder, and clutch master cylinders. Additionally, the Company also increased its market share for Diesel Exhaust Fluid (DEF) and looks forward to the following strategic opportunities in the coming years.

• Partner with trailer customers for implementing 100% TABS, penetrating and expansion of Intelligent Trailer Program products and air disc brakes for trailers

• Close association with the OEMs on implementing the ADAS as a part of regulatory requirement and retain our market position

• Technical / Homologation support for advanced technology products

• Expand its manufacturing footprint to ensure increased customer centricity

• Increase in penetration of new products

- Automated Manual Transmission, Doors with door control system, Trailer Lift axle suspension systems, air disc brakes among others

Anticipating evolutionary changes in the traditional aftermarket business models, the Company is striving to introduce new business and revenue models through e-commerce. It is also looking at ramping up sales, service, and distribution networks to effectively cater to fleets and mobility users across the country. Leveraging the wave of digitalization, the Company is also exploring the use of digital models and other initiatives to be ahead of the curve.

The authorized service centre network is expanding and currently, the Company has around 280 service centers with a pan-India presence to cater to customer requirements. These initiatives have resulted in improved service practices, and availability of genuine parts, and generated additional revenue for the Company. The Company is also cognizant that with the opportunities available within the commercial vehicle segment, the competitor activity will also be on the rise.

IV Risks and Concerns

The Company has cash reserves to meet its obligations and does not foresee a need to borrow or raise capital. The Company has a strong credit management process and investment vetting processes. The Company is receiving all major dues from its customers albeit with minor delays. The Company has met all its financial obligations and would continue to do so. The Company also has imposed strict cost control measures to reduce and avoid discretionary spend.

The Company has robust ERP systems in place and all its locations are well networked. All reporting systems have worked seamlessly without any disruption and ensuring adequate controls. Apart from the above, the cyclical nature of the Indian commercial vehicle industry presents its own risk to the business.

Indias steel demand is projected to grow by 8% over 2024-2025, driven by infrastructure investments, manufacturing expansion, and supportive government policies. By 2025, demand is expected to be nearly 70 million tonnes higher than in 2020, strengthening Indias role in the global steel market. Globally, steel demand is set to grow moderately, reaching 1,815 million tonnes in 2025 and 1,832 million tonnes in 2026, indicating steady momentum despite economic challenges.

Iron ore prices are expected to decline in 2025, ranging between $85 and $105 per tonne, due to weaker Chinese demand and higher global supply. Conversely, Indian shredded steel scrap prices may rise owing to tight domestic supply and import restrictions, while aluminium prices are forecast to dip to $2,000 per metric ton in Q3 2025 before rebounding to $2,300 by year-end. Price fluctuations in these raw materials might have an impact on the companys operating costs, with rising scrap and aluminium costs likely to offset benefits from lower iron ore prices. The company aims to counter these pressures through value engineering, localization, and strategic supplier partnerships.

Enterprise Risk Management:

The Company has formulated a detailed Risk Management Policy and adopted an integrated ERM framework as aligned with the ZF Group and is implemented across the Company. ERM Framework is developed by incorporating the best practices based on COSO and ISO 31000 and then tailored to suit our unique business requirements and laid down procedures for enterprise risk assessment and mitigation actions. The Board has constituted a Risk Management Committee to review the aspects of risk management periodically, to ensure that executive management reviews and controls risk through means of a properly defined framework. Risks identified and mitigation measures are periodically checked by the internal audit team and are communicated to the Board of Directors.

During the year 2024-25, the Company had two meetings of its Risk Management Committee in which a detailed presentation was made thereat, about risk mitigation in place & future risk mitigation action with timeline and accountable risk owner.

V Internal control systems and their adequacy:

The Company has proper and adequate systems of internal control including internal financial controls for financial reporting to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition thereof and ensure accurate reporting. All transactions are authorized, recorded, and reported correctly. The internal controls are checked by internal auditors. Observations made by them, management actions, and time frames are reviewed.

VI Operations review Manufacturing

The Company continues to launch advanced technology products and solutions from its newly inaugurated, state-of-the-art, multi-divisional manufacturing plant at Oragadam, catering to both Indian and global customers. New manufacturing lines for next-generation e-mobility products have been commissioned at this plant to produce e-compressors, ASP cartridges, hydraulic ESCs for Indian OEMs, and wheel-end products such as actuators, brake chambers, and ASAs for both domestic and export markets.

New products, including twin-cylinder compressors and actuators for European customers, as well as actuators, AMTs, APUs, charging valves, and ECUs for Indian OEMs, have been successfully launched.

Manufacturing capacities have been scaled up across all plants for braking system products to capitalize on growth opportunities. New assembly lines have been established at the Jamshedpur and Lucknow plants, enhancing agility and customer responsiveness.

Over 25 parts have been transferred to these plants, improving delivery performance, enhancing flexibility through proximity-based operations, and supporting our sustainability objectives by reducing transportation emissions. Significant gains in productivity and quality have been realized through the implementation of smart automation robotic technologies, testing automation, and leveraging digitalization in assembly and machining cells. Disclosures continue to be filed within the group for indigenously developed process inventions, leveraging lean and frugal engineering capabilities.

During the year, machine refurbishment was performed in four machining cells (crankshaft and crankcase) at our plant in Mahindra World City, adopting the latest technologies. Additionally, condition monitoring powered by the Digital Manufacturing Platform (DMP) was implemented in 40 critical CNC machines at Ambattur, 6 critical CNC machines at Oragadam, and 20 critical CNC machines at Mahindra World City to monitor machine behavior and health conditions, thereby preventing unplanned downtime. There has been a considerable reduction in maintenance costs and energy consumption through the adoption of DMP. We continue to nurture citizen development, driving efficiency and better decisionmaking, through adoption of Microsoft Power Platform and automate repetitive tasks using Robotic Process Automation (RPA). These tools enable quick analysis and improved responsiveness in areas such as customer updates and inventory management at plant and distribution centers.

The ZF Production System (ZF PS) is a comprehensive framework designed to implement lean manufacturing principles across ZFs global operations. It focuses on enhancing efficiency, reducing waste, and fostering a culture of continuous improvement. Key tools from ZF PS Method box were launched successfully, with guided workshops and resource qualification across plants during the year.

As an initiative to eliminate landfill, hazardous waste from the Mahindra World City plant is sent to the cement industry for co-processing. In the area of distribution, we have invested in additional returnable pallets to support growing volumes in the region, further minimizing waste and environmental impact. Further, we have introduced CNG-powered vehicles in one of the logistics corridors and are currently evaluating the use of electric vehicles (EVs) for last-

mile delivery to further reduce our carbon footprint.

As a testament to our commitment to sustainable manufacturing, the Oragadam plant was awarded the United States Green Building Councils LEED GOLD certification. This prestigious recognition highlights our efforts in implementing global green standards in the design and construction of the building, with practical and measurable strategies in areas such as energy efficiency, water conservation, and sustainable materials selection.

Total Employee Involvement (TEI) is the key pillar that engages employees across all plants and functions of the Company. During the year 2024-25, we won a total of 55 external awards in all competitions. Among these there were one at the international level, 16 at the National level, 16 at the regional level, and 22 at the State level conducted by CII, ACMA, QCFI, and others. Some of the significant awards include Platinum Award for the team from Ambattur in CII National level Low-Cost Automation competition,

2 Platinum awards for the teams from Ambattur in CII National DigiTech Competition, First Prize for the team from Ambattur in CII National Energy Efficiency competition and 2 Platinum awards from Ambattur in CII National Six Sigma competition.

VII Quality

The ideology of quality: ZF DNA of Quality - Living in a Zero-Defect Environment.

In the Company , quality is not a department - its our way of life. Guided by the DNA of Quality, we continuously foster a zero-defect culture, embedding quality principles into every process, product, and employee mindset. Our goal is total customer satisfaction by proactively meeting global standards and raising product quality and reliability.

Though we recorded a Parts per Million (PPM) rate of 71 in FY 2024-25, our customers expectations remain firm:

• Zero PPM

• Zero field failures up to 1 lakh kilometers

• Zero unplanned dealer visits

The Company is fully committed to closing this gap through a zero tolerance on deviations, flawless execution, and a cultivating prevention-first mindset.

Highlights of 2024-25 Initiatives

This year, the latest version of the ZF DNA of Quality introduced focused improvements in:

• Readiness and Safe Launch

• Software Supplier Management

• Control of Changes

• Risk-Based Decision Making

• Supplier Performance Management

• Customer DNA Master Plans

Our Total Quality Management culture remains deeply rooted, with:

• 273 Quality Control Circle projects

• 265 Supervisory Improvement Team projects

• 109833 employee suggestions successfully implemented

We strengthened empowerment through initiatives like the "Raise Your Hand" process part of ZF DNA of Quality 5 P framework, expanded awareness programs, competency development for new technologies, and structured recognition systems for quality contributions.

Our processes advanced through enhanced global standard adherence, better readiness evaluations, stronger safe launch controls, lessons learned sharinxg, and improved traceability systems end to end supply chain.

Leveraging Artificial Intelligence and data analytics, we enhanced defect prediction, decision-making speed, and proactive failure prevention.

Continuous improvement remains core — driving supplier performance, structural alignments, and executing our long-term Quality 4.0 roadmap.

Key Recognitions and Awards Internal and Customer Awards

1. Excellence Award under the category of ZF DNA of Quality for 2024 at the Group level for the 3^rd consecutive time.

2. Recognized by VECV with the Best Field Quality Support award at the Annual Supplier Conference 2024.

3. Pant Nagar plant won the Gold Award in Ashok Leylands Q Max Supplier Improvement Program for its Zero-Defect Approach.

4. Customer Award from VECV for its Field Claim Transformation journey during the Apex Supplier Quality Forum (Samunnati).

5. Ambattur Plant was honored with the Platinum Award by Ashok Leyland for achieving Zero PPM in Fiscal Year 2024.

6. Jamshedpur team secured the First Prize in the L3 Process Controls category awarded by Tata Motors.

7. Ambattur Plant - Quality team was awarded the Runner-Up position by Ashok Leyland at the regional level in the Supplier Samrat competition.

8. Ambattur plant was recognized as the Best Supplier by JBM during their annual supplier meet.

9. Pant Nagar team received a Problem-Solving Culture Certification from Ashok Leyland Pant Nagar plant.

10. Lucknow plant won the Silver Award in the Tata Motors EDs DWM Cup competition.

External Industry Awards

1. Companys Quality teams won the Platinum Award at the National Level CII Six Sigma Competition.

2. Ambattur Plant - Quality team secured the Second Prize (First Runner-Up) in the CII Mastermind National Quiz Competition.

3. Ambattur Plant and Oragadam Plant - Quality teams won Gold Awards at the 17^th QCFI Kaizen Competition.

4. Ambattur Plant - Quality team won the Runner- Up Award in the ACMA Kaizen Competition at the regional level.

5. Ambattur Plants team secured the Gold Award in the NIQR Six Sigma Competition.

These recognitions reflect our teams relentless focus on quality, continuous improvement, and customer satisfaction.

VIII Information Technology

The Company continues to focus on Data Privacy, Cyber Security, Digital Transformation in-line with the Global IT Framework and Policies of the Company. ZF Group focusses towards being a technology platform provider for the Digital Core.

The solutions and ideas for digitalisation are registered & tracked on a Continuous Improvement platform and are prioritized based on the quantified business benefits.

AI/Advanced Analytics: ZF Group is focused on implementation of data & AI solutions, enabling data-driven decision making & driving data excellence with a vision to have AI as part of software running products and processes. The ZF Global AI Centre of Excellence is in place to bring in cohesion on topics regarding organization, people, technology, and ecosystem related to Data & AI.

The Global AI CoE Team conducted the 2025 Global Data and AI Conference, an inspiring event which explores the latest advances in Data, Analytics & Artificial Intelligence. The Conference brings together experts, innovators, and enthusiasts to share knowledge and foster connections.

Additionally, an AI/Generative AI workshop was conducted to the business teams in the Company to share best practices, projects within ZF and promote adoption of these technologies.

Digital Manufacturing Platform (DMP): As stated under Manufacturing initiatives, the Company is in the process of adopting the ZFs Cloud based Digital Manufacturing Platform (DMP) that acts as the central enabler to realize one global production network through digital solutions to achieve higher flexibility, productivity, and efficiency. DMP enables to create transparency of production performance, enhance maintenance operations through machine condition/ energy monitoring and fault prediction. These plants have started realizing the benefits of digitalization.

ERP: In alignment with the Companys strategic transformation towards becoming a digital, data-driven enterprise with optimized processes, Next-Generation ERP solution is being discussed and evaluated that leverages cutting-edge technology on SAPs S/4HANA platform.

Cyber Security & Data Privacy: ZF Global Enterprise IT Security is focused on the Operational Enterprise IT-Security by Prevention, Detection and Defending/ Mitigation of Cyber Risks. ZF Corporate & IT Security is constantly improving the Security Policies, Cyber capabilities, tools, and processes by Protection of the entire IT infrastructure (global network, cloud, servers, endpoints...), the Company has in place a 24x7 Security Operations Centre (SOC) that globally monitors the environment for security conditions, alarms, health of the security platform, and responding through the organizations various technical solutions.

Internally simulated phishing attacks are conducted periodically along with regular awareness sessions to all employees on the Dos & Donts best practices. One of the factories of the Company has received TISAX certification. Trusted Information Security Assessment Exchange (TISAX) is an assessment and exchange mechanism for the information security of enterprises, published by the Verband der Automobilindustrie (German Association of the Automotive Industry or VDA).

With reference to the new Digital Personal Data Protection Act, 2023 requirements, the company has submitted its clarifications to the draft rules released by The Ministry of Electronics and Information Technology (MeitY).

IX Human Resource Development

The Companys growth story in India continues to mature with increasing talent base and technology ownership across all its manufacturing and technology centres. The newest Oragadam facility continued

the momentum in ensuring more than 80% gender diversity across its production lines.

HR policy enhancements which focused on people development, care and inclusivity where the notable highlights during the year. Learning and development continue to be the highest organizational priorities with dedicated interventions like Plant Manager Development Program, Sales Leader Development Program and curated women leadership development interventions (HerRise, Empower Her Power).

Building an emotional connect through various engagement initiatives which focused on employee health & wellness, culture & diversity, and various technology initiatives ensured a motivated workforce and this reflected in the annual global employee engagement survey results with greater than 90% participation and 79% engagement index which is 4% over the ZF Group average.

The organization Company enhanced its skill base by hiring 450 plus engineers and 70 professional talents, hired from various premium engineering institutions as part of Future Starters Initiative. Overall gender diversity for the Company has increased from 17% to 18.5% which reinforced our commitment to building an inclusive workforce.

Another significant highlight for the year was our commitment to develop talents and provide them opportunities for internal growth through our internal placement program (17% of the overall hiring).

This comprehensive talent management framework which focused on attracting, developing and engaging our talent ensured a low voluntary employee turnover at 7% across the Company.

The Company continued the culture of maintaining smooth and engaged industrial relationship with various works councils across various factories in India. As on March 31, 2025, the Company had 2488 employees on its rolls.

X Environment, Health & Safety

First quarter of every year is focused on EHS themes and this year, the Company has focused on EHS & Sustainability initiatives with a theme approach in the key areas, where our operations play a bigger role to ensure safe, healthy & sustainable workplace. Based on the above context, the theme for this year: "Be the STAR"(Safety Champion, Transformation agent, Active & Fit & Resources Conscious), this theme drives a behavioural transformation across the shopfloor to adhere EHS practices & systems and resources conscious challenge with 5R.

During the above mentioned period, more than 40 awareness programs were organized across the plants

with more than 4124 employees benefited. As part of the campaign, 15 competitions like essay, drawing, quiz, and speech were organized, and winners were recognized in the town hall meeting held, subsequently.

On March 4^th, National safety day is celebrated across all the plants starting with the pledge taken and a lot of engagement activities were organized.

During the year, surveillance audits of ISO 14001(Environment management system) & ISO 45001(Occupational Health and Safety management system) were completed as part of the ZF corporate audit scheme. The Ambattur plant and the Test track have completed the re-surveillance audit for ISO 50001 standards for implementing energy management systems and achieving continuous improvement in energy performance.

During the year 2024-25,, Ambattur plant won 1^st place "Platinum award" in CII National energy efficiency circle competition for best energy efficiency approach and projects.

Mahindra World city team won gold award in Sustainability category at CII National Kaizen Competition, to reduce the LPG consumption 25% in the powder coating process.

As part of Sustainability initiatives, the energy efficiency program was rolled out involving all stakeholders in the operations as well as in other areas where 12% energy reduction resulted from implementing 103 projects across the sites.

To improve Energy efficiency program, we have collaborated with IIT Madras Industrial Energy Assessment cell to audit our Ambattur and Mahindra World City site where more than 20% potential opportunity identified to improve the Energy improvements.

To promote renewable energy, we have installed onsite roof solar of 500KWp to support 25% of plant renewable energy and installed onsite roof solar of 60 KWp at Pant Nagar site to support 40% renewable energy of plant energy.

To phase out of fossil fuel in our operations, fossil fuel diesel is phased out with electrical induction vessel at Ambattur kitchen which is approx. 66000 liters/annum diesel is eliminated in turn we avoided 151 tons of Co2e.

As part of Circularity initiative, zero waste to landfill & incineration achieved by reuse the hazardous waste into cement industry at Mahindra World City plant.

XI Community development and social responsibility

As a responsible corporate citizen, the Company engages in social responsibility and community development activities. This year the activities were conducted through the internal engagement of employees and resources, primarily focused on activities that would help the needy sections of the society as specified in Schedule VII of the Companies Act, 2013 and the Companys CSR policy with a specific focus towards areas surrounding the Companys plant locations. The Company views CSR as a powerful opportunity to help create a positive impact for the future by working together with Communities, Governments, and local bodies to deliver qualitative social improvement. The Company identifies appropriate CSR projects in line with the Companys CSR policy and implements them. The Company had identified various projects towards spending 2% of average net profits for the previous three years. Along with Year 2024-25 identified projects, Company has completed the previous two years unspent CSR of 2022-23 and 2023-24 against ongoing projects, resulting in to no unspent amount as on March 31, 2025. The Company executes all its CSR projects under identified four primary areas such as Road Safety, Supporting Communities, Skilling Individuals and Environmental Sustainability.

Promoting road safety across India:

Improve Road Safety by creating awareness among stakeholders like drivers and technicians from State Transport Undertaking at various States Gujarat, Karnataka, Kerala, Andra Pradesh, Maharashtra, Telangana and Tamil Nadu. Topics covered includes Do and Donts while driving, awareness of the safety system available on the vehicle, the importance of the maintenance of the key safety systems available on the vehicle. Road Safety Awareness events carried out in 37 Locations from various States of 817 drivers and technicians of various private fleets benefitted. 7 Dual Brake System Working Models provided to Driver/Technician Training Centres of APSRTC, MTC and TSRTC. Also 4 Workshop equipments installed at various divisional workshop of TSRTC and MTC. Above working models and workshop equipment will reduce the downtime of vehicles and the road accidents.

Supporting Communities:

The Company has embarked on a range of community service projects aimed at bolstering local communities. These initiatives encompass enhancements to the infrastructure of Primary Health Care Centres, modernization of hospital amenities, refurbishments of Government school buildings, improvements to sanitation facilities in the schools, and the execution of various projects cantered on womens welfare, among others.

The Company has improved the infrastructure of 4 UPHCs of Zone 7, The Greater Chennai Corporation, Ambattur by providing medical equipment such as Ultrasound Sonography Machine- 3 nos, Auto Clave- 3 nos & Microscope- 1 no. The Company has provided 150 mA Computerized X-Ray Machine to the Primary Health Centre, Perambakkam. Our organization has provided 300 sets of Classroom Study Table with Bench to the Government Inter College at Barabanki, Lucknow, thereby improving the ergonomic health of the 900 students. The kitchen of the Govt. Middle School, Uperbera, Jamshedpur was renovated into a hygienic and well-ventilated kitchen for their mid-day meal preparation along with hygienic dining area. Moreover, our Company has supported the under privileged High School students with 10 nos of Laptops through "Namma School Namma Ooru Palli" (NSNOP) which is a Tamil Nadu state Government Initiative for Rural Education.

Upon request of the villagers of Hussain Nagar, Thiruvallur district, Tamil Nadu to provide a safe Road for safe commuting and prevention of Road Traffic Accidents, we have relayed the Meppedu main road for a length of 791 meters.

To promote the sports and cultural activities in the Uperbera Village, Jamshedpur, the Company has renovated the Football Ground & the Stage thereby promoting Sports and social wellbeing of the villagers.

The Local village people of Uperbera and Ramachandrapur Village, Jamshedpur were facing water scarcity and fetching of ground water using hand pump. Therefore, our organization provided an overhead tank with solar power operated motor thereby providing the villagers with safe potable drinking water.

The Company has completed the ongoing project of 2023-24 "Multi-Purpose Activity Hall , library,

computer lab infrastructure for Kasturba Gandhi Balika Awaseey Vidyalaya , Barabanki. Uttar Pradesh.

Skilling Individuals: In order to improve the skill of Polytechnic students, the Company has improved the infrastructure and upgraded the Physics, Chemistry and Computer labs at Govt Polytechnic Harakh Deeh, Barabanki- Lucknow.

The Company has covered under the National Apprenticeship Promotion Scheme (NAPS) and trained 1000 Persons under CSR. We also train them in the basics of manufacturing excellence to upskill them and enhance their employability

Environmental Sustainability:

The Company has implemented a suite of renewable energy solutions, including the installation of Solar Power Systems, solar powered traffic signals, streetlights, and high mast lights. Solar power systems have been installed in seven Primary Health Centres at Chengalpattu based on the need. The Primary Health Centres reported that, they experienced no power interruptions, enabling them to continuously deliver healthcare services to underprivileged communities. Installation of Solar based Traffic Signals has enhanced road safety with uninterrupted power supply, Company has installed 9 traffic signals at Jamshedpur, 2 at Lucknow and 1 at Chennai. Company has also installed 100 Solar based streetlights, and 4 Solar based High mast lights which has benefited the public. Uttar Pradesh Government has appreciated our efforts towards the development of Society.

The Company has completed the ongoing project of 2022-23 "Rejuvenation of Vaipur Lake near our Oragadam Plant". The Companys efforts led to the enhancement of water storage capacity at Vaipur Lake, Oragadams to 3000 m³, thereby promoting sustainable water management.

XII Financial Statement

	Standalone		Consolidated
Particulars	Year ended March 31,2025	Year ended March 31,2024	Year ended March 31,2025	Year ended March 31,2024
Revenue from Operations	3,80,408.92	378,370.85	383,096.25	381,564.74
Other Income	10,974.90	9,577.37	10,819.72	9,481.61
Total Income	3,91,383.82	387,948.22	393,915.97	391,046.35
Profit before interest depreciation and tax	73,520.17	65,891.45	73,927.53	66,123.85
Finance Costs	570.47	500.91	570.47	500.91
Depreciation	12,270.06	10,948.78	12,425.23	10,979.88
Profit before tax	60,679.64	54,441.76	60,931.83	54,643.06
Provision for taxation (including deferred tax and tax relating to earlier years)	14,813.83	13,963.82	14,858.83	13,998.41
Profit after tax	45,865.82	40,477.94	46,073.00	40,644.65
Other Comprehensive Income / (Loss) for the year net of tax	(426.22)	(58.63)	(426.22)	(58.63)
Total Comprehensive Income for the year Net of Tax	45,439.60	40,419.31	45,646.78	40,586.02

In the preparation of financial statements, the Company has followed the Indian accounting standards (Ind AS) as notified under section 133 of companies act 2013 read with the companies (Indian Accounting Standards) Rules.

Key Financial Ratio

Particulars	2024-25 (in %)	2023-24 (in %)	Significant changes compared to previous year. i.e., 25% or more	Detailed explanation for the change
Current ratio	6.03	4.94	N.A	N.A
Debt-equity ratio	N.A	N.A	N.A	N.A
Debt service coverage ratio	49.45	54.91	N.A	N.A
Return on equity ratio	0.15	0.16	N.A	N.A
Inventory turnover ratio	12.76	14.70	N.A	N.A
Trade receivables turnover ratio	3.71	4.47	N.A	N.A
Trade payables turnover ratio	6.43	6.50	N.A	N.A
Net capitals turnover ratio	1.61	1.92	N.A	N.A
Net profit Margin	12.06	10.70	N.A	N.A
Operating Profit Margin	16.10	14.52	N.A	N.A
Return on capital employed	18.83	19.43	N.A	N.A
Return on investments	7.80	7.84	N.A	N.A
Return on net worth	15.3	15.6	N.A	N.A

XIII Cautionary Statement

Statements in the management discussion and analysis report describing the Companys objectives, projections, estimates, and expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.