ZF Commercial Vehicle Control System India Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

ZF Commercial Vehicle Control Systems India Limited is shaping the future of commercial vehicle transportation systems. Our technologies and solutions for commercial vehicles and trailer fleets enable them to be more efficient, safe, connected, intelligent, and automated in their operations. We partner with customers to introduce integrated and innovative solutions that positively impact the commercial vehicles lifecycle, from cradle to grave.

The Company offers customers access to the broadest range of commercial vehicle solutions in key domains like Automated Driving, Electric Mobility, Safety, and Connected or Shared Transportation and Fleet Operations Digitalization to enable Next Generation Mobility. Our local teams and partners are well represented across the country for close customer proximity.

I INDUSTRY STRUCTURE AND DEVELOPMENT:

GDP growth and Indian economic outlook:

Strong domestic demand supports growth; external headwinds remain a key watch factor

With robust growth of 7.8% in Q3, following 8.4% in Q2 FY26, the overall growth projection for FY26 for the nation has been revised upward from 7.4% to 7.6%. This revision is supported by strong momentum in the manufacturing and services sectors.

Looking ahead, GDP growth for FY27 is projected at 6.9% reflecting a relatively slower trajectory as the economy navigates external headwinds. On the domestic front, consumption is expected to remain supported by the favourable impact of GST rate rationalization and the benefits of earlier RBI rate cuts. On the investment side, the Centres continued emphasis on capex-led growth, along with emerging signs of a revival in private capital expenditure, is encouraging.

Recently announced trade agreements with partners such as the US, EU, Australia, and the UK are positive developments for Indias export performance. However, despite the economys underlying resilience and uptick, growth in 2026-27 is likely to be constrained by external headwinds arising from geopolitical uncertainties and inflationary pressures. Given the continued volatility in global economic conditions, close monitoring of evolving geopolitical dynamics and trade policy changes is critical, as these factors could impact overall growth to some extent

Manufacturing: Manufacturing and capex led growth offset mixed industrial performance

India remains firmly committed to expanding its manufacturing base, with a strategic focus on diversification, strengthening traditional industries such as automobiles, and building a resilient, globally competitive domestic supply chain ecosystem.

Industrial activity showed a mixed momentum in FY26. While Index of Industrial Production (IIP) growth touched a six quarter high of 5.2% in Q3, it tapered to 4.8% in Q4 FY26. On a full year basis, industrial output expanded by 4.1% in FY26, broadly unchanged from the previous year. Subdued growth in mining (1.4% in FY26 versus 3.0% in FY25) and electricity (1.0% versus 5.2%) weighed on overall industrial performance. In contrast, manufacturing emerged as a bright spot, recording a growth of 5.0% improving over 4.1% recorded in FY25.

Within the use-based classification, capital goods and infrastructure segments delivered strong performance, registering growth of 8.3% and 9.8%, respectively, in FY26. The Centres continued emphasis on a CAPEX led growth strategy has supported the growth momentum in these segments.

However, the global economic environment remains challenging amid persistent geopolitical tensions, including ongoing uncertainties around the conflict in West Asia. Elevated global risks and potential supply chain disruptions are expected to pose headwinds to Indias industrial activity. Looking ahead, heightened external volatility could keep industrial growth under pressure, underscoring the need for continued policy support to sustain momentum

i. Indian Commercial Vehicle Industry:

Landmark year for CV industry

Aided by strong GDP growth and underpinned by broad-based consumption recovery following GST reforms and RBIs repo rate cuts, the automotive industry recorded robust sales growth of 13% in FY26 (Source: FADA), while the commercial vehicle (CV) industry grew by 11%, marking a landmark year for the sector. Within the CV space, the medium-duty segment witnessed stellar growth of 23%, while the heavy-duty segment grew by a moderate 7.9%.

While demand fundamentals remain strong and are supported by sustained tailwinds from GST 2.0 reforms, improving affordability, and a supportive monetary policy stance to address the potential headwind arising from the Middle East conflict, will need close monitoring. These geopolitical risks could impact raw material and energy prices, with significant implications for vehicle prices and fleet profitability.

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

• Aging vehicle fleet: Nearly 42% of trucks are over 12 years old, creating a strong, multi-year replacement cycle.

• E-commerce-led growth: E-commerce is entering a high-growth phase, driven by rising disposable incomes, rapid digital adoption, and increasing demand from Tier II and III cities. It is estimated that ~25% of new sales will be driven through online channels, with the e-commerce market expected to grow at a CAGR of ~15% to reach USD 345 billion by 2030.

• Digitalization and connectivity: Growing adoption of telematics and fleet management systems is improving tracking, maintenance, and operational efficiency, which in turn is opening new opportunities across the CV value chain.

• Emerging business models: The rise of freight aggregators and logistics platforms is creating an incremental demand for commercial vehicles.

• Trailer industry formalization: The trailer segment is rapidly transitioning from unorganized to organized players, supported by a surge in demand for specialized trailers, including refrigerated units.

• Shift in public transport procurement models: State Transport Undertakings (STUs) are increasingly migrating from CAPEX-based procurement to Public Private Partnership (PPP) and Gross Cost Contract (GCC) models (around 18% as of 2023).

• Policy support and sustainability push:

Government initiatives such as the Vehicle Scrappage Policy, green mobility measures, and the PM-eBus Sewa scheme are accelerating the replacement of older and polluting vehicles.

A well-thought-out vehicle scrappage policy with incentives will spur the demand for commercial vehicles in the short term, and the adoption of digital connectivity solutions will make fleets more efficient and cost-effective.

With more structural reforms underway in a stable economic environment and supported by 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

• Light weighting technologies

• Predictive maintenance using AI/ML

• Advance Driver Assistance Systems (ADAS)

• Collision Avoidance Warning System

• Lane Departure Warning Systems

• Electric Vehicles and EV retrofits

• Battery swapping and fast-charging ecosystem for electric CVs

• E- trailers

• 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

• eSIM-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

The commercial vehicle industry is likely to sustain this growth over the next 2 to 3 years. Demand for commercial vehicles, particularly medium and heavy commercial vehicles, is likely to benefit from various government initiatives to help revive the economy.

II OPPORTUNITIES AND THREATS

The Indian Commercial Vehicle (CV) industry has undergone a transformative shift, commencing with the implementation of BS VI emission standards. This evolution was further amplified by the subsequent introduction of Phase II/2 Real Driving Emissions (RDE) norms in April 2023, representing a substantial advancement for the automotive sector. By aligning with the stringent European and American regulatory frameworks, the elevated standards establish a more equitable competitive landscape for both Original Equipment Manufacturers (OEMs) and Auto Component suppliers. Consequently, as domestically produced vehicles and their underlying technologies now conform to premier international benchmarks, this regulatory convergence unlocks enhanced opportunities for increased participation in the global export market.

Driven by the governments emphasis on safety, several key measures are being implemented. The mandatory Electronic Stability Control (ESC) for buses and the recent amendment mandating Advanced Driver Assistance Systems (ADAS) in M2 and M3 category buses, as well as N2 and N3 category trucks are included in these measures. Furthermore, the significant increase in ESC adoption in passenger cars and the demand for Trailer Anti-lock Braking Systems (TABS) and Electronic Braking Systems (EBS) in hazardous goods carriers indicate a growing prioritization of safety by customers within the automotive industry. Beyond safety, there is also a clear regulatory push toward improved driver comfort, as reflected in the recent mandate for air-conditioned cabins in M2 and M3 category vehicles, aimed at enhancing driver wellbeing and increasing operating efficiency.

The Governments focus on sustainable mobility is driving increased adoption of transitional low-emission fuels like CNG and LNG, alongside zero-emission technologies including BEV, FCEV & H2 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 demand. 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.

Manufacturers are developing a wider range of electric CV models to cater to different 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 the challenges around the charging infrastructure. This combined push from Government and private players holds a promise for increasing EV penetration in the Indian CV market. Our Company has collaborated with the OEMs and launched E mobility products like electric compressor, electronic braking system and electronically controlled air suspension successfully across all the major traditional and emerging mobility segments

The development of enhanced infrastructure, notably with 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 concept of 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 haul capabilities.

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

During the year, the Company worked with OEMs as a technological solutions partner to introduce technologies like Exhaust brake valve with Key OEM, increase in market share in E-Compressor , ABS/EBS braking system with Independent Bus manufacturers, OPR compressor as a part of Fuel efficacy, Clutch servo with sensor ,Electronic Stability Control (ESC), Automated Manual Transmission (AMT),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 real-time to empower the fleets to significantly enhance safety and operational efficiency. The Company is now working with several OEMs across 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.

As the industry shifts to better emission norms and upgrading vehicle platforms, this has created numerous digitalization opportunities in the entire fleet ecosystem with huge potential to mobilize vehicle intelligence. This provides deep meaningful insights on vehicle performance to the end user and/or fleet owner. These insights, when utilized effectively have the potential to transform user experience to a whole new level.

The Company also introduced numerous products through its aftermarket division/ to enhance the safety and efficiency of fleets including air suspension with ECAS technology, tandem master cylinder, and clutch master cylinders. 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, penetration 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

• Leverage or expand its manufacturing footprint to ensure increased customer centricity

• Increase in penetration of new products - Automated Manual Transmission, door control system, Trailer Lift Axle Suspension Systems, Air Disc Brakes amongst 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 its sales, service, and distribution network 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 (ASC) 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 easy availability of genuine parts, and generated additional revenue for the Company. Given the opportunities available in the commercial vehicle segment, we expect the activity levels of the competitors to also be on the rise.

III RISKS AND CONCERNS

The Company has cash reserves to meet its obligations and does not foresee a need to borrow or raise capital. With a strong credit management process and investment vetting processes, the Company has met all its financial obligations and will continue to do so. The Company is receiving all major dues from its customers albeit with some minor delays. The Company has been accepting payments through arrangements with the banks, as our customers have made on a selective basis. The Company also has imposed strict cost control measures to reduce and avoid discretionary spend.

The Company has robust ERP system in place, and all its locations are well networked. The reporting systems work seamlessly without any disruption and ensure 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 Outlook (2026-2027)

• India maintains its position as the worlds fastest- growing (consumer) major steel market, with demand projected to expand by 7.4% in 2026 and estimated to accelerate to 9.2% in 2027.

(Ref : World Steel) and ICRA (Investment Information and Credit Rating Agency of India Limited) suggested 9-10% growth considering growth in roads, railways and infrastructure projects

Global Steel Demand Forecast (2026-2027)

• 2026: Global steel demand is projected to reach 1,724 million tonnes (Mt), marking a 0.3% increase from 2025 .

Iron Ore and Steel Scrap :

Iron Ore Price Forecast for 2026

Iron Ore imports to India are set to rise to a seven- year high in the 2025/2026 fiscal year (ending March 31) due to a domestic shortage of high-quality raw materials

Middle East conflict is driving up Indian iron ore prices and input costs in 2026 by increasing delivery cost owing to freight and fuel-related expenses.

At a global level, iron ore prices are projected decrease in 2026 due to weakening demand from China and an increased global supply.

• Goldman Sachs: Average price of $88-$93 per tonne,

Scrap Steel Price Outlook for 2026

In India, shredded scrap prices are expected to rise in early 2026 with 2.7%

• Tight domestic supply: stabilization phase with tightening supply and prices increased by 2.7% at India and 7% for Europe.

Aluminium Price :

High prices are expected all through 2026 due to structural deficits and geopolitically triggered supply bottlenecks which will increase tariffs.

Aluminium prices in India are expected to remain elevated throughout 2026, driven by global supply deficits and high demand from electric vehicles (EVs) and infrastructure. As of April 2026, prices surged, with Indian MCX futures trading around ?370-?379 per kg due to tightened inventories.

Aluminium price forecast: LME cash price

Whereas Goldman Sachs report said that a downtrend is expected for Aluminum prices from late 2026 - (from $3150 to $2350)

HRC Steel:

Domestic hot rolled coil (HRC) prices rose from Rs 46000/ MT to Rs 53800/ MT and it is expected to stay volatile between Rs 50000/ MT to Rs 53800/ M. With respect to cooking coal price and high RM prices, Global HRC prices are expected to stabilize around ($700 to $750), with regional variations.

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. The 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 2025-26, the Company had a very detailed road map including the creation of risk awareness, adopting the ISO standards in managing and monitoring the risks, and a detailed presentation was made to the risk management committee about risk mitigation in place & future risk mitigation action with timeline and accountable risk owner.

IV 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 to ensure accurate reporting. All transactions are authorized, recorded, and reported precisely. The internal controls are checked by internal auditors. Observations made by them, management actions, and time frames are also reviewed.

V OPERATIONS REVIEW

A. Manufacturing

During the year, the Company expanded its manufacturing footprint with the commissioning of new production lines at the Oragadam plant for next-generation e-mobility products. These facilities now undertake the manufacture of e-Compressor Lite, Brake Signal Transmitters and wheel-end actuators for various Indian OEMs, and vacuum pumps for the export markets. Several new products including twin-cylinder compressors and actuators for European customers, and Relay Valves, High-Force Actuators and Exhaust Brake Assemblies for Indian OEMs, were also successfully launched. The product portfolio was further extended to cater to the aftermarket segment.

Manufacturing capacities for braking systems were scaled up across all plants to capitalize on emerging growth opportunities. Assembly line upgrades at Jamshedpur, Lucknow and Pantnagar enhanced production capability, delivery performance, flexibility and customer responsiveness, while also contributing to sustainability through reduced transportation- related emissions. Productivity and quality improvements continued through increased adoption of smart automation, robotics, testing automation and digitalisation across assembly and machining operations.

The Company significantly strengthened its digital and IT foundation. A robust wired shopfloor network was deployed across all production areas, ensuring reliable connectivity for manufacturing assets. Data centre upgrades in line with MiConDis (Minimum Data Center Continuity and Disaster Requirements) and ProSA (Production Service Area Ready for 14.0) standards, together with enhanced cybersecurity controls, enabled the achievement of PITS (Production IT Security) Level 3 across all factories. In alignment with the ZF Strategic IT Landscape, a model production line was established at the Ambattur plant, integrating paperless operations and digital solutions to deliver measurable improvements in safety, quality and operational efficiency, and serving as a local Industry 4.0 benchmark. Next-generation process control and traceability were piloted using ZFs SCADA system (Agile Cell Controller), demonstrating improved transparency and process steering, with scaling underway across plants. The Digital Manufacturing Platform (DMP) was further leveraged to roll out data-driven shopfloor solutions and Digital Shopfloor Management, strengthening governance and operational visibility.

As of December 2025, the Ambattur, Mahindra City and Jamshedpur plants successfully completed ZFs Overall Maturity Assessment (OMA). With an average score of ~2.7, CVS India is positioned competitively within global benchmarks, reflecting strong alignment with the ZF Production System and a structured approach to continuous improvement. Capability building remained a key focus, with over 255 employees qualified across multiple Production System levels and topics. Value Stream Analysis initiatives progressed as planned, enhancing end-to-end process visibility, flow efficiency and operational effectiveness across Indian operations.

The Company also advanced its environmental stewardship agenda, delivering measurable reductions in emissions, energy consumption and resource use. Eliminating diesel and LPG usage in canteen operations reduced approximately 207 tonnes of Scope 1 CO2e emissions annually. Renewable energy adoption and energy efficiency initiatives gained momentum, with a 200 kWp rooftop solar plant at Lucknow contributing over 40% of peak monthly power requirements and 51 energy efficiency projects delivering annual savings of about 2,617 MWh. Water and waste management initiatives included commissioning a 1,200 KL rainwater harvesting pond at Jamshedpur, meeting nearly 40% of site water needs, installing an Organic Waste Converter at Ambattur, and optimizing effluent treatment operations, significantly reducing sludge generation.

B. Quality

ZF DNA of Quality - Living in a Zero-Defect Environment.

At ZF, quality is 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 PPM rate of 89 in FY 2025-26, our customers expectations remain firm:

• Zero PPM

• Zero field failures up to 1 lakh kilometers

• Zero Unscheduled Visit per vehicle UVPV

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

Highlights of 2025-26 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:

• 238 Quality Control Circle projects

• 234 Supervisory Improvement Team projects

• 17263 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 towards quality contributions.

Our processes advanced through enhanced global standard adherence, better readiness evaluations, stronger safe launch controls, lessons learned sharing, 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 at the core of driving supplier performance, structural alignments, and executing our long-term Quality 4.0 roadmap.

Key Recognitions and Awards

1. Mahindra City Plant won the award for Zero Defect Culture in VOLVO Supplier Day.

2. Ambattur team was awarded with Supplier Quality Excellence award for problem solving completion in Ashok Leyland.

3. Ambattur and Mahindra City teams won ASCEND 2025 Supplier Quality Award from UD trucks customer for outstanding contribution towards POKAYOKE implementation through innovative digital solutions.

4. Ambattur team won Runner up Award in the National "Supplier SAMRAT Competition organized by Ashok Leyland

5. Ambattur team received Winner Award at "NO MAKE" Competition organized by Ashok Leyland

6. Ambattur team received Runner-up award at "KAIZANIA" competition organized by Daimler

7. Ambattur team received Runner-up award at Regional "Supplier SAMRAT" competition organized by Ashok Leyland

8. Ambattur and Oragadam teams received awards at Quality Month Competition organized by JBM. Awarded for Best Poka Yoke and Best Quality improved through Ergonomics.

9. Pune plant team won Best L3 Control award from Tata Motors customer.

10. Lucknow team received Winner award for Best QC story project presented by TATA Motors during the Quality Month.

External Industry Awards

1. CVS India Quality teams recognized with one Platinum and two Silver awards in the Anna University Industrial engineering competition, INDCON 26.

2. Ambattur Quality team participated in QCFI competition and won GOLD Award.

3. Oragadam team won the first prize at the IMTMA-ACE Micromatic Productivity Championship Awards 2025.

4. Oragadam team was awarded the Gold Award in the QCFI Kaizen Competition for achieving quality through improved ergonomics.

5. Ambattur team was awarded the third position in the CII Poka-Yoke Competition for the Automotive Sector.

6. Ambattur team participated in 34th CCQCC 2025 Competition and won 2 Gold awards for the best rejection elimination projects.

7. Ambattur team was recognized with the first prize in the National Level Quiz Competition Conducted by CII on TPM.

8. Lucknow team secured the 2nd Runner-Up Award at the CII QC competition.

9. Lucknow team won Silver Award at the QCFI QC Competition.

10. Ambattur and Mahindra City teams received Gold award in NIQR Six Sigma Competition.

All of these recognitions reflect the teams relentless focus on quality, continuous improvement, and customer satisfaction.

C. Information Technology

The Company continues to focus on Data Privacy, Cyber Security, Digital Transformation in-line with the Global IT Framework and Policies. and is focused on being a technology platform provider for Digital Core Global ZF IT has gone through an organizational transformation this year to reduce complexity and strengthen accountability at all levels with a strengthened regional IT .

The solutions and ideas for digitalisation are registered and 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 and AI solutions, enabling data-driven decision making and 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 for cohesion on topics regarding organization, people, technology, and ecosystem related to Data & AI. 2026 Global Data & AI conference was conducted by the Global AI CoE Team as an inspiring event which explores the latest advances in Data Analytics & Artificial Intelligence. The Conference brings together experts, business teams, innovators, and enthusiasts to share knowledge and foster connections.

Multiple AI based projects are already underway or are under evaluation in the areas of Warranty Analytics, R&D and Sales.

Digital Manufacturing Platform (DMP): The

Company is in the process of adopting the ZFs Cloud based Digital Manufacturing Platform (DMP) that acts as the foundational digital backbone for operations to achieve higher flexibility, productivity, and efficiency. Three manufacturing plants in India have already been onboarded to DMP 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 towards SAPs S/4HANA platform are being evaluated. Migration of current SAP Server from ZF Data center to SAP RISE on AWS is scheduled this year.

Plan to Implement Supply Chain Solution across India in partnership with Bank to optimize working capital through a seamless, single-file digital workflow via a holistic, H2H-automated supply chain financing solution.

SAP based DART solution has been put in place to ensure compliance to Companies Act mandate on maintenance of Books of Accounts in India Servers and activation of Audit Trail. The setup has also been audited by our Auditors.

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 for all employees on the Dos & Donts best practices. The Engineering Center in Chennai, has received TISAX (Trusted Information Security Assessment Exchange) 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).

External Facing and Third-Party Regional Applications are periodically assessed for vulnerabilities and actions are taken to mitigate any identified risks. All database and windows servers hosting these applications are constantly evaluated for migrating to latest versions/patches as per ZF standards

With reference to the new DIGITAL PERSONAL DATA PROTECTION ACT (DPDPA), 2023 requirements, initial preparations and discussions with consulting partners initiated to draw out a plan on as-is assessment and planned actions towards compliance by May 2027.

VI HUMAN RESOURCE DEVELOPMENT

During FY 2025-26, the Human Resources ZF India continued its strategic evolution towards becoming a governance-driven and digitally enabled function. Anchored by the philosophy of "moving from clean data to clean governance," HR has focused on building a disciplined, compliant, and scalable foundation that supports sustainable business growth. This transformation reflects a shift towards structured processes, strengthened accountability, and technology-led efficiency, positioning HR as a key enabler of organizational excellence.

The year witnessed the introduction and rollout of several progressive and employee-centric policies aimed at strengthening governance and enhancing employee experience. Key policies implemented include the Prevention of Sexual Harassment (POSH) policy, Retention Guidelines, Performance driven variable pay for non-management employees, Loan & Salary Advance policy, Creche policy, and an enhanced Rewards & Recognition framework.

Our plants are actively focusing on establishing inhouse creche facilities to better support our women employees, enabling them to work with greater peace of mind while also strengthening our commitment to diversity hiring and an inclusive workplace. These initiatives reinforce the organizations commitment to fairness, inclusivity, and employee well-being.

The primary focus for HR remains on fostering a respectful, inclusive, and secure workplace through proactive policy implementation, awareness programs, and sustained employee engagement. Strengthening Gender Diversity and Inclusion continues to be a critical priority. In addition, strategic focus areas for the upcoming year include succession planning for key roles (N-1 and N-2 levels) and preparedness for Labour Code implementation along with organizational restructuring initiatives.

The Company brought on board a total of 187 employees, including 18 campus hires, demonstrating a balanced approach to lateral and early talent acquisition. The diversity ratio for the year stood at 20%, reflecting continued efforts toward inclusive hiring practices. The average recruitment lead time was maintained at 59 days, ensuring efficiency and responsiveness in meeting business requirements.

The Company maintained a stable and healthy attrition rate of 6.58% during the year, reflecting strong employee engagement, effective retention strategies, and a positive work environment.

In FY 2025-26, Diversity Equity, and Inclusion continued to be a key focus area with the launch of the Sheshpere initiative, a dedicated womens forum aimed at fostering dialogue, support, and development among women employees. The overall diversity ratio reached 27%, supported by initiatives such as five fully operational women-led production cells and a notable 80% female workforce representation at the Oragadam Plant. Additionally, over 50 Persons (including Trainees) With Disabilities (PwD) were deployed in suitable roles across locations, reinforcing inclusive employment practices. POSH awareness was further strengthened through the introduction of communication materials in regional languages.

The Company undertook a wide range of employee engagement, community development, and CSR initiatives during the year. Environmental sustainability was promoted through a tree plantation drive involving employees and their families, alongside the annual Gift a Smile community outreach program.

Talent pipeline development was strengthened through a robust trainee and NAPS framework, by strategic collaborations with Board of Apprenticeship Training (BOAT) and Tamil Nadu Skill Development Corporation(TNSDC). The Apprentice Engineering Development Program (AEDP) was successfully introduced at the Ambattur and Mahindra World City plants, further enhancing structured skill-building initiatives. Additionally, in partnership with the Tamil Nadu Skill Development Corporation and the Tata Institute of Social Sciences, the LEG (Learn,

Earn, Grow) program was launched as part of the organizations broader Talent Development agenda.

Employee engagement initiatives included the Coffee Connect series and structured 90-day connect sessions for new joiners. The launch of the "Mentoring@ZF" platform has enabled employees to connect with inspiring mentors through quick, focused interactions, designed to spark ideas, facilitate experience sharing, and accelerate professional growth. Key capability-building programs such as Six Sigma projects on direct labour optimization, Plant Manager Development Program (PMDP), Operational Leadership Program (OLP), Talent Transformation, and standardization of working practices are in progress.

Additional initiatives included focused group discussions, emotional intelligence sessions, the ZIGNITE GEC Hackathon, and Train-the-Trainer programs. Employee well-being was supported through the introduction of diet counters, while cultural engagement was strengthened through HR Foster Connect initiatives, including the GEC Music Band (MANTRA). Various celebrations across sites, such as family engagement events, sports activities, annual day, Republic Day celebrations, International Womens Day programs, and health camps including specialized screenings, contributed to a vibrant and inclusive workplace culture.

This year saw constructive developments in collective bargaining, including new leadership formation at Ambattur and MWC plants. Bonus negotiations were successfully concluded across all locations, and the Plant Performance Incentive (PPI) program was effectively implemented at the Ambattur plant, reflecting collaborative engagement between management and workforce.

The Company maintained a positive and stable industrial relations climate throughout the year. Structured grievance redressal mechanisms through committee forums ensured timely resolution of employee concerns. There were zero major disruptions reported, and full statutory compliance was maintained across locations. Progress is underway toward Labour Code integration, further strengthening the organizations compliance framework and readiness for future regulatory requirements. Overall, the Company continued the culture of maintaining smooth and engaged industrial relationship with various works councils across various factories in India.

VII ENVIRONMENT, HEALTH & SAFETY

Every year the first quarter is focused on EHS themes. This year we focused on EHS & Sustainability initiatives with a theme approach in the key areas, where our operations play a bigger role to ensure safe, healthy and sustainable workplace. Based on the above context, we have taken a theme for this year is "Build SHIELD" framework, a comprehensive series of Environment, Health, and Safety (EHS), wellness, and sustainability initiatives were executed across the Company to strengthen safety as a culture and embed responsible practices into daily operations. SHIELD covering Safety, Health, Infrastructure, Energy, Leadership, and Development, serving as a unifying theme to drive safer workplaces, healthier employees, and greener operations through structured programs, employee engagement, innovation, and leadership commitment.

Together, these initiatives reinforced proactive participation, continuous awareness, operational excellence, and long-term sustainability across all locations.

1. Strengthening Safety & Environmental Culture

Employee Engagement and Communication

To embed safety and environmental responsibility into everyday work, Company wide initiatives were rolled out. This included signature campaigns that enabled visible and personal commitment from employees toward safe and responsible behavior.

Theme-based posters were displayed at strategic locations for constant reinforcement. Toolbox Talks, which were conducted during every shift, emphasized safe work practices, accountability, and shared responsibility.

These actions ensured alignment at all operational levels and sustained awareness across sites.

2. Extending EHS Awareness to Families

Family Health & Safety Day

The Company is celebrated annually in March or April, with the Family Health and Safety Day extended EHS culture beyond the workplace.

Ambattur site marked its fifteenth year in 2025, with over 500 family members participating. Mahindra City site hosted a similar event with 150+ participants. The programs included:

• Health and green home awareness talks for spouses

• Safety-themed activities for children (Drawing, Quizzes, Pick-and-Talk)

• Comprehensive health screening camps (BMI, BP, Sugar Tests, ECG, Eye, Dental, Mammogram, Consultations)

These initiatives reinforced safety, health, and sustainability practices at home and within communities.

3. Road Safety Month - Building a Culture of Safe Mobility

January focused on Road Safety, followed by Machine Safety in February, ensuring year-round safety engagement.

Key Highlights

• Expert-led awareness sessions by Tamil Nadu Police, Lucknow Police, and ACPs

• VR-based driving simulations, daily toolbox talks, and organization-wide safety pledges

• Road Safety programs at schools and quizzes for students

• Shuttle audits and breath-analyzer checks for drivers

• Drawing competitions for employee children Impact:

Over 3,400 employees and family members participated, making it one of the most impactful safety campaigns and reinforcing responsible road behavior within and beyond the workplace.

4. Machine Safety, Workplace Training & Risk Prevention

Training Programs

Focused sessions were conducted on:

• Machine guarding and material handling

• Firefighting and emergency preparedness

Over 150 employees and associates were trained, improving operational discipline and emergency readiness.

Poka-Yoke & FMEA Alignment

Poka-Yoke campaign promoted error-proofing through prevention at source.

FMEA alignment improved risk visibility, mitigation controls, and integration of safety aspects into machine design.

These initiatives strengthened systematic risk management and preventive safety culture.

5. SHIELD Inter-Plant Kaizen Competition (EHS)

This is a flagship initiative involving 16 teams from six plants, and the competition was conducted in hybrid mode.

Evaluated by EHS Leader - Nokia Ltd.

• Top three teams were awarded and qualified for external competitions.

• Emphasized cross-plant learning, practical solutions, and sustainable EHS improvements.

Strong leadership engagement and coordination reflected the organizations maturity in EHS excellence.

6. Health & Wellness: "No Sports? Every Activity is a Win!"

Rolled out across multiple Company sites in 2024-2025, the campaign emphasized daily movement and preventive health.

Key Initiatives

• Stair-use encouragement, walkathons, Zumba, yoga, ergonomic stretches

• Stepathon 2025

• 200 participants

• 10+ million steps logged in 30 days

• Health talks, webinars, "Back to Basics" challenge

• International Yoga Day celebrations across sites

Impact:

More than 1,000 employees participated, fostering sustainable health habits and reinforcing preventive care as a shared responsibility.

7. Environmental Sustainability & ESG Initiatives

Decarbonization and Energy Transition

Mahindra City canteen fossil-fuel elimination:

Removed 57.6 KL diesel/annum in canteen & 8.7 tons LPG annually in turn to educed ~207 tons CO2e (Scope 1) 200 KWP rooftop solar at Lucknow, contributing over 40% of monthly power during peak periods.

Energy efficiency program identified 51 projects, saving 2,617 MWh annually.

Water and Waste Stewardship

1,200 KL Rainwater Harvesting Pond at Jamshedpur, meeting ~40% of water needs and supporting groundwater recharge.

Organic Waste Converter at Ambattur plant:

Converts 250 kg/day food waste into bio-manure

Eliminated transport emissions and landfill disposal.

ETP Optimization

Reduced chemical sludge from 10 to 5 MT/year

Improved compliance, efficiency, and cost savings

Practices now scaled across ETP/STP operations.

8. Sustainability Week & Employee-Driven Innovation

CVS Sustainability Week 2025 engaged over 4,300 employees through:

• Sustainability pledges

• Toolbox talks on energy, water, waste, and food conservation

• Idea Garden Campaign - 230+ ideas submitted

• Online Sustainability Quiz

This week reinforced long-term thinking and everyday sustainability actions.

9. Recognition and Awards

The organization received numerous prestigious awards, including:

• Ambattur team won Tamil Nadu State Safety Award - 1st Place (Engineering category)

• Ambattur & Mahindra city team won CII EHS Excellence Awards - Gold, Silver, and Special Awards

• Ambattur & Mahindra city team QCFI SHEEN 2025 - Gold Awards for all participating teams

• JSR team won ACMA Regional Kaizen Awards - Safety Category

• Ambattur & Mahindra city won Anna University ESG Summit 2026 Gold Award for energy reduction initiative

These recognitions validate the Companys strong safety systems, innovation, employee ownership, and Vision Zero commitment.

VIII COMMUNITY DEVELOPMENT AND SOCIAL RESPONSIBILITY

As a responsible corporate citizen, the Company is committed to undertaking social responsibility and community development initiatives. During the year, CSR activities were carried out through active employee participation and utilization of internal resources, primarily focusing on supporting underprivileged sections of society in accordance with Schedule VII of the Companies Act, 2013 and the Companys CSR Policy, with particular emphasis on areas surrounding its plant locations.

The Company views CSR as a strategic opportunity to create a meaningful and lasting positive impact by collaborating with communities, government bodies, and local authorities to drive sustainable social development. CSR projects are identified and implemented in alignment with the Companys policy framework. In line with statutory requirements, the Company earmarked 2% of the average net profits of the preceding three financial years for CSR initiatives, and all identified projects were successfully completed during the financial year ended March 31, 2026. Accordingly, there were no unspent amounts required to be transferred to any special account or specified funds.

The Company undertakes its CSR activities across four key focus areas, namely Road Safety, Community Development, Skill Development, and Environmental Sustainability.

Promoting road safety across India: In FY 2025-26, under the Road Safety CSR pillar, two key pan-India initiatives were completed. A Road Safety Awareness Programme delivered 30 training sessions via Authorized Service Centers and RTO collaborations, covering traffic rules, safe driving, and vehicle technologies across major transport hubs. It benefited 1,858 participants, including 1,267 drivers and 591 technicians, improving safety practices and awareness. Additionally, 500 Safety Tool Kits were distributed to technicians, containing protective gear and tools to enhance workplace safety. Overall, these efforts improved road discipline, reduced occupational risks, and supported safer transport and service ecosystems nationwide.

Supporting Communities: In FY 2025-26, three Community Service CSR projects were completed.

First, three buildings at Utkarmit Madya Vidyalya, Jamshedpur, were renovated, including fans, lighting, and improved toilet facilities, benefiting 370 students through safer infrastructure and better hygiene. Second, 15 solar streetlights were installed at Kasturba Gandhi Girls Residential School, enhancing safety and security for 510 girls through improved night-time visibility. Third, eye and general health check-ups were conducted for 1,858 drivers and mechanics during training sessions, enabling early detection of vision and lifestyle health issues, thereby promoting overall community well-being and safer working conditions.

Skilling Individuals:

NAPS Trainee - Training Program Summary

The NAPS Trainee Skill Development Program is designed to develop competent, disciplined, and industry-ready shop floor professionals through structured training aligned with ZF DNA and World Class Manufacturing practices. The program focuses on building strong foundations in safety, ethics, and workplace culture while equipping trainees with essential technical skills and promoting a quality- driven mindset.

The curriculum comprises 12 structured modules integrated with DOJO 2.0 simulation-based learning, combining classroom sessions, practical exposure, and hands-on demonstrations. Key areas include Environment, Health & Safety (EHS), 5S practices, Total Employee Involvement, and shop floor discipline. Trainees gain product knowledge, particularly in Air Brake Systems, and learn the use of hand tools, gauges, and measuring instruments. The program alsc introduces machining basics, quality principles, TPM concepts, and organizational values.

DOJO 2.0 simulations reinforce learning across safety compliance, engineering concepts such as pneumatic and hydraulic systems, quality tools, and manufacturing excellence practices like waste elimination and autonomous maintenance.

Upon completion, trainees demonstrate safe working behavior, adherence to quality standards, understanding of manufacturing processes, and active participation in continuous improvement initiatives, ensuring readiness for productive and sustainable operations.

Environmental Sustainability: The Company undertakes environmental sustainability as key pillar and has implemented a suite of renewable energy solutions, , water conservation, and green cover expansion to foster long-term societal impact. Several solar-powered infrastructure projects were implemented to enhance road safety while reducing reliance on conventional energy. In Kanchipuram and Chengalpattu districts, solar traffic signals and hi- mast lights were installed. Additional hi-mast solar lighting was deployed in Ambattur, Jamshedpur, and Barabanki, while rural and educational areas in Lucknow benefited from solar streetlights, improving safety and accessibility.

A tree plantation drive at the Oragadam facility resulted in 500 native saplings being planted, with participation from employees and their families, promoting biodiversity and community engagement. Supporting infrastructure includes rainwater harvesting and solar-powered irrigation systems, ensuring sustainable maintenance without fossil fuel dependency. Together, these initiatives strengthen environmental stewardship, reduce carbon footprint, and support safer, greener communities.

IX FINANCIAL STATEMENT

				(Rs. in Lakhs)
Particulars	Standalone		Consolidated
	Year ended 31.03.2026	Year ended 31.03.2025	Year ended 31.03.2026	Year ended 31.03.2025
Revenue from Operations	4,05,547.93	3,80,408.92	4,11,894.25	3,83,096.25
Other Income	18,583.44	10,974.90	18,318.96	10,819.72
Total Income	4,24,131.37	3,91,383.82	4,30,213.21	3,93,915.97
Profit before interest depreciation and tax	81,517.00	73,520.17	83,025.80	73,927.53
Finance Costs	528.78	570.47	534.18	570.47
Depreciation	12,961.37	12,270.06	13,179.78	12,425.23
Profit before tax	68,026.85	60,679.64	69,311.84	60,931.83
Provision for taxation (including deferred tax and tax relating to earlier years)	17,359.30	14,813.82	17,597.07	14,858.83
Profit after tax	50,667.55	45,865.82	51,714.77	46,073.00
Other Comprehensive Income/(Loss) for the year net of tax	(506.92)	(426.22)	(506.92)	(426.22)
Total Comprehensive Income for the year Net of Tax	50,160.63	45,439.60	51,207.85	45,646.78

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	2025-26	2024-25	Significant changes compared to previous year. i.e., 25% or more	Detailed explanation for the change
Current ratio (times)	5.60	6.03	N.A	N.A
Debt-equity ratio	N.A	N.A	N.A	N.A
Debt service coverage ratio (times)	39.97	49.45	N.A	N.A
Return on equity ratio (%)	15	15	N.A	N.A
Inventory turnover ratio (times)	10.57	12.76	N.A	N.A
Trade receivables turnover ratio (times)	3.99	3.71	N.A	N.A
Trade payables turnover ratio (times)	6.51	6.43	N.A	N.A
Net capitals turnover ratio (times)	1.43	1.61	N.A	N.A
Net profit Margin (%)	12.49	12.06	N.A	N.A
Operating Profit Margin (%)	16.90	16.10	N.A	N.A
Return on capital employed (%)	18.55	18.83	N.A	N.A
Return on investments (%)	6.58	7.80	N.A	N.A
Return on net worth (%)	14.70	15.30	N.A	N.A

X 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.