Happy Forgings Ltd Management Discussions

The global economy recorded a modest growth rate of 3.3% in 2024, reflecting a phase of relative stability amid ongoing macroeconomic headwinds. However, as 2025 progresses, this stability is increasingly under strain. Countries are reassessing their policy priorities in response to rising geopolitical tensions, economic fragmentation, and evolving global challenges, leading to a more uncertain and uneven outlook.

A key trigger for this shift has been the resurgence of protectionist trade policies. The United States introduced a sweeping set of new tariffs, prompting immediate retaliatory measures from major trading partners. This escalation culminated in the near-universal imposition of tariffs on April 2, 2025, driving effective tariff rates to levels not seen in over a century. The resulting trade disruption has significantly weakened global growth momentum and introduced fresh volatility into financial and commodity markets.

The pace and unpredictability of these policy changes have further amplified economic uncertainty. As a result, many traditional forecasting models have become less reliable, making it increasingly difficult for businesses and policymakers to base decisions on historical patterns or stable assumptions.

Emerging markets are witnessing a tempered growth outlook as economies such as Mexico, South Africa, and Argentina contend with elevated debt burdens, currency volatility, and constrained policy manoeuvrability. The environment is further shaped by tighter global financial conditions and cautious investor sentiment, adding layers of complexity to recovery pathways. While financial systems are gradually adapting to these dynamics, central banks remain focussed on striking a delicate balance between inflation management and financial stability. Strengthened multilateral coordination and structured debt resolution mechanisms will be pivotal in mitigating systemic risks and fostering a more stable and resilient recovery across these regions.

OUTLOOK

Despite persistent global headwinds, the current landscape also offers an opportunity to reinforce economic resilience and lay the foundation for sustainable long-term growth. Navigating these macroeconomic challenges will require cohesive policy alignment, timely structural reforms, and effective debt resolution frameworks. With clear monetary direction, disciplined fiscal policies, and strengthened financial systems, economies can restore stability and accelerate recovery. Continued global collaboration will remain essential to addressing systemic vulnerabilities, supporting emerging markets, and fostering a more balanced and inclusive trajectory for global growth.

(Source: https://www. imf. org/en/

Publications/WEO/Issues/2025/04/22/world- economic-outlook-april-2025)

INDIAN ECONOMIC OVERVIEW

Indias economy is on solid ground, with a growth rate of 6.5% estimated in 2024-25. Its a clear sign of how well the country is holding up, even as the global economy faces turbulence. This steady pace is being driven by a mix of smart policy decisions and strong internal fundamentals. Big investments in infrastructure, tech breakthroughs, and reform efforts are keeping the engine running. Government support continues to play a key role, while improving job markets and steady consumer demand add to the momentum. Moreover, agriculture and services stand tall as pillars of strength, balancing the rhythm of private consumption with macroeconomic stability.

Forecasts signal a promising rebound in the agricultural sector, with growth anticipated to reach 3.8% for 2024-25, a significant rise from 1.4% observed in 2023-24. This recovery is largely attributed to higher agricultural yields, spurred by favourable monsoon conditions, sustained rural demand, and targeted government interventions. Initiatives such as the Kisan Credit Card and e-National Agriculture Market have significantly improved financial accessibility for farmers, fostering competitive pricing. Additionally, the governments substantial ^ 1.52 tn budget allocation continues to drive productivity and support the long-term sustainability of agricultural practices.

As of April 2025, Indias manufacturing sector growth for the fiscal year 2024-25 has been revised downward to 5.3%, a notable decrease from the 9.9% growth recorded in 2023-24. This slowdown is primarily attributed to weakened global demand, subdued corporate investments, and persistent inflationary pressures, which have collectively dampened industrial activity. Weaker manufacturing exports, driven by reduced demand from key markets and aggressive trade policies by major trading partners, have been a significant factor. Additionally, an above-average monsoon had mixed effects—while it replenished water resources and supported agriculture, it disrupted operations in mining, construction, and certain manufacturing segments. The timing of festivals between September and October also varied across consecutive years, leading to slight growth moderation.

Despite this annual deceleration, Indias manufacturing sector sustained strong momentum through 2024-25, with the PMI consistently above the 50-mark, signalling steady expansion. The year began on a high note with a PMI of 58.8 in April 2024, dipped slightly mid-year due to seasonal factors and weak global demand, but regained pace with 58.1 in March and a 10-month high of 58.2 in April 2025.

This resilience was underpinned by robust domestic demand and a sharp rise in export orders, one of the fastest

Indias economy is on solid ground, with a growth rate of 6.5% estimated in 2024-25.

Its a clear sign of how well the country is holding up, even as the global economy faces turbulence. in over a decade by shifting global trade flows. Despite temporary headwinds, the sector closed the year on a strong footing, reinforcing its role as a key growth driver for the Indian economy.

Investor sentiment remains optimistic towards manufacturing stocks, as seen in the Nifty India Manufacturing Index closed at 13,098 points, reflecting a significant increase from the previous years close of 12,240 points. This positive shift is fuelled by better corporate earnings, an increase in foreign investment, and technological advancements that have enabled manufacturers to sustain profitability, despite the rising costs, particularly in consumer goods, chemicals, and pharmaceuticals.

(Source: Trading Economics)

Alongside domestic economic expansion, Indias external sector has demonstrated remarkable strength and stability, supported by robust export growth and controlled imports during the first half of 2024-25. Indias total exports reached a record US$ 820.93 Bn in 2024-25, marking a 5.5% increase over the previous years US$ 778.13 Bn, with dynamic services exports propelling India to claim the seventh-largest share in global services exports, underscoring its international competitiveness. The positive contribution of net exports to real GDP growth reflects the effectiveness of macroeconomic policies, including inflation management, fiscal discipline, and monetary interventions such as the recent rate adjustment. These measures have reinforced macroeconomic stability, fostering a favourable environment for sustained growth and resilience across both domestic and external sectors.

OUTLOOK

As India edges into 2025-26, the economic outlook is laced with a quiet caution. The global stage remains turbulent, shaped by shifting geopolitical alliances, disrupted trade corridors, and unpredictable swings in commodity prices. Back home, the priorities are clear: keep private investment moving, lift consumer spirits, and make sure corporate salaries grow in a way that reflects economic ambition. In the countryside, recovery is beginning to show. As agriculture steadies and inflation finds its footing, rural demand is expected to gather pace. To build lasting strength, India will need to clear the underbrush of outdated regulations and let enterprise breathe, especially at the local level. A more enabling regulatory and business climate will be critical to translating macroeconomic stability into widespread, durable growth.

(Source: Economic Survey 2024-25)

AUTOMOTIVE SEGMENT

India

Segments	Production Growth (YoY)	Domestic Sales Growth (YoY)
Commercial Vehicles	(3.3%)	(1.2%)
Goods Carriers	(4.4%)	(3.2%)
M&HCVs	(4.2%)	(4.0%)
LCVs	(4.5%)	(2.8%)
Passenger Carriers	5.2%	14.8%
M&HCVs	25.9%	23.4%
LCVs	(10.5%)	5.9%

Table: YoY Growth in Production and Domestic Sales of Commercial Vehicles in India for 2024-25

(Source: SIAM)

Indias commercial vehicle (CV) sector witnessed a subdued performance in 2024-25, marked by contrasting trends across its two primary subsegments: goods carriers and passenger carriers. Overall, both production and domestic sales declined, driven by a year-on-year contraction of 3.3% in production and 1.2% in domestic sales.

Goods Carrier segment registered a decline of 4.4% and 3.2% in production and domestic sales respectively. The Medium and Heavy Commercial Vehicle (M&HCV) goods carrier segment was impacted by weak demand in the first half of the fiscal, due to election-related disruptions, fewer project awards, and delayed infrastructure spending. Although activity picked up in the second half with the rollout of previously stalled projects, the overall performance remained muted. The Light Commercial Vehicle (LCV) goods carrier segment faced headwinds from elevated financing costs, subdued e-commerce activity, and a growing preference for pre-owned vehicles as the total cost of ownership continued to rise. Erratic monsoons further weighed on rural demand, though momentum improved in the post-monsoon period alongside a gradual economic recovery.

In contrast, the passenger carrier segment recorded a year-on-year increase of 5.2% in production and 14.8% in domestic sales. This growth was supported by the mandatory scrappage of old government vehicles, strong replacement demand from public transport operators, supportive policymeasures, and renewed investments in mass mobility infrastructure.

Looking ahead, the domestic CV sector is projected to grow by 3-5% in 2025-26. This growth will be driven by a postelection infrastructure push, economic stability, and continued replacement demand. While truck volumes are expected to register modest growth, the bus segment is likely to sustain steady single-digit expansion.

(Source: ICRA)

COMMERCIAL VEHICLES

Europe

Segments	YoY Growth
Trucks (3.5 Tonne+)	(9%)
Buses (3.5 Tonne+)	11%
Vans (Upto 3.5 Tonne)	1%
TOTAL	(1%)

Table: YoY Growth in New Registrations in EU+UK+EFTA for the period April 2024 to March 2025

(Source: ACEA (European Automobile Manufacturers Association))

The European commercial vehicle market experienced a mixed performance through 2024 and into early 2025. The van and bus segments demonstrated resilience during 2024, supported by steady fleet replacement cycles and improving service sector activity.

Van registrations increased across all major markets, while the bus segment benefitted from continued investments in public transportation, particularly in Italy and Spain.

In contrast, the truck segment faced headwinds from subdued freight demand and elevated operating costs, leading to a decline in sales. This downward trend intensified in the first quarter of 2025, with both truck and bus sales falling further amid ongoing economic sluggishness, reduced order backlogs, and growing regulatory complexity.

Germany and France were particularly affected, recording sharp declines in commercial vehicle demand.

(Source: ACEA (European Automobile Manufacturers Association))

USA

The US commercial vehicle market remained largely stable in 2024, with total Gross Vehicle Weight (GVW) 1-8 registrations holding flat at 2.8 Mn units. However, notable shifts emerged across segments. Class 8 registrations declined significantly by 11%, reflecting broader freight-related and macroeconomic pressures. In contrast, Class 4 and 5 segments recorded moderate growth of 7% and 9%,, respectively. Registrations for cargo vans and tractor trucks continued to correct following pandemic- driven highs, declining by 2% and 18% compared to 2023.

Despite overall stability, the market remains approximately 2,00,000 units below pre-pandemic 2019 levels, underscoring continued softness in the heavy-duty and last-mile delivery segments.

The outlook for 2025 across the US and European CV markets remains cautious, shaped by rising economic pressures and regulatory uncertainty. In Europe, demand is expected to stagnate as stricter emission standards, tariff risks, and political volatility dampen consumer sentiment and influence OEM strategies. The US market is projected to experience modest growth, although this will likely be constrained by affordability challenges, inflationary trends, and policy ambiguity under a new administration.

As regulatory pressure for electrification intensifies and global trade tensions persist, medium and heavy commercial vehicle (M&HCV) demand in both regions is expected to remain subdued. Prospects for improvement hinge on fiscal stability, clearer regulatory direction, and improved operating conditions in key end-use sectors.

(Source: S&P Mobility)

PASSENGER VEHICLES

PASSENGER VEHICLES

India

Segment	Production Growth (YoY)	Domestic Sales Growth (YoY)
Passenger Cars	(12%)	(13%)
Utility Vehicles	14%	11%
Vans	8%	1%
TOTAL	3%	2%

Table: YoY Growth in Production and Domestic Sales of Passenger Vehicles in India for 2024-25

(Source: SIAM)

Indias passenger vehicles (PV) segment achieved record-breaking sales in 2024-25, surpassing 4.3 Mn units and registering 2% year-on-year sales growth, despite the impact of a high base from the previous fiscal. This growth was largely driven by sustained demand for utility vehicles, which now account for 65% of total PV sales.

Consumer preference for advanced features, modern design, and enhanced driving experience aligned well with a wave of new model launches. Additionally, attractive discounts and targeted promotional campaigns bolstered retail momentum. On the global front, PV exports reached an all-time high of 0.77 Mn units, reflecting a 14.6% increase, supported by strong demand from Latin America, Africa, and select developed markets.

Looking ahead, Indias passenger vehicle industry holds strong long-term growth potential. Rising income levels, expanding infrastructure, and growing consumer inclination towards personal mobility are expected to fuel continued demand. The utility vehicle segment is anticipated to remain the primary growth driver, supported by evolving lifestyle needs, increased rural and urban penetration, and a robust pipeline of new product offerings.

(Source SIAM)

This growth was largely driven by sustained demand for utility vehicles, which now account for 65% of total PV sales.

PASSENGER VEHICLES

USA and Europe

YoY Growth in CY 2024	Registrations	Production
USA	3.1%	(3.5%)
Europe	3.9%	(4.6%)

Table: YoY Growth in Registrations and Production of Passenger Vehicles in Calendar Year 2024

(Source: ACEA (European Automobile Manufacturers Association))

In calendar year 2024, passenger vehicle sales in the United States rose by 3.1%, reaching 12.7 Mn units. This growth was primarily supported by a strong fourth quarter, despite policy uncertainty surrounding electric vehicle incentives. However, domestic production declined by 3.5% to 7.4 Mn units. The decline highlights a cautious manufacturing approach in response to evolving consumer behavior and a shifting regulatory environment.

The European passenger vehicle market expanded by 3.9% in 2024, with total sales reaching 16.1 Mn units. However, growth within the European Union remained modest at 0.8%. While the

United Kingdom and Spain posted sales increases of 2.6% and 7.1% respectively, key markets such as France, Germany, and Italy experienced either stagnation or marginal declines. Despite the overall recovery, volumes remained 18.4% below pre-pandemic levels from 2019.

On the production front, Europe registered a 4.6% decline in 2024. This was primarily attributed to weaker industry sentiment and the normalisation of demand following a surge in order fulfilment during 2023.

(Source: ACE) (European Automobile Manufacturers Association)

Production declined both in the USA and Europe during CY 2024

NON-AUTOMOTIVE SEGMENT

FARM EQUIPMENT

India

Particulars	YoY Growth
Tractor Production	6%
Tractor Domestic Sales	8%

Table: YoY Growth in Production and Domestic Sales of Tractors in India in 2024-25

(Source: Tractor and Mechanisation Association (TMA))

The Indian tractor industry staged a strong recovery in 2024-25, with domestic sales rising by 8% year-on-year to 9,39,713 units. This performance brought the segment close to its all-time high of 9,45,311 units recorded in 202223. Total production reached 10,07,660 units, reflecting a 6% increase over the previous year and marking the second- highest annual output on record.

The recovery was supported by a favourable agricultural environment, including healthy rabi and kharif seasons, robust reservoir levels, and improved terms of trade for farmers. These factors contributed to a positive shift in rural sentiment, driving demand across key farming regions.

Looking ahead, the Indian tractor industry is expected to maintain its growth momentum, with domestic sales projected to surpass the 1 Mn unit mark in 2025-26. A strong rabi harvest, favourable monsoon outlook, and seasonal demand during the festive period are likely to support robust first-quarter performance. While cost pressures may emerge due to the implementation of TREM V emission norms, the overall industry outlook remains optimistic. According to ICRA, domestic sales are expected to grow by 4% to 7% in 2025-26, assuming normal monsoon conditions.

(Source: Tractor and Mechanisation Association (TMA))

Total production reached 10,07,660 units, reflecting a 6% increase over the previous year and marking the second- highest annual output on record.

FARM EQUIPMENT

Europe and USA

Particulars	YoY Growth
Europe (CY 2024)	(8%)
USA (April 2024 - March 2025)	(13%)

Table: YoY Growth in Tractor registration and sales in Europe and USA

(Source: CEMA - European Agricultural Machinery Association and AEM - Association of Equipment Manufacturers)

Europe

In calendar year 2024, agricultural tractor registrations in Europe declined by 8.1% compared to the previous year, reaching their lowest level since at least 2014. This marks the third consecutive year of decline, with overall registrations down by 20% from the peak recorded in 2021.

Several structural and cyclical factors contributed to this downturn.

Weakening farm profitability, reduced government support for machinery investments, and widespread adverse weather conditions negatively impacted farmer sentiment and purchasing capacity. Additionally, falling agricultural commodity prices and rising input costs further compressed farm incomes, discouraging capital expenditure across key markets in the region.

The short-term outlook for the European tractor market remains challenging. Capital investment in agricultural machinery is expected to remain subdued, with recovery contingent on improvements in farm profitability, policy support, and weather stability across the continent.

(Source: CEMA - European Agricultural Machinery Association)

USA

The U.S. tractor industry experienced a sharp decline in 2024-25, with total tractor sales (2WD and 4WD combined) falling by 13% year-on-year. This contraction reflects broader weakness in the agricultural economy, shaped by elevated input costs, high interest rates, and persistent global trade uncertainties. In response to these pressures, farmers adopted a conservative approach, conserving working capital and deferring equipment purchases.

Manufacturers, anticipating the slowdown, proactively scaled back production and optimised workforce levels to align with the reduced demand environment.

Despite these near-term headwinds, the outlook for the U.S. tractor industry remains cautiously optimistic. Projections of higher overall farm income in 2025, supported in part by government disaster relief measures, could help lift demand modestly. However, farmers continue to prioritise sustained commodity price strength over shortterm subsidies, which may limit the pace of recovery.

While industry leaders remain confident in the long-term fundamentals, shortterm demand trends are expected to remain volatile amid continued economic and policy uncertainty.

(Source: AEM - Association of Equipment Manufacturers)

OFF-HIGHWAY

India

Indias construction equipment sector recorded a modest 3% growth in domestic sales volumes in 202425, following a robust 24% increase in the previous fiscal. Growth was largely driven by the dominant earthmoving equipment segment, which continued to perform well despite broader market headwinds. Other sub-segments witnessed a decline due to subdued project awarding and execution in the first half of the year, impacted by the General Elections and prolonged monsoon-related disruptions.

Additional pressures emerged from input cost inflation, a constrained financing environment, and emission norm transitions, which led to supply chain realignments and temporary production adjustments.

Given the sectors inherent cyclicality and the elevated base-having surpassed 1,00,000 units annually for three consecutive years at a compound annual growth rate of approximately 18% from 2021-22 to 2024-25- volume growth is expected to moderate to a range of 2% to 5%. This reflects current market saturation and tepid demand momentum.

However, the outlook holds upside potential. An acceleration in domestic project awarding, improved execution timelines, and a rebound in export demand could support stronger growth. Timely policy intervention and clarity on post-election infrastructure priorities will be critical in reviving momentum and unlocking the sectors next phase of expansion.

(Source: ICEMA and ICRA)

Europe and North America

In calendar year 2024, the construction equipment market witnessed a broad-based decline across both Europe and North America. Equipment sales in Europe fell by 17%, with major markets such as Germany and France experiencing significant contractions. In North America, sales declined by 5%, marking a more moderate correction following three consecutive years of record-high demand. The recent surge in fleet renewals left equipment relatively new, reducing the immediate need for replacement.

Several leading original equipment manufacturers (OEMs) operating in these regions reported double-digit sales declines during the calendar year 2024, with similar trends extending into the first quarter of calendar year 2025.

The near-term outlook remains subdued. In Europe, only a marginal improvement is expected, constrained by low business confidence and ongoing geopolitical instability.

In North America, demand is projected to decline at a sharper pace, as the market continues to normalise. This downturn is further compounded by inflationary tariffs and persistent policy uncertainty.

(Source: Off-Highway Research)

Timely policy intervention and clarity on post-election infrastructure priorities will be critical in reviving momentum and unlocking the sectors next phase of expansion.

Wind Energy

The global wind energy market remained largely flat in calendar year 2024, with new capacity installations increasing marginally by 0.3% year-on-year. Despite this limited growth, total new installations reached an all-time high of 117 gigawatts, reflecting continued momentum in select regions.

The Asia-Pacific region led global additions, accounting for 75% of new capacity, driven predominantly by China, which alone contributed 68%. Installations increased in Asia-Pacific and the Africa and Middle East regions, while North America, Latin America, and Europe recorded year-on-year declines. Europe remained the second- largest regional market, despite a 10% reduction in new installations.

Looking ahead, the global wind energy market is projected to expand at a compound annual growth rate of 8.8% through 2030. This outlook is supported by strong policy frameworks, heightened energy security considerations, and long-term climate commitments. Continued growth in China, supportive regulations in Europe, and the advancement of emerging technologies such as floating wind are expected to play a central role in driving the sectors sustained expansion.

(Source: Global Wind Report 2025 - GWEC (Global Wind Energy Council))

Stationary Power Generators

The global gensets market was valued at US$ 24.5 Bn in 2024, according to Frost & Sullivan, and is positioned for steady growth driven by rising power requirements across commercial, industrial, and residential sectors. Increased outage frequency and severity, coupled with aboveaverage hurricane forecasts, are expected to fuel demand for backup power solutions.

Growth is further supported by expanding energy needs in data centres, healthcare facilities, and commercial office spaces. The adoption of 5G networks and edge computing infrastructure is also contributing to the surge in demand. In parallel, advancements in genset technology-such as remote monitoring capabilities and predictive maintenance features-are enhancing reliability and operational efficiency, particularly in high-capacity systems above 300 kW.

COMPANY OVERVIEW

Happy Forgings Limited (referred to as Happy Forgings, or the Company), headquartered in Ludhiana, brings 45+ years of engineering distinction to the forging and machining landscape. Founded in 1979, the Company has earned a reputation for manufacturing intricate, high-precision components that serve a breadth of industries. Ranked as the fourth-largest engineering-led manufacturer in India, the Company specialises in high-precision, heavy-duty, and safety-critical forged components. Happy Forgings portfolio caters to key sectors, including Commercial Vehicles, Passenger Vehicles, Agricultural and Off-Highway Equipment, Oil & Gas,

Power Generation, Railways, and Wind Turbines. With three vertically integrated manufacturing facilities located in Ludhiana, the Company retains comprehensive oversight across its production lifecycle, ensuring superior quality and operational efficiency.

Happy Forgings is gearing up for a phase of significant expansion. The Companys roadmap includes investing in expansion and manufacturing infrastructure, aimed

at enhancing its capabilities to broaden the product portfolio and address the evolving needs of diverse market segments, particularly in the heavier components segment, which is highly capital intensive, has a limited number of capable suppliers, and presents an attractive opportunity for profitable growth for the Company. This forwardthinking approach keeps Happy Forgings firmly positioned at the forefront of the forging and machining space, both in India and internationally.

CAPEX PLAN

As part of its growth blueprint, Happy Forgings is set to invest ^ 650 Cr to enhance its capabilities, broaden its revenue base, and enter high-value industrial segments. This capital outlay will support the creation of a cutting- edge facility for forging and machining heavyweight components between 250 kg and 3,000 kg. Once commissioned, it will be Asias first and the worlds second- largest facility of its kind by capacity, significantly enhancing the Companys positioning in the global industrial components landscape.

The 650 Cr capital infusion will be phased across a three-year window, starting 2024-25 through 2026-27. Production at the new facility is projected to kick off by the close of 2026-27. The facility is expected to generate ^ 600-800 Cr. in annual turnover, on achievement of optimal utilisation levels, propelled by strong tailwinds from high-growth sectors such as wind power, oil & gas, marine, defence, aerospace, nuclear energy, and heavy industrial machinery.

With this expansion, the Company steps into a high-stakes segment where expertise is rare, investment steep, and quality non-negotiable. Its a space few global manufacturers can access. With an exceptional track record spanning over four decades and solid financial footing, the Company holds a rare edge in this elite circle of manufacturers.

Covering the full gamut from forging to machining and a broad spectrum of component weight ranges, this investment will position the Company as a formidable player in the forging and machining industry-distinguished by its proven track record, deep engineering expertise, and robust production capabilities to deliver a wide and complex portfolio of components. Funded largely through internal cash accruals and prudent capital management, the plan may call for limited short-term credit support, though the broader impact on the balance sheet will be modest and tightly controlled.

This capital deployment goes beyond topline impact, aligning closely with Happy Forgings objective of insulating the business through well-calculated diversification. As exports and nonautomotive verticals gain traction, the Company anticipates stronger returns and reduced earnings turbulence over time.

As a result of this investment, proportion of export and non-automotive business is also set to increase, thereby elevating profitability while buffering against income fluctuations in the long term.

The Company is proactively engaging in discussions with key customers and anticipates securing a solid roster of orders. This expansion mirrors Happy Forgings long-term vision to invest in sophisticated, future-facing opportunities that deepen business strength and value creation.

PERFORMANCE OVERVIEW

In 2024-25, Happy Forgings delivered a resilient performance amid a challenging macroeconomic environment that affected underlying user industries and weighed on topline growth due to declining steel prices. Despite these headwinds, the Company reported stable growth across key financial metrics, reflecting the strength of its diversified and value-added business model.

Revenue grew by 4.7% year-on-year, while gross profit, EBITDA, and profit after tax (PAT) increased by 9.1%, 7.4%, and 11.2% respectively on an adjusted basis. This performance led to the Companys highest-ever profitability, with

a gross margin of 58.0%, EBITDA margin of 28.9%, and PAT margin of 18.6%

(on an adjusted basis). Realisations on finished goods improved to ^ 248 per Kg, supported by a favourable product and machining mix, despite softening steel prices.

The domestic business, accounting for 82% of total revenues, grew by 6.2% year- on-year, driven by continued strength in end-user segments. Export revenues increased by 1.8% (on adjusted basis), impacted by weakness in the commercial vehicle, farm equipment, and off-highway segments across global markets.

Cash flow conversion remained strong. The Company generated ^ 292 Cr. in operating cash flows (post-working capital and tax adjustments), maintaining a robust liquidity position of ^ 356 Cr., which includes cash balances, fixed deposits, and liquid mutual fund investments. With a conservative leverage profile-Debt-to-Equity of 0.1x and near-zero Net Debt-to-EBITDA-the balance sheet remains exceptionally strong and well-positioned to fund future growth initiatives.

Segmental Performance

Commercial Vehicles

Accounted for 38% of revenues but recorded a mid-single digit decline due to reduced domestic M&HCV production and volume contractions across Europe and North America.

Passenger Vehicles

Contribution increased to 4% of revenues, with strong momentum from the ramp-up of dedicated production lines and robust growth in the domestic SUV segment.

Farm Equipment

Comprising 32% of revenues, delivered mid-single digit growth. Growth in domestic tractor sales offset international softness in this segment.

Off-Highway

Contributed 12% and remained flat, reflecting weak global demand despite stable construction equipment activity in India.

Industrials

Rose to 14% of revenues, supported by strong growth in the wind energy sector and the addition of new customers.

ANALYSIS OF FINANCIAL PERFORMANCE

Figures in Rs Cr. (Except per Share Data)

Particulars	For the Year Ended 31st March, 2025	For the Year Ended 31st March, 2024
Revenue from Operations	1,408.89	1,358.24
Gross Profit	817.23	761.64
Employee Costs	124.82	114.46
Other Expenses	285.71	259.64
Earnings before Interest, Tax, Depreciation & Amortisation (EBITDA)	406.70	387.54
Depreciation	77.06	64.73
Earnings before Interest & Tax (EBIT)	329.64	322.81
Finance Costs	7.53	11.78
Other Income	37.45	13.35
Profit before Tax	359.55	324.39
Profit after Tax	267.44	242.98
EPS (Basic) (In Rs)	28.39	26.78
EPS (Diluted) (In Rs)	28.37	26.75

 

Key Financial Ratios
Particulars	2024-25	2023-24
Gross Margin	58.0%	56.1%
EBITDA Margin	28.9%	28.5%
PAT Margin	19.0%	17.9%
Return on Equity (RoE)	15.4%	18.7%
Return on Capital Employed (RoCE)		22.7%
Debt/Total Net Worth	0.1x	0.1x
Net Debt/EBITDA	0.2x	0.1x
Gross Fixed Assets Turnover	1.1x	1.3x
Inventory Turnover	2.6x	3.0x
Trade Receivables Turnover	3.6x	4.0x
Trade Payable Turnover	14.4x	14.8x

RISK MANAGEMENT

At Happy Forgings, risk management is integral to strategic decision-making and operational execution. Our robust risk governance framework proactively identifies, assesses, and mitigates potential threats while safeguarding long-term value creation for stakeholders. As we continue expanding our scale and reach, we remain vigilant of both internal and external risk exposures and committed to maintaining resilience through agility, foresight, and continuous improvement.

Business Risk

Impact	The Companys reliance on key customers and specific product segments exposes it to fluctuations in order volumes and contract renewals. Dependency on cyclical industries increases growth volatility, while rising input costs may compress margins and strain profitability.
Mitigation V	Happy Forgings is strategically diversifying its customer base, product mix, and end-use industry exposure to reduce concentration risk. It is also expanding its geographic footprint and focussing on high-margin, value-added components. These efforts enhance revenue stability and create buffers against cyclical slowdowns and input cost pressures. >

Operational Risk

/ Impact	Operational disruptions due to supplier constraints, or logistics delays may affect business continuity, escalate costs, and erode customer confidence. Failure to meet stringent quality benchmarks may lead to liability claims and reputational damage.
Mitigation	A diversified and monitored supplier network ensures material availability, while contingency planning, predictive maintenance, and expanded logistics options reinforce delivery reliability and operational resilience. The Company maintains robust quality assurance systems, employee training programmes, and product liability insurance.

Financial Risk

Impact	High leverage, rising borrowing costs, or cash flow mismatches can undermine liquidity, affect investment capacity, and jeopardise long-term financial stability. Interest rate fluctuations and credit rating sensitivity may add further pressure.
Mitigation V	With a low debt-to-equity ratio of 0.1x and strong internal accruals, Happy Forgings maintains a sound balance sheet. Efficient working capital management and prudent capital allocation enable the Company to fund growth with minimal external debt exposure, enhancing resilience to financial shocks.

ESG Risks

Impact	Non-compliance with environmental regulations, insufficient progress on emissions reduction, or weak governance practices may invite regulatory penalties, customer attrition, or reputational loss. Increasingly, customers are prioritising ESG performance in vendor selection.
Mitigation V	An ESG Committee led by a Whole-time Director governs the Companys sustainability agenda. The ESG roadmap includes decarbonisation, resource optimisation, compliance tracking, and social responsibility initiatives—all aligned with global standards. These structured actions mitigate regulatory, reputational, and commercial ESG risks.

Technological Risk

Impact	Disruptions from IT system failures, cyber threats, or inadequate adoption of evolving technologies may impact operations, data security, and customer trust. Rapid technological changes in manufacturing or end- use industries could challenge adaptability, efficiency, and competitiveness.
Mitigation V	The Company has implemented a secure and scalable IT infrastructure with strong cybersecurity protocols and disaster recovery systems. Investments in modern manufacturing technology and diversifying business across industry segments also reduces disruption exposure.

Competition and Pricing Pressure Risk

Impact	Competitive intensity and price negotiations from OEMs may impact gross margins and profitability. Regulatory shifts, such as tariffs or cost subsidies can alter competitive positioning and pricing flexibility.
Mitigation	Happy Forgings focusses on delivering superior value through precision engineering, quality, and performance. Initiatives such as value engineering, supply chain efficiency, and scale-based production help manage costs. Strategic price adjustments and customer-centric engagement further protect margins and market share.

ESG INITIATIVES DURING THE YEAR

Happy Forgings made meaningful strides in embedding ESG principles across its operations through a structured, insight- driven approach. Supported by external experts, the Company undertook a comprehensive materiality assessment, ESG gap analysis, and benchmarking exercise, culminating in the development of a well-defined ESG strategy and roadmap.

At the core of this strategy lies the materiality assessment, which identified 15 priority topics spanning environmental, social, and governance pillars. These include critical focus areas such as energy and emissions management, climate strategy, labour practices, health and safety, diversity and inclusion, and corporate governance. Each topic was mapped against leading global frameworks including, GRI, SDGs, TCFD, and SASB, ensuring alignment with stakeholder expectations and industry best practices.

Building on these insights, the Company developed an ESG roadmap with clearly articulated goals, measurable targets, and time-bound implementation plans, prioritising actions with the highest potential for positive impact. Following the gap assessment and peer benchmarking, internal systems were strengthened to support ESG data capture and reporting in alignment with global standards. As part of its journey towards enhanced transparency, the Company also evaluated assurance readiness and instituted robust processes to facilitate continuous monitoring and timely, credible ESG disclosures.

SUSTAINABLE PROGRESS

Happy Forgings continues to prioritise environmental responsibility through resource efficiency, emissions reduction, and compliance. In 2024-25, energy consumption totalled 5,61,699 GJ, including 17,852 GJ from renewables. Energy intensity was 3.99 GJ per Lakh rupees of turnover, supported by 6.5 MW of solar capacity, including new rooftop installations.

A key milestone was the complete phaseout of furnace oil, replaced by induction billet heaters. A 1.7 MW solar plant was commissioned during the year, and an LPG-based heat treatment facility was adopted, resulting in combined Scope 1 and 2 GHG emissions of 1,05,532 tCO2e.

In water management, total withdrawal stood at 2,60,263 KL and 36,156 KL treated and reused. ZLD systems, RO plants, and rainwater harvesting support sustainable water use. Additionally, through a 3R (Reduce, Reuse, Recycle) waste strategy and hazardous waste reduction efforts, Happy Forgings is steadily reducing its environmental footprint.

HUMAN RESOURCES

Happy Forgings places immense value on its human capital, recognising the distinct potential within each individual. As of 31st March 2025, the Company had a workforce of 631 employees and 2,540 workers, underscoring its strong manufacturing footprint and operational scale. With the belief that its people are its most important asset, the Company is deeply committed to supporting their well-being, development, and engagement.

To this end, a comprehensive suite of initiatives has been institutionalised:

Learning & Development

Over 440 employees and 2,236 workers received training in 202425 on skills upgradation, and 215 employees and 669 workers received training on health & safety measures. Career development reviews were also conducted for over 51% of the employee base, ensuring consistent feedback and growth alignment.

Employee Welfare & Engagement

The Company ensures full coverage under key social security schemes, including PF, ESI, gratuity, Welfare Fund, Group Mediclaim Health Policy and Group Personal Accident Insurance and accident insurance. It also provides maternity benefits and facilitates well-being through periodic health check-ups and tie-ups with hospitals for off-site emergencies. Welfare benefits are extended to immediate families in the unfortunate event of a fatality. As a routine practice, the Company arranges health awareness sessions in its facilities on frequent intervals.

Diversity & Inclusion

Happy Forgings promotes an inclusive workplace and is committed to improving gender diversity. As of 2024-25, women comprised 4.1% of employees, with 28.6% representation on the Board and 50% among KMPs. The Company has also adopted the Equal Opportunity Policy in line with the Rights of Persons with Disabilities Act, 2016, and maintains fully accessible workspaces.

Grievance Redressal & Human Rights

A multi-tiered grievance mechanism ensures that employees and workers have multiple channels to raise concerns. The Company maintains a zero-tolerance approach to harassment, supported by awareness sessions and a dedicated Internal Complaints Committee under the POSH Act. No complaints were reported in 2024-25, reflecting the strength of its proactive safeguards.

Occupational Health & Safety

Certified under ISO 45001:2018, the Company has institutionalised rigorous safety protocols, including daily toolbox talks, mock drills, HIRA assessments, and near-miss reporting. The Lost Time Injury Frequency Rate (LTIFR) stood at 0.37 for workers, and zero for employees— testament to the robust culture of safety.

The Company also maintains a detailed HR Policy Manual, which serves as the cornerstone for consistent, transparent, and fair people practices. These policies embody the Companys core values—discipline, integrity, collaboration, and care—and are periodically reviewed to remain aligned with evolving employee needs and regulatory expectations.

INTERNAL FINANCIAL CONTROL SYSTEM AND ITS ADEQUACY

At Happy Forgings, strong internal financial control are in place to keep everything on track. The Board of Directors has developed clear and thorough policies to guide how the business runs. These measures help the Company follow its rules, protect its assets, and spot or prevent any errors or fraud. They also make sure financial records are accurate and that reliable information is available on time.

In its commitment to strengthening internal controls, the Company enlists both internal and external auditors to provide independent evaluations, vitalising its in-house capabilities. Continuous system upgrades are executed to ensure adherence to leading industry standards. Regular review of reports and identified discrepancies by the Management Committee guarantee timely corrective actions. Furthermore, the Independent Audit Committee of the Board vigilantly monitors and evaluates the adequacy and efficiency of the Companys financial control framework.

CAUTIONARY STATEMENT

The financial statements appearing above are in conformity with the accounting principles generally accepted in India. The statements in the Management Discussion and Analysis Report, which may be considered forward-looking statements, within the meaning of applicable laws and regulations, have been based on current expectations and projections about future events. The actual results could differ from those expressed or implied. Important factors that could influence the Companys operations include global geopolitical shifts, economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors, such as industrial relations. The Management cannot, however, guarantee that these forwardlooking statements will be realised or achieved.