Varroc Engineering Ltd

India continues its impressive growth trajectory, supported by digitalization, infrastructure development, and a burgeoning middle class. The government's focus on ‘Make in India' and ‘Atmanirbhar Bharat' initiatives foster a conducive environment for manufacturing, innovation, and investments, leading to an optimistic outlook for the auto sector.

Dear Shareholders,

It gives me great pleasure to present to you the Annual Report for the financial year 2024–25. This year has been marked by continuing the journey by the company of prudent capital allocation and sustainable approach towards business in a dynamic and often challenging global automotive landscape.

The global economy is navigating a phase of gradual recovery driven by technological innovation, shifting geopolitical dynamics, and adaptive policy measures. The global economy shows signs of a steady rebound post-pandemic disruptions, with an expected growth rate of ~3% in 2025 (IMF projections). While uncertainties remain, especially in geopolitics and supply chain resilience, the overall outlook underscores opportunities for industries aligned with technology and sustainability.

India continues its impressive growth trajectory, supported by digitalization, infrastructure development, and a burgeoning middle class. The government's focus on ‘Make in India' and ‘Atmanirbhar Bharat' initiatives foster a conducive environment for manufacturing, innovation, and investments, leading to an optimistic outlook for the auto sector.

The auto industry is at the brink of a transformative era driven by trends such as electrification, connectivity, autonomous systems, and shared mobility. These mega trends are catalysing a paradigm shift, compelling stakeholders to innovate and adapt rapidly.

The increasing adoption of electronics in vehicles presents immense opportunities for auto ancillary players. From e-mobility to advanced driver-assistance systems (ADAS) to infotainment, electronics are becoming central to vehicle evolution. Our industry stands to benefit significantly by integrating cutting-edge electronic components, enhancing product offerings, and aligning with future-ready automotive solutions. We are witnessing an unprecedented surge in the adoption of electronics in the automotive sector. Usage of electronics component is expected to grow rapidly with the adoption of EVs, autonomous technologies, and software-defined vehicles and will reach more than 40% of the value chain in coming years.

In an era defined by rapid technological change and evolving consumer expectations, the auto ancillary industry is charting a path of purpose-driven progress. This theme captures our unwavering commitment to innovation, sustainability, and financial discipline, ensuring we not only adapt to the evolving mobility landscape but lead it responsibly along with prudent capital deployment.

The current automotive environment demands resilience, agility, and strategic focus. As an industry, we are making intentional investments in:

Advanced manufacturing technologies that improve quality and reduce waste

Smart electronics and digital tools such as IoT and AI to enhance efficiency

Sustainable processes that align economic performance with environmental responsibility

Our progress is not just about speed but about meaningful improvements — in product design, supply chain transparency, and customer experience. By fostering a culture of continuous learning and investing in talent and technology, we are transforming today's operations with a clear sense of purpose: to deliver long-term value to customers, employees, and partners.

As we look to the future, our purpose is clear — to Create safe, smart and sustainable future mobility solutions for everyone. The emergence of electric, connected and autonomous vehicles presents opportunities to engineer innovative components and systems that drive the next generation of mobility. But our vision extends beyond technology. We are committed to: Green manufacturing and energy-efficient product development Circular economy models that reduce environmental impact Prudent-capital deployment that accelerates safe, smart and sustainable future mobility

By aligning our efforts with global megatrends like electrification, connectivity, and sustainable development, we are ensuring that every step forward is intentional, responsible, and impactful.

This theme is more than a guiding principle — it reflects how we operate, innovate, and grow. Our goal is not just to keep pace with change, but to lead change with integrity, ensuring our progress contributes meaningfully to a smarter, cleaner, and highest value for money mobility solutions.

With a strong foundation of values and a future-focused mindset, the Company is making progress with purpose — shaping mobility that benefits not only the industry, but society at large.

Before discussing the operational performance of the Company, I would like to highlight a few other aspects which will help the Company to become more sustainable and enable value enhancement for the stakeholders :

Beyond business, we continue to focus on various ESG aspects to make the organization more sustainable. We have published our first sustainability report which can be accessed on our website. Our efforts towards giving back to society is being also recognized. The Kham River Restoration was recognized by the WRI Ross Center for Sustainable Cities, as one of the top five finalists globally for their prestigious award. The project also received globally recognized prestigious award i.e. The St Andrews Prize for the Environment

Our sourcing of electricity from Renewable Energy has been increasing throughout FY25 and was around 31% for FY 25 as against 13% last year. For the month of March'25, it reached around 45%. We are also working on commencement of phase-2 of renewable energy project which will further improve this to > 50% in the coming year. These initiatives will boost our ESG credentials, besides giving us savings in electricity cost. Thirdly, we also completed the sale of our stake in the China JV and realised the net proceeds of RMB 290 million during May 2025. Fourthly, the Company received NCLT approval for amalgamation of Varroc Polymer Ltd. with Varroc Engineering Ltd. effective 1st April 2024.

In FY25, we filed 25 patents and were granted more than 10+ patents. Thus, the total filings made now add up to more than 120 for the Company, which will further strengthen the intellectual property of the Company and help in developing technologically advanced products at an affordable cost.

In respect to financial performance of the Company The Company registered consolidated revenue of RS. 81,541 million in FY2024-25 which is growth of 8.0%. The growth was supported by growth in India business of around 10.4%.

The PBT before JV and exceptional item also improved to 3.8% of the Revenue in FY2024-25 as against last year 3.6%.

The Company generated free cash flow (after interest and before growth capex in land) of RS. 3,116 million or 3.8% of sales in FY2024- 25 and ROCE (before tax) of 20.8% Looking at the financial performance of the Company, The Board of Directors have recommended 100% of Face Value i.e. RS. 1 as dividend for FY2024-25 subject to the shareholders approval. The Company revenue in FY25 was impacted by de-growth in overseas operations but the good news is that we have won various business both in electronics and global 2W lighting whose SOP will start in FY27 and thus growth in overseas business will come back strongly. The endeavour remains to lower our breakeven point in overseas operations by further reducing the fixed cost in our operations and doing backward integrations. Our people are the foundation of our success. In FY 2024–25, we rolled out extensive training and upskilling programs, focusing on digital tools, lean manufacturing, and safety practices. We are proud to maintain a safe, inclusive, and growth-driven work culture.

In today's dynamic business environment, strong corporate governance is not merely a regulatory necessity—it is a strategic imperative. At the core of our governance framework lies our commitment to transparency, accountability, and ethical conduct, which underpin the long-term sustainability and trust we build with all our stakeholders.

The future of our growth is being reshaped by four powerful trends: EV penetration, premiumization, electronics, and advanced lighting. As electric vehicles gain traction, we are aligning our product portfolio to support EV-specific components. Rising consumer demand for premium features is driving higher content per vehicle, benefiting our value-added offerings. The growing integration of electronics is transforming vehicles into intelligent systems, and our capabilities are evolving to meet that shift. Meanwhile, automotive lighting is emerging as both a safety and styling differentiator. We are well-positioned to capitalize on these trends and drive sustainable, innovation-led growth. Our Board of Directors plays a critical role in this journey, with Independent Directors serving as vital guardians of governance and strategic oversight. Their impartial perspective, depth of experience, and ability to challenge management constructively ensure that our decisions are balanced, forward-looking, and in the best interest of shareholders and society at large.

I would like to thank Mr. Marc Szulewicz, Mr. Gautam Khandelwal and Mrs. Vijaya Sampath our existing Independent directors who have retired as their tenure ends and would like to welcome Mrs. Liselott Kilaas, Mr. Akshaykumar Chudasama and Mr. Padmanabh Sinha who have joined as independent directors for further enhancing board effectiveness. In conclusion, the Indian auto ancillary sector stands at the cusp of a multi-decade growth opportunity. Companies that invest in innovation, scale, and global integration — like ours — will be the frontrunners in this journey. We are confident that the years ahead will reward our vision, resilience, and commitment to excellence.

As we look ahead, we remain optimistic yet prudent. With continued investments in automation, product innovation, and global partnerships, Varroc Engineering is well-positioned to capitalize on emerging trends such as electric mobility, connected vehicles, and advanced driver-assistance systems (ADAS).

We are committed to delivering long-term value to all stakeholders—our customers, employees, partners, and you, our shareholders.

On behalf of the Board, I thank you for your continued trust and support.