Diffusion Engineers Ltd

As a pragmatic and future-focused organisation, we recognise that past achievements do not guarantee future success. Accordingly, we remain vigilant in identifying emerging opportunities, embracing innovation to stay ahead of the curve, adapting to dynamic market conditions, and unlocking new avenues for sustainable growth.

I am truly honoured to connect with you as the Chairman of Diffusion Engineers. Having been associated with the company for nearly 22 years, engaging with you in this capacity always remains a privilege.

Reflecting on our journey in the last fiscal year, I am deeply grateful for the resilience and dedication of my team that have guided the Company through a dynamic global landscape. Our steadfast commitment to innovation, operational excellence, and sustainable growth has strengthened our foundation, enabling us to create enduring value for our stakeholders. Commencing on a new journey, with a clear vision and unwavering resolve, we stand ready to embrace the opportunities within India's vibrant economic transformation.

I warmly welcome our new shareholders and express our sincere gratitude to the investor community for their confidence in Diffusion Engineers' vision and growth journey. Your trust reinforces our commitment and inspires us to strive towards continued excellence and accelerated progress.

We are proud to share that Diffusion Engineers was successfully listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on 4th October 2024. The listing was met with enthusiastic investor response, resulting in substantial gains and signalling strong market confidence. This milestone significantly enhances our financial position, empowering us to invest further in infrastructure, innovation, and strategic expansion.

In FY25, India continued to distinguish itself globally through a stable democratic framework and a progressive, outward-looking foreign policy. This foundation has enabled the country to navigate geopolitical tensions and supply-chain disruptions more effectively than many of its emerging market counterparts.

The Government's ambitious long-term roadmap, Viksit Bharat @ 2047, envisions transforming India into a US$5-trillion economy, anchored by robust high single-digit GDP growth and sustained industrial expansion. The manufacturing sector has steadily regained strategic prominence, with its contribution to Gross Value Added (GVA) rising to 17% in FY25.

Record-breaking public infrastructure investments further supported this industrial resurgence. The momentum is set to continue, with the Union Budget 2025-26 allocating ?11.21 lakh crore toward core capital expenditure, demonstrating a strong commitment to infrastructure-led growth.

Our core end markets—cement, steel, power and engineering —are witnessing sustained momentum, underpinned by significant capacity expansions and improved utilisation levels nationwide. India's cement industry has entered a renewed expansionary cycle, with expectations of strong volume growth. Concurrently, the country has reinforced its position as the world's second-largest producer of steel, reflecting the sector's growing scale and resilience.

Meanwhile, the ongoing energy transition continues to gather pace. Strategic government initiatives—such as the National Infrastructure Pipeline and the Make in India programme—are providing robust support to domestic demand across the heavy engineering and manufacturing landscape. These structural tailwinds are creating a fertile environment for long-term growth and sectoral transformation.

FY25 marked a significant milestone for the Company, reflecting robust operational and financial performance. Consolidated net revenue rose by 20.51% year-on-year to ?3,351.96 million. EBITDA (excluding other income) reached ?470.76 million, representing a 21.12% increase, while Profit After Tax (PAT) grew by an impressive 17% year-on-year to ?360.40 million.

This strong performance was anchored by sustained demand in core sectors, timely execution of high- value projects, and deeper market penetration.

EBITDA margins improved to 14.63%, driven by a favourable product and customer mix, disciplined cost management, and reduced direct expenses.

In line with our commitment to stakeholder value, the Board has recommended a 15% final dividend for FY25. Furthermore, we are in the process of setting up an ESOP scheme to align employee interests with long-term value creation and attract top talent to drive the next phase of growth.

We sustained a healthy average capacity utilisation of approximately 85% during the year. We made capital investments to strengthen our production and machining infrastructure aligned with our strategic growth objectives.

Key initiatives included commissioning of an additional flux-cored wire manufacturing line and the installation of advanced wire-drawing machine at our Nimji facility. Additionally, we upgraded our heavy engineering and component machining capabilities by deploying state-of-the-art CNC

We are also broadening our presence in strategic sectorssuch as Indian Railways, Nuclear, Mining and Oil & Gas. Notably, we recently secured ^? a prestigious order from the Heavy Vehicle Factory for the supply of Flux Cored Wires, reinforcing our credentials in high-specification manufacturing.

Horizontal-Lathe Machine and a 6.5-metre swing Vertical Lathe Machine. These enhancements significantly expand our ability to manufacture larger, high-precision components and better serve evolving customer requirements. We are also in the process of commissioning a CNC Horizontal-Boring Machine(X- 8m; Y-3.5m; Z+W-2m).

We successfully manufactured and exported a rotor assembly for a Russian client, engineered as a singlepiece fabrication and reassembled on-site under extreme conditions at -20?C, demonstrating our exceptional fabrication standards and operational reliability in challenging environments.

In the cement sector, we executed a turnkey replacement of an 18.6-meter kiln shell within a month—a highly complex undertaking rarely performed outside OEM capabilities in India, further underscoring our technical expertise and execution excellence in critical industrial applications.

In the steel sector, we successfully executed the supply of 300+ continuous casting roller assemblies involving complex machining, hard facing and assembly.

These items operate in extremely harsh industrial conditions and are critical components needed in steel manufacturing.

As a pragmatic and future-focused organisation, we recognise that past achievements do not guarantee future success. Accordingly, we remain vigilant in identifying emerging opportunities, embracing innovation to stay ahead of the curve, adapting to dynamic market conditions, and unlocking new avenues for sustainable growth.

Looking ahead, we see substantial opportunities across various sectors. Our strategic forward integration—from special-purpose electrodes to flux-Cored wires, wear plates, wear parts, and heavy engineering equipment—positions us as a comprehensive solution provider, effectively serving as a one-stop shop for our customers.

In line with evolving market preferences, there is growing demand for ready-to-fit and complete solutions. This trend is driving accelerated growth in our heavy engineering and wear parts business. Our deep expertise in metallurgy and materials science, rooted in our welding alloy legacy, enables us to develop durable, high-performance wear parts that enhance uptime and reliability for process plants— directly addressing customers' need to minimise operational disruptions and profit loss.

We are also broadening our presence in strategic sectors such as Defence, Indian Railways, Nuclear, Mining, and Oil & Gas. Notably, we recently secured a prestigious order from the Heavy Vehicle Factory for the supply of Flux Cored Wires, reinforcing the credentials of our high performance products.

Our industrial services portfolio, which includes super-conditioning, critical breakdown repairs, and kiln alignment, remains essential even during cyclical downturns in capital expenditure, as customers prioritise operational continuity and asset performance. We anticipate this segment will contribute increasingly to our revenue mix in the coming years.

Moving forward, we maintain a highly optimistic and ambitious outlook for the financial year 2025-26 and beyond, envisioning a phase of considerable growth propelled by strategic capacity expansion, deeper market penetration, and an expanded range of product and service offerings. The company anticipates a future characterised by a focus on evolving into a more comprehensive solutions provider for core industrial clients.

In such a scenario, our strategy for the coming year is anchored on aggressive capacity expansion, product leadership, and deepening market penetration.

As part of our long-term strategic vision, we have committed to a capital expenditure programme that will enable us to nearly double our production capacity across all three key business segments— Heavy Engineering, Wear Parts & Plates, and welding Consumables.

A new manufacturing complex in Nagpur at B33 MIDC Hingna and at Nimji is currently under development and is slated to commence operations in this financial year. The B33 facility will be dedicated to producing special-purpose electrodes and wire strips. The expansion of the Nimji facility will enable us to significantly increase our capacity to manufacture wear parts and heavy engineering equipment.

Internationally, we are in the process of incorporating a wholly owned subsidiary, Diffusion Engineers Middle East, in the UAE to provide service and manufacturing facility in Abu Dhabi. These initiatives are part of a broader strategy to strengthen our international footprint by extending our supply and service capabilities outside India. The Abu Dhabi plant is expected to be operational shortly.

Domestically and globally, our focus remains on enhancing product and customer mix, with cost efficiency as a central pillar to drive margin improvement. We anticipate accelerated growth in all the three offerings - Anti-wear & Welding Consumables, Wear Plates & Wear Parts and Heavy Engineering.

Our in-house DSIR-recognised R&D laboratory will continue to spearhead innovation, enabling the development of high-performance, application- specific products tailored to evolving industry requirements. We are also expanding our offerings in anti-wear and welding consumables and actively developing advanced grinding rollers for the cement sector.

We are also strengthening our distribution network by signing a Memoranda of Understanding with over 50 dealers across India to reinforce market reach. This and our strategically deployed sales force ensure extensive coverage and prompt customer engagement.

From a sustainability standpoint, we are investing in a

1.1 MW captive rooftop solar plant at our Nimji facility. This initiative reaffirms our commitment to energy efficiency and environmental responsibility.

Ultimately, none of our accomplishments would have been feasible without the unwavering support of our stakeholders—employees, customers, partners, and communities. Your trust and commitment have constituted the foundation of our success, and we remain resolutely devoted to maintaining the highest standards of corporate responsibility and transparency.

I sincerely thank each of you, our esteemed shareholders, for your unwavering confidence in our organisation. Together, we commence a new chapter replete with promise and opportunity, propelled by a collective dedication to excellence and value creation.

Warm regards,