Ucal Ltd

Dear Shareholders,

We have just completed a full year since our collective decision to transition from being solely a fuel management systems provider to becoming a manufacturer of a diversified portfolio of products and systems across multiple industries, both in the automotive and nonautomotive sectors.

FY 2023-24 has been a transformational year for UCAL, aligned with our strategic intent to de-risk the business and expand our operations into new and emerging segments to drive greater growth.

Global Economic Overview

The global economy demonstrated resilience with a 3.2% GDP growth, marked however by a widening divergence between developed countries and many low-income and developing nations. The latter faced inflationary pressures and were affected by regional conflicts and political turbulence.

Indian Economic Overview

In contrast, the Indian economy remained robust, achieving a GDP growth of 7.6%, further solidifying its position among the fastest- growing economies in the world. Supportive government policies, a large infrastructure-focused budget, controlled oil prices, and strong market demand contributed to a stable business environment and significant growth in core sectors.

Industry Overview

The Indian automobile industry, a key consumer segment for UCAL, experienced a 12.5% overall growth in sales, particularly in the passenger car segment, with SUVs and commercial vehicles leading the resurgence in market demand. This sectoral buoyancy was reflected in strong domestic auto component sales, with the aftermarket segment showing a significant upward growth trajectory.

However, the export market faced challenges, with a significant decline in the offtake of two-wheelers, three- wheelers, and commercial vehicles.

This impacted the export sales of our Auto OEM customers, especially in the two-wheeler segment, in key markets like Nigeria, Sri Lanka, and Sudan, resulting in a decline in our export earnings.

Transformational Initiatives

At UCAL, the year was marked by the seamless implementation of strategic initiatives to transform the company into a sustainability-aligned growth engine. To mitigate business risks associated with over-dependence on a few customer-product silos, we focused on expanding our market-product axis, targeting new geographies and enhancing our presence in high-potential, emerging business streams.

The Asia-Pacific region has emerged as the fastest-growing market for automobiles globally. Population density, urbanization, and growing affluence have led to a surge in demand for passenger cars and commercial vehicles in both developed and emerging economies in the region.

At UCAL, the year was marked by a seamless deployment of strategic initiatives to transform the Company into a strong and sustainability- aligned growth engine.

In India, supportive Government policies, a skilled resource pool and a large demographic of a young, affluent and aspirational middle-class, have turned the country into one of the largest automobile markets and an important auto manufacturing hub in the world. This has led global OEMs and Auto Majors to prioritize India as the preferred destination for their 'China Plus One' re-shoring strategies.

Globally, a seismic shift in technologies is rapidly transforming the automotive landscape. Sustainability-centric advancements in fuel and engine management have given rise to fuel- efficient, lightweight engines with high emission control and enhanced safety features. Additionally, internal combustion engines are increasingly used in verticals such as construction, mining, agriculture, and power generation. For UCAL, with its expertise in fuel injection and emission control systems, these are potential markets for expansion.

The demand for mechatronics is growing exponentially in the

automotive industry. Mechatronics enables optimization through technologies like engine management systems, hybrid powertrains, and electric vehicle drivetrains. From advanced driver-assistance systems (ADAS) to autonomous vehicles, mechatronics is driving innovation across the automotive value chain.

At UCAL, we are leveraging our deep multi-disciplinary expertise in mechanical, electrical, and electronic engineering to design and develop cutting-edge mechatronic products and systems for global OEMs and major auto manufacturers for their new and critical projects built on the sustainability platform.

Sustainability-Driven Growth

As the target date for the UN Sustainable Development Goals (2030) approaches, governments worldwide, including India, are enacting more stringent regulatory policies to accelerate the reduction of greenhouse gas emissions and transition to non-fuel energy sources. India has fast-tracked its migration to a

green energy and electric vehicle (EV) ecosystem with supportive policies, a large infrastructure-focused budget, and a roadmap to replace 30% of the vehicles in the country with EVs by 2030.

The automotive industry has made a significant technological leap from hardware-driven vehicles to software- driven vehicles. Automation, AI- integrated connected cars with onboard diagnostic features require a large number of electronic and software components and systems.

Aligned with our transformation strategy to deepen participation in new-age technologies, we are harnessing our strong research and manufacturing capabilities in electronics to design and develop a range of products and systems for the rapidly growing EV segment.

Additionally, the Government of India's Hydrogen Fuel Policy offers UCAL new growth opportunities in the alternate energy domain.

Transformational Strategies

Strong Research & Engineering Expertise aligned with New-age Technologies

Leveraging the growing demand for Mechatronics

Focus on Sustainability- aligned business segments

Harnessing Backward- Integrated Capabilities in Casting & Machining

Global Footprint Expansion

The global casting and machining segment is projected for exponential growth, driven by advances in technology for large and complex lightweight parts, leading to demand across a multi-industry spectrum.

Leveraging our partnership with our US subsidiary, we executed critical orders for large, high-precision, high-density machined parts for a leading US engine manufacturer and a domestic auto OEM, further consolidating our capabilities in this segment.

We continued to expand into new geographies, adding to our customer roster of global OEMs and auto manufacturers with research-driven products and solutions. Additionally, we also enlarged our aftermarket presence and channel footprint both in India and overseas.

Looking Ahead

Moving forward, we will continue to expand our global presence with research-driven, value-engineered products in both automotive and non-automotive segments, while progressively deepening our involvement in sustainability-aligned sectors like EV, micro-mobility, and alternate energy.

Acknowledgements

Our people are our greatest strength and it is their dedication, steadfast commitment and passion that is driving UCAL's journey of transformation.

The management team has done an outstanding job leading the team through a challenging yet exciting year of change and transformation.

I extend my gratitude to the Senior Management for their dedication and efforts in guiding UCAL through its transformational journey.

All this would not have been possible without the guidance and support of the Board and for that I also express my heartfelt thanks and appreciation to them.

I extend my gratitude to our valued customers, suppliers, vendors, bankers, and government bodies for their unwavering support in all our endeavors.

Lastly, I sincerely appreciate you, our shareholders. Your enduring support and trust in UCAL propel us forward on our journey of transformation and transcendence.

Warm regards,

CEO's Message

Dear Shareholders,

We began the year 2023-24 continuing on our journey of transformation aligned with our vision of transitioning from a pure player of fuel engine and automotive component systems to a Company expanding operations into new and emerging business streams in both the Auto and Non Auto space.

A transformation journey comes with its allied angst and transitioning challenges. So it was at UCAL as we sought to reshape, reset and reimagine a future-fit and resilient Company.

Industry Overview

The Indian Automobile Industry, an important consumer segment of the Company, posted a domestic sectoral growth of 12.5% during FY '23-24 buoyed by the supportive policies of the Government of India, and a robust 7.6% GDP growth.

However, while the domestic

environment was encouraging, exports remained under stress impacted by the geo-political

turbulence and inflationary pressure leading to economic instability in many developing countries. As a consequence, the export sales of our OEM customers particularly in the two-wheeler segment in key markets like Nigeria, Sri Lanka and Sudan were impacted, with the domino effect denting our export earnings.

Transformational Initiatives

'U-Rise' the company - wide, transformational endeavour and ambitious blueprint for growth, begun in FY 2022-23, has gained momentum with the deployment of various de-risking strategies to build a stronger UCAL.

The year was marked by a strategic shift to de-risk the business from an over-dependence on a few customer- product clusters to a wider market- product axis addressing new and emerging business segments.

Enlarging Product Portfolio

To de-risk the business from dependence on a few legacy products, we have mapped out a prioritization matrix to identify key and anchor products for development, in alignment with the rapidly changing technologies and green energy transitioning trends in the auto industry.

In line with this, value - driven R&D products with accelerated time-to- market schedules were developed for both the Auto and Non Auto segments, thereby enlarging our presence across sustainability-centred, high potential business streams. While sales from new business showed a strong and positive trend, RFQs recorded a significant four-fold growth, leading to a robust order pipeline.

Additionally, we leveraged on our strong brand image, to address new market segments with a select range of white-labelled products both for the domestic and export markets.

A transformation journey comes with its allied angst and transitioning challenges. So it was at UCAL as we sought to reshape, reset and re-imagine a future-fit

and resilient fnmnanv

Expanding Customer Bandwidth

We have, during the past year, consciously focused on expanding our bandwidth of customers leveraging our industry experience and interdisciplinary expertise in mechanical, electrical and electronics engineering to develop bespoke products and systems aligned to emerging market needs. This has enabled us to onboard major OEM customers and business in new product categories with strong growth potential.

Capability Building

As part of our capability building strategies, new lines for the manufacture of Intake Throttle Valve, HC Doser, and Mechanical Throttle Body were commissioned at Maraimalai Nagar, Plant-6, during the year.

Globally, there is a greater call for conscious investments in green and climate-resilient technologies. Cutting fossil-fuel dependence, and reducing emissions have gained priority in designing automobiles for the future.

Demand for advanced mechatronic systems are rising rapidly with the advent of new generation vehicles. In particular, major applications include safety, ADAS (Advanced Driver- Assistance System), infotainment, body electronics and powertrain. Experts in the field estimate that applications for safety, ADAS and infotainment will account for 60% of the global demand.

In line with this, precision engineered, mechatronic products for new, high potential segments in lightweighting, safety, fuel efficiency and low carbon energy were launched during the year such as FI systems, Intake Throttle Valve, HC Doser, Oil & Vacuum Pumps, to name a few.

Deepening participation in new and emerging technologies

The automotive industry is making a major technology - transition from hardware-driven to software-driven vehicles. Automation, AI integrated connected cars with on-board diagnostics demand a larger number of electronic and software components in automobile manufacturing.

The Government of India has implemented the OBDII (On Board Diagnostics, Stage A) regulatory standards from 1st April, 2023 for the Auto industry, to be on par with Euro VI Standards. This entails mandatory diagnostic features in vehicles for emission compliance through monitoring of sensors and catalytic converter.

In addition, Government policies for building an integrated EV ecosystem for green mobility, and the augmentation of the alternate and green energy infrastructure, provide

a further impetus for new business opportunities.

In India the Auto Industry has already commenced the production of vehicles which are material compliant to 20% Ethanol while recording a growth of 90% in Electric Passenger Vehicles and 30% in Electric Two- Wheelers.

In alignment with our strategic intent of deepening our participation in this rapidly growing, high potential segment, we have built a core Electronics eco-system with a state- of-the-art manufacturing Plant of our fellow subsidiary at Pune and a dedicated R&D division comprising domain specialists with industry expertise and design capabilities.

We have, in addition, entered into strategic technical tie-ups with a global auto manufacturer and an engineering design company to amplify our product development capabilities. This is aimed at strengthening our Electronics product portfolio in alignment with the steady dominance of electronics in the Automotive space.

During the year, a slew of Electronic and Mechatronic products were developed for the rapidly growing EV segment, including Electronic Fuel Injection systems, Electronic Throttle Body, Multi Application Sensors, APS, among many others.

Enlarging Market Presence & Channel Footprint

We have enlarged our presence in new geographies both in the Aftermarket and OE segments with collaborative Channel partnerships, including with a major Distributor in the US with presence in 30 countries world-wide. Concurrently, we focused on the OES & Domestic aftermarket segment with Buy and Sell initiatives.

The Aftermarket segment has emerged as a key enabler of business growth. We undertook aggressive steps to strengthen our Aftermarket presence both in India and the overseas markets. Around 70 new Distributors were appointed across regions for greater market penetration and to deepen retail presence. Further, we have added a new Distribution Division at UCAL as a platform for direct customer interface and sales touchpoint.

Casting & Machining - Greater Focus

World-wide the casting and machining segment is showing great potential for growth. By leveraging the backward integration capabilities of our casting facilities in India and the state-of-the- art machining facility in the US, we are well positioned to mine the potential in this rapidly growing segment. Casting and machining of HD Injector Throttle Body and Crank Case were completed for both domestic and

global Auto OEMs during the year.

Strong People Asset

Our people are our greatest asset. U-Rise, the company-wide, transformational endeavour has gained impressive traction, with cohesive teams working together on inter-departmental synergies and forging ahead towards a greater goal. The goal of transforming UCAL into a stronger and more resilient company.

Outlook

Going forward, we are confident that UCAL will emerge stronger to take its place among the global manufacturers of sustainability-aligned, cutting edge, products for the automotive and nonautomotive segments.