Aeroflex Enterprises Ltd Management Discussions

Investment in artificial intelligence and allied infrastructure is partly offsetting the drag on global trade, with activity expected to firm through 2027 28 as energy supplies normalise and trade recovers, lifting global growth to 2.8% in 2027. Risks remain skewed to the downside: a renewed escalation in West Asia or a prolonged disruption to commodity flows could push growth as low as 1.3% in 2026 under a severe scenario. Coordinated policy action on energy security, inflation containment, and private investment mobilisation remains essential to restoring momentum.

Sources: World Bank Global Economic Prospects (June 2026); IMF World Economic Outlook

Indian Economy

India retained its position as the worlds fastest-growing major economy in FY26. Real GDP grew 7.7% in FY26, against 7.1% in the preceding year and ahead of earlier official projections, with the momentum sustained into the fourth quarter, where GDP expanded 7.8%. Manufacturing and services led the expansion, aided by GST rationalisation, earlier personal income tax changes, sustained public capital expenditure, and more accommodative monetary conditions. The general government deficit consolidated from 7.7% of GDP in FY25 to 7.4% in FY26, foreign exchange reserves stood at approximately USD 698 billion as of March 31, 2026, and formal job creation strengthened during the year.

The outlook for FY27 remains healthy in relative terms, though it has moderated on account of external conditions. The Reserve Bank of India lowered its FY27 growth forecast to 6.6% from 6.9%, held the repo rate at 5.25%, and raised its FY27 inflation projection to 5.1% from 4.6%, citing the prolonged West Asia conflict, elevated energy prices, and supply chain disruption. The

World Bank likewise projects 6.6% for FY27, improving to 7.2% in FY28, a marginal upgrade delivered even as forecasts for most major economies were reduced.

Indias most significant exposure is its dependence on imported crude oil, which transmits energy price movements directly into inflation, the current account, and the currency. Sustaining the growth trajectory will therefore depend on energy and trade diversification, prudent fiscal management, and continued structural reform, even as India remains a central contributor to global economic momentum.

Industry Overview

Global and Indian Stainless Steel Flexible

Hose Market

The global market for stainless steel flexible hoses is valued at approximately USD 2,182 million in CY2025 and is projected to reach approximately USD 4,380 million by CY2035, registering a CAGR of 7.2%. Growth reflects the ongoing migration toward corrosion-resistant, long-life fluid transfer solutions across industrial end markets, alongside industrialisation, infrastructure development, and rising energy consumption. Within the segment, corrugated flexible hoses lead on the strength of their reliability in high-pressure and high-temperature service, while strip-wound flexible hoses are the fastest-growing category at a CAGR of 7.7%, favoured for harsh environments such as oil and gas and industrial manufacture.

Demand is led by oil and gas, followed by chemical and petrochemical, power generation, pharmaceutical, and food and beverage. Oil and gas remains the largest end-use sector at 39% of value in 2025, and together with chemical and petrochemical and power generation accounts for 81% of the market. In India, growth is supported by the versatility of stainless steel hoses across automotive, oil and gas, and chemical processing, and by the steady shift away from rubber, PTFE, and polymer alternatives. The market is fragmented, with leading global players holding 20% to 30% share alongside specialised manufacturers competing on customisation and performance in critical applications. Key industry trends include the integration of IoT and smart sensors for real-time monitoring of pressure, temperature, and flow; sector-specific customisation for aerospace, pharmaceutical, and food and beverage applications; a shift toward recyclable materials and lower-impact manufacture; and advances in hoses engineered for extreme pressures and temperatures.

Global and India Metal Bellows Market

The global metal bellows market is gaining traction on account of the flexibility, durability, and adaptability of these components across industries.

The global market is estimated at USD 3,012 million in 2025, growing at a 6.4% CAGR to USD 5,608 million by 2035; the India market is growing faster still, at a 7.3% CAGR, from USD 161 million in 2024 to USD 348 million by 2035. Demand from data centres, semiconductors, and clean energy is layering onto established aerospace and industrial use.

Source: FMI Analysis Analysis

Global Data Centre Liquid Cooling Market

The build-out of AI and high-performance computing infrastructure has created a new demand vector for precision flow solutions. As rack power densities rise beyond what air cooling can economically handle, liquid cooling is becoming a core requirement for modern data centres. Under the realistic scenario, the global data centre liquid cooling market is estimated at USD 5,655 million in 2024 and is projected to reach USD 48,427 million by 2034, at a CAGR of 24%. North America dominated the market in 2023 and is expected to retain that position, with adoption led by direct-to-chip and immersion cooling and driven by hyperscale data centre expansion, high-performance computing, and edge computing; Asia-the fastest growth.

Every liquid-cooled deployment requires an ecosystem of flexible hoses, manifolds, quick-connect fittings, skid assemblies, and coolant distribution infrastructure, each demanding leak-proof performance under sustained pressure and thermal cycling. This places precision stainless steel flow solutions at the centre of the opportunity and opens a multi-year growth avenue for qualified and certifications to serve global data centre customers.

Source: BIS Research Analysis

Within the data centre cooling landscape, liquid cooling is increasingly being preferred over conventional air-cooling methods on account of its superior efficiency and sustainability profile. Liquid coolings higher thermal conductivity enables more effective heat transfer, reducing energy consumption by over 27% relative to air-cooling systems, while also allowing for more compact, higher-density rack designs and lower auxiliary capital requirements. Liquid-cooled systems are also quieter, less susceptible to dust and contaminants, and support longer component lifespans with fewer hardware failures.

Although capital expenditure for liquid-cooling systems is higher upfront, the payback period is typically short, ranging from less than a year to about three years depending on regional electricity costs, and is supported by operating expenditure savings of up to 31 37% isexpectedtorecord compared to air cooling.

Source: McKinsey & Company, "Keeping Cool in the Data Age"

Global FIBC Market

The global Flexible Intermediate Bulk Container (FIBC) market continues to grow with the expanding needs of modern supply chains and the shift toward cost-effective, sustainable bulk packaging. As per industry estimates ofsupplierswiththeengineeringcapability 2026, the market is valued at approximately USD 6.0 6.6 billion in 2025 and is projected to reach USD 10.4 11.9 billion by 2036, at a CAGR in the range of 4.2% to 6.4% depending on the source and forecast horizon. Demand is spread across agriculture, chemicals, food and beverage, pharmaceuticals, construction, and mining, each drawing on the cost, handling, and storage advantages of bulk containers over rigid packaging.

Structural shifts are reshaping the category. Tightening hazardous-goods regulations are lifting demand for Type C and Type D electrostatic-safe bags; food-grade and pharmaceutical-grade certification requirements are opening premium pricing tiers for coated and laminated formats; and circular-economy policies and extended producer responsibility rules are accelerating adoption of recycled-content polypropylene, moving the industry away from virgin-polymer dependency. The scale-up of battery metals, rare-earth, and lithium supply chains has emerged as a newer source of demand for high-specification bulk packaging.

Source: Future Market Insights (2026); Mordor Intelligence (2026)

Indian FIBC Market

India is both a leading global supplier and a growing domestic consumer of FIBC solutions. Demand in

India is projected to grow at approximately 5.8% to 8.1% CAGR over the coming decade, ahead of global averages, supported by industrialisation, capacity expansion under Make in India, and export momentum, with India ranked among the fastest-growing FIBC markets globally. The domestic industry is evolving from a low-cost volume supplier into a base for higher-technology, sustainable packaging, driven by the specification requirements of Western customers.

Policy support continues to strengthen export competitiveness, including the adjustment of the

RoSCTL rate for FIBCs to 2.3%. Demand across agriculture, chemicals, pharmaceuticals, and food processing remains healthy, with food-grade FIBCs gaining share as hygiene, tamper-evidence, and moisture resistance become procurement priorities. Polypropylene price volatility, environmental scrutiny of plastics and end-of-life disposal, and trade uncertainty remain the principal challenges. Investment in recyclable materials, international certifications, and value-added designs positions

Indian manufacturers as preferred partners for multinational customers.

Company Overview

Aeroflex Enterprises Limited (AEL) is a diversified conglomerate with interests spanning knowledge-driven engineering and advanced manufacturing, tech-enabled industrial and utility services, financial services, strategic investments and mergers and acquisitions, as well as a vibrant portfolio of start-up investments. The Company operates through a network of subsidiaries and step-down subsidiaries, curating a portfolio that balances established, cash-generating businesses with strategic investments in high-growth startups and venture capital funds. Listed since 1985, the Group has evolved into a dynamic incubator, taking on new opportunities while maintaining a strong foundation in its core businesses.

AEL is publicly listed on both BSE (since 1985) and NSE (since 2022), with a reputation built on trust, transparency, ethical practice, and consistent stakeholder value creation. Its business model integrates traditional manufacture, including stainless steel flow solutions and flexible bulk packaging, with new-age growth engines, including a fresh entry into data centre liquid-cooling infrastructure, alongside fintech-enabled financial services and investments in disruptive startups across fintech, engineering, SaaS, healthcare, and spacetech. The Company maintains a global footprint, with international offices in five countries and sales touchpoints in over 100 countries, and a workforce of over 2,000 individuals across its businesses as of March 31, 2026.

FY26 was defined by global uncertainty and Indias relative resilience, a backdrop against which the Groups operating model delivered its clear proof-point: the divestment of the MRO business to Ingersoll-Rand, a Fortune 500 acquirer, at a ~3x multiple and ~107% XIRR, validating the Groups approach of building and exiting the right businesses at the right time.

Financial Performance

On a consolidated basis, Total Income for FY26 stood at 726.10 crore as against 606.09 crore in FY25, an increase of 19.80%. EBITDA rose to 149.81 crore from 129.95 crore, an increase of 15.28%, with the EBITDA margin at 20.63% in FY26 compared with 21.44% in the previous year. Profit after tax was 85.33 crore as against 80.73 crore and the PAT margin stood at 11.75% compared with 13.32% in FY25. Diluted earnings per share were 5.68 as against 4.70.

The moderation in the PAT margin is primarily attributable to a higher depreciation and amortisation charge of 32.96 crore in FY26 as against 15.27 crore in FY25, arising from the substantial capital expenditure undertaken across the Group during the year. Cash PAT, which more closely reflects underlying earnings during a period of heavy investment, was

118.29 crore as against 96.01 crore, an increase of 23.21%, with the Cash PAT margin improving to 16.29% from 15.84%. Finance costs remained contained at 5.26 crore as against 5.58 crore in the previous year. Over the five-year period from FY21 to FY26, consolidated Total Income has grown at a CAGR of

29%, Operating EBITDA at 42%, and Profit before Tax at 55%, and Profit after Tax at 55%.

During the year, the Company declared a dividend of 0.40 per share, representing 20% of the face value, underscoring its consistent track record of shareholder returns.

Financial Ratios

Operational Performance

Flow Solutions: Aeroflex Industries

Manufacturing capacity for hoses was expanded to 17.5 million metres during the year, enhancing operational scale and execution capability. Investment in automation continued, with two robotic welding lines added and an automatic welding station and annealing plant scheduled for commissioning by December 2026. The core hose and assemblies business recorded steady growth through the year, supported by long-standing global customer relationships and diversified end-user demand across oil and gas, chemicals, pharmaceuticals, and food and beverage.

Internal Control Systems and Their Adequacy

The Company places strong emphasis on maintaining a comprehensive internal control system to safeguard its assets against unauthorised use or disposal. All transactions are carefully authorised, accurately recorded, and properly reported, ensuring a high level of transparency and accountability throughout the organisation. Through this control framework, the Company ensures optimal resource utilisation, smooth operational processes, continuous monitoring, and strict compliance with applicable laws and regulations. The system is commensurate with the size, scale, and complexity of the Companys operations. The auditors have confirmed their satisfaction with the adequacy and effectiveness of the Companys internal controls, reflecting the Companys commitment to rigorous financial and operational standards.

Human Resources Development and Industrial Relations

At Aeroflex Group, considerable emphasis is placed on the role of human resources in the Companys achievements. Ongoing initiatives are directed toward employee engagement, skill enhancement, and knowledge development across the workforce. The Company has invested in building its employer brand in order to attract and retain talent, and maintains cordial and collaborative relations with employees at every level. As of March 31, 2026, the Groups workforce totals over 2,000 individuals, including permanent and contractual employees, across its businesses. The Group regards its human capital as a key driver of sustained performance and remains committed to developing its people as part of its long-term strategy.

Corporate Social Responsibility

Aeroflex views Corporate Social Responsibility as a core expression of its values as a responsible listed company. The Company administers its CSR activities through the SAT Foundation, the Aeroflex

Groups CSR arm. The Company fully discharged its CSR obligation for FY26 with no amount remaining unspent. Key initiatives undertaken during the year included nutritional support for abandoned and rescued children through Bal Asha Trust, distribution of school kits and educational supplies to tribal children in Vangao, provision of daily essentials to children in need through St. Anthony Home, and continued support for the reconstruction of Ashadham, a care facility for the elderly and differently challenged.

Cautionary Statement

This document contains forward-looking statements regarding anticipated future events, financial outcomes, and operational performance of Aeroflex Enterprises Limited. Actual results could differ materially from those expressed or implied. Important factors that could cause a difference include economic conditions affecting demand and supply, price conditions in domestic and international markets, changes in government regulations and tax regimes, raw material and energy costs, exchange rate movements, geopolitical developments, and other incidental factors. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements on the basis of subsequent developments, information, or events.