Afcom Holdings Ltd Management Discussions

Economic Overview

Global Economic Outlook

In 2025, the global economy is projected to grow at a modest pace. According to the IMFs July 2025 World Economic Outlook, global GDP is expected to expand by 3.0% in 2025 and 3.1% in 2026, remaining below pre-pandemic averages. Growth continues to be uneven across regions, with advanced economies facing slower momentum due to tight financial conditions and softening demand, while emerging markets demonstrate stronger expansion.

Inflationary pressures have started to ease, aided by lower energy and commodity prices, although the pace of disinflation differs across regions. Financial markets are showing early signs of stability, driven by expectations of monetary policy easing in key economies.

International trade, however, remains subdued, weighed down by tariff adjustments, supply chain reconfiguration, and weaker goods demand. Commodity markets are expected to stay broadly stable, with softening energy prices providing relief for import-dependent economies.

Despite these stabilizing factors, downside risks remain significant. Rising protectionism, heightened geopolitical tensions, fiscal vulnerabilities in several economies, and fragile supply chains could increase volatility. The outlook suggests that while growth will persist, it is likely to remain below pre-pandemic trends, with structural risks requiring careful monitoring.

Indian Economic Overview

According to the Press Information Bureau (PIB), Government of India, the nation became the fourth-largest global economy in 2025, driven by reforms, robust domestic demand, and the vision of Aatmanirbhar Bharat. India remains the worlds fastest-growing major economy, with real GDP growth of 6.5% in FY 2024-25 and a projection of 6.3%-6.8% in FY 2025-26.

Exports have expanded significantly, rising 76% in the last decade, led by engineering goods, electronics, and pharmaceuticals. Services exports more than doubled, underscoring Indias role as a global services hub.

Macroeconomic stability has strengthened with retail inflation falling. Cumulative FDI inflows crossed US$ 1.05 trillion, reflecting global investor confidence. Infrastructure growth also accelerated, with increasingoperational airports and national highways expanding.

India is on track to become the third-largest economy by 2030, advancing as a digital, green, and resilient growth engine.

Industry Overview

Global Air Cargo Industry

The global air cargo industry remains on a steady growth trajectory. According to Boeings Commercial Market Outlook 2025, long-term traffic is projected to expand at a CAGR of -3.7% through 2044, with the global freighter fleet expected to rise by nearly 67% from around 2,375 in 2024 to approximately 3,975 by 2044. Over this period, about 2,900 freighters are anticipated to be delivered, nearly half for replacement and the rest to meet incremental demand. A large share of future supply is likely to come from passenger-to-freighter conversions, with Asia Pacific and North America together accounting for close to two-thirds of overall demand.

In the near term, the industry continues to expand though at a moderating pace. As per lATAs Air Cargo Market Analysis (May 2025), global cargo tonne- kilometres grew by 2.2% year-on-year, supported by robust Asia Pacific volumes while North America softened due to tariff effects. Available cargo tonne- kilometres increased by 2.0% year-on-year, keeping the cargo load factor stable at around 44.5%. With the resumption of broader passenger travel, belly- hold capacity now represents more than half of total lift. Meanwhile, lower jet fuel prices and a marginal decline in cargo yields have contributed to a more balanced operating environment for airlines.

ASEAN Air Cargo Industry (Southeast Asia)

ASEAN has become a strategic cargo hub as supply chains diversify across Asia. Boeings Commercial

Market Outlook (CMO) 2025-2044 indicates Southeast Asias GDP is expected to grow -5.1% annually through 2044, with airline traffic (RPK) -7.0% and fleet growth -6.6%. Low-cost carriers now operate -70% of flights within the region, underpinning network depth; long-haul capacity has largely recovered to pre-pandemic levels, with airlines in Southeast Asia providing -40% of all long-haul capacity to/from the region

lATAs May 2025 analysis shows Asia Pacific carriers leading international cargo growth (+8.2% to +8.3% YoY), with ASEAN gateways such as Singapore and Vietnam benefiting from electronics, high-tech and e-commerce flows. Capacity expansion is skewed to belly-hold as summer passenger ramp up. As per lATA Air Cargo Market Analysis - May 2025 report

Indian Air Cargo Industry Overview

Indias air cargo industry is emerging as a critical enabler of trade and economic growth, driven by rising e-commerce, pharmaceuticals, electronics, and global supply chain shifts. With its strategic geographic location and a growing consumer base, India is positioning itself as a regional cargo hub.

Growth Drivers

? Strong GDP growth (6.5% in FY25) fueling demand for trade and logistics

? Rising e-commerce penetration, expected to cross USD 160 billion by 2026

? Government initiatives like PM Gati Shakti, National Logistics Policy, and UDAN scheme ? Increasing demand for time-sensitive shipments in pharma, perishables, and electronics ? Expansion of airports and dedicated cargo terminals

Market Size & Trends

India handled around 3.5 million metric tonnes (MMT) of air cargo in FY24, projected to grow at a CAGR of 7-8% over the next decade. International cargo accounts for nearly 60% of the total, with hubs like Delhi, Mumbai, Bengaluru, Chennai and Hyderabad leading volumes.

Comparative Advantage

? Geostrategic location connecting Asia, Middle East, and Europe

? Competitive cost base compared to global hubs ? Strong growth in pharmaceutical exports (India is the 3rd largest producer by volume)

? Supportive government policies encouraging cargo infrastructure investment

Challenges

? High logistics cost (13-14% of GDP compared to global average of 8-9%)

? Infrastructure bottlenecks at smaller airports ? Limited freighter fleet and reliance on belly cargo ? Need for faster digitalisation and paperless trade processes

Outlook

With sustained policy support, digitalisation, and infrastructure expansion, Indias air cargo industry is set to become a USD 20 billion+ market by 2030, as per Ministry of Civil Aviation (MoCA), IATA, Boeing CMO 2025, IATA Cargo Market Analysis May 2025 & PIB. The sector is expected to play a pivotal role in making India a global manufacturing and export hub under the Make in India and Aatmanirbhar Bharatvision.

The Indian air cargo industry is witnessing strong growth, driven by rising e-commerce demand, expansion of export-oriented manufacturing, and the development of airport infrastructure across metro and regional hubs. AFCOM is well-placed to capitalize on this momentum, driven by its transshipment leadership in South Asia, strategic expansion into major Indian airports like Kempegowda International Airport, Bengaluru, and collaborative partnerships with leading carriers such as Vietjet. By leveraging technology-driven operations and a network-focused model, the Company is aligning its growth strategy with the broader industry trend of increasing cargo throughput and efficiency.

Company Overview

AFCOM Holdings Limited (AFCOM) is a leading integrated air cargo solutions provider with a focus on the south east Asian countries to move the cargo faster and smarter. With operations spanning multiple geographies across this region, AFCOM plays a critical role in facilitating regional trade flows, particularly between India, Southeast Asia, and the Maldives. The Companys business model combines infrastructure presence at strategic airports with strong carrier relationships, enabling it to handle large cargo volumes efficiently and competitively.

Current Fleet Composition

? 3* Aircraft under Dry-Lease

• Type: Boeing 737-800 (BCF) Converted Freighters

• Cargo Capacity: 22 tonnes each

• Lease Tenure: 96 months (8 years)

• Deployment: Deployed across high-demand domestic and regional routes, offering efficient turnaround and optimized payload utilization.

(* The third aircraft is joining the fleet soon)

FY 2024-25 was a transformative year for AFCOM as the Company continued to expand its cargo operations across key geographies and strengthened its positioning in the fast-growing air cargo industry. Despite a challenging global trade environment, AFCOM successfully leveraged industry tailwinds such as e-commerce growth, rising express logistics demand, and the shift of manufacturing to India and ASEAN region.

During the year, AFCOM scaled its operations by adding new routes, enhancing transshipment capabilities, and deepening its presence in strategic hubs. The Company achieved notable milestones including:

? Achieved Air Operators Permit (AOP)

? Established operational routes to Bangkok, Hanoi, Myanmar, Colombo, and Maldives ? Appointed strong GSAs in respective territories under the umbrella of TT Group - Global GSSA ? Secured FAOC approvals in Sri Lanka, Thailand, Maldives, and Vietnam

? Commenced domestic charter operations for shrimp, mobile phones, and e-commerce cargo ? Obtained memberships with IATA, ICH, and SIS ? Developed transshipment hubs in Bangkok, Hanoi, and Maldives

? Completed Indian Customs Registration for cargo movement

? Entered interline agreements with Etihad Airways, Turkish Airlines, and Vietjet

? Commencement of operations from Kempegowda International Airport, Bengaluru, strengthening South India connectivity.

? Establishment as the largest handler of transshipment cargo into Maldives Velana International Airport, cementing its leadership in the region.

? Strategic agreement with Vietjet to boost regional cargo capacity and network coverage.

AFCOMs ability to rapidly scale capacity, enter new routes, and deliver reliable services has positioned it as a preferred partner for airlines, freight forwarders, and e-commerce players.

Financial Highlights

The Company delivered a strong financial performance in FY25, supported by expanding fleet capacity, new domestic and ASEAN routes, and strengthened strategic partnerships.

Particulars	FY25	FY24
Revenue	23,871.80	14,754.55
Other Income	382.35	63.72
Total Income	24,254.16	14,818.27
Total	16,993.34	11,181.05
Expenditure
EBITDA	7,260.82	3,637.22
PAT	4,842.23	2,544.16

Performance Highlights

? Revenue Growth: Total income rose 63.7% YoY to Rs24,254.16 lakhs, driven by new dry-leased aircraft deployment, pan-India expansion, and focus on ASEAN operations.

? Profitability: EBITDA nearly doubled to Rs7,260.82 lakhs, with margins improving to 29.9% from 24.6%, reflecting operational leverage and efficiency.

? Net Profit: PAT surged 90.3% YoY to Rs4,842.23 lakhs, with margins strengthening to 20.0%, underscoring resilient cost management.

? Balance Sheet: Net worth more than doubled to Rs22,036.74 lakhs from Rs10,324.93 lakhs in FY24, strengthening the Companys capital base.

? Cashflows: Cash flow from operations stood at Rs2,738.25 lakhs, supporting reinvestment in fleet expansion and network scale-up.

AFCOMs robust financial trajectory reflects its ability to scale profitably while managing operational complexities. The improved margins and rising profitability underscore the benefits of a dual leasing strategy, deeper ASEAN connectivity, and long-term GSSA partnerships.

Key Financial Ratios

Ratio	FY25	FY24
EBITDA Margin (%)	29.94	24.55
PAT Margin (%)	19.96	17.17
ROE (%)	21.97	24.64
ROCE (%)	27.48	29.82
Book Value (Rs per share)	88.65	57.29
Fixed Assets Turnover Ratio	13.68	11.68
Debt to Equity (Times)	0.12	0.18
Interest Coverage Ratio (Times)	20.58	18.39
Current Ratio (Times)	4.03	2.04

Opportunities & Threats

Opportunities

? Growing Air Cargo Market: With India emerging as the fastest-growing major economy and trade volumes expanding, the demand for reliable and time-sensitive cargo movement is rising.

? ASEAN Expansion: AFCOMs entry into ASEAN routes positions it to capture a larger share of international cargo flows, particularly in the movement of e-commerce electronics and engineering goods.

? Policy Support: Initiatives like National Logistics Policy, UDAN, and Make in India are expected to boost airfreight demand.

? Technology Integration: Adoption of digital cargo tracking, route optimization, and automation enhances efficiency and customer satisfaction.

Threats

? Regulatory Environment: The aviation sector is subject to stringent compliance, changes in leasing norms, and taxation policies that could impact operations.

? Competition: Intensifying competition from integrated logistics providers and larger cargo operators from outside India could put pressure on yields.

? Geopolitical Risks: Regional instability and global trade disruptions could impact international cargo volumes.

Risk Management

AFCOM hasestablished a structured risk management framework to identify, assess, and mitigate risks across operational, financial, and strategic areas.

? Operational Risks: Addressed through preventive maintenance schedules, fleet redundancy planning, and partnerships with reputed lessors.

? Financial Risks: Foreign currency fluctuations are managed by higher Forex earnings which in our trade works as a natural hedging.

? Regulatory & Compliance Risks: A dedicated compliance team ensures adherence to DGCA, IATA, and international aviation standards.

? Business Continuity: Strong GSSA partnerships, diversified cargo mix (perishables, e-commerce, pharma, general cargo), and scalable leased fleet ensure resilience.

Outlook

AFCOM is poised to sustain its growth trajectory, supported by favorable industry trends and its scalable business model. The Companys near-term priorities include:

? Scaling up fleet capacity through additional leased aircraft.

? Deepening ASEAN operations to tap into fast-growing regional trade.

? Expanding domestic connectivity to Tier-2 and Tier-3 cities. ? Strengthening digital systems for cargo tracking, client

servicing, and route optimization.

? Leveraging policy initiatives in logistics and aviation to build long-term competitive advantage.

The outlook remains positive as AFCOM consolidates its leadership in Indias air cargo space while pursuing profitable international expansion.

Internal Control Systems & Their Adequacy

AFCOM has instituted robust internal control systems designed to safeguard assets, ensure reliability of financial reporting, and maintain compliance with applicable laws and regulations.

? Framework: Controls are reviewed periodically by the Audit Committee and strengthened with technology- enabled monitoring.

? Processes: Standard Operating Procedures (SOPs) are in place for critical functions, including flight operations, cargo handling, and financial transactions.

? Audits: Internal audits are conducted regularly by independent professionals, and observations are reviewed by management for timely corrective action.

? Adequacy: The Board is satisfied that the internal control systems are adequate, commensurate with the size and nature of operations, and provide a sound basis for decision-making.

Kaizen and IOSA Accreditation: The Company has voluntarily adopted the Kaizen methodology to drive continuous improvement initiatives and has also engaged lATAs consultancy services for the IOSA Accreditation Audit.

Human Resource Development

People are AFCOMs key enablers of growth and operational excellence. The Company is committed to fostering a skilled, motivated, and safety-oriented workforce.

? Workforce Strength: AFCOM has built a multidisciplinary team comprising aviation professionals, cargo handlers, logistics experts, and support staff.

? Training & Development: Continuous training programs are conducted to enhance technical expertise, regulatory compliance, and customer service orientation.

? Culture & Engagement: A performance-driven culture is encouraged, with emphasis on accountability, collaboration, and recognition.

? Diversity & Safety: Equal opportunity practices and strict adherence to workplace safety standards ensure an inclusive and secure work environment.

? Future Focus: The Company is investing in talent aligned with digital transformation, analytics, and international operations.

Cautionary Statement

The Companys objectives, projections, outlook, expectations, estimates, and other information expressed in the Management Discussion and Analysis may be considered forward-looking statements under applicable securities laws and regulations. These statements are based on certain assumptions that the Company cannot guarantee. Several circumstances, some of which the Company may not have direct control over, could have a substantial impact on the Companys operations. As a result, actual results may differ materially from such projections, whether expressed or implied, because it would be beyond the Companys ability to successfully implement its growth strategy. The Company assumes no obligation or responsibility to update forward-looking statements or to publicly amend, modify, or revise them to reflect events or circumstances that occur after the date of the statement on the basis of subsequent development, information, or events. The Management of AFCOM presents below an analysis of its performance during the year under review, i.e., accounting year ended 31 st March, 2025 (for the period 1 st April, 2024 up to 31st March, 2025).