Apsis Aerocom Ltd Management Discussions

OPERATIONS

You should read the following discussion of our financial position and results of operations together with our Restated Financial Statement which have been included in this Red Herring Prospectus. The following discussion and analysis of our financial position and results of operations is based on our Restated Financial Statement for the period ended September 30, 2025 and financial years ended March 31, 2025, March 31, 2024,and March 31,2023 including the related notes and reports, included in this Red Herring Prospectus prepared in accordance with requirements of the Companies Act and restated in accordance with the SEBI Regulations, which differ in certain material respects from IFRS, U.S. GAAP and GAAP in other countries. Our Financial Statements, as restated have been derived from our audited financial statements for the respective years. Accordingly, the degree to which our Restated Financial Information will provide meaningful information to a prospective investor in countries other than India is entirely dependent on the readers level of familiarity with Indian GAAP, Companies Act, SEBI Regulations and other relevant accounting practices in India.

This discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materiallyfrom those anticipated in these forward-looking statements as a result of certain factors such as those described under the section titled "Risk Factors " and the chapter "Forward Looking Statements" beginning on page 38 and 23, respectively, and elsewhere in this Red Herring Prospectus. Our Financial Year ends on March 31 of each year. Accordingly, all references to a particular Financial Year are to the 12 months ended March 31 of that year.

BUSINESS OVERVIEW

Our Company is engaged in the field of precision engineering, with primary focus on manufacture of components and allied services for the aerospace, defence and healthcare industries. Driven by modern manufacturing techniques, we provide engineering and precision machining services, offering end-to-end solutions ranging from design support to final product delivery.

Our manufacturing processes have consistently achieved high levels of dimensional accuracy over the last three fiscal years. We maintain quality systems aligned with AS9100D and ISO 9001:2015 certifications, which are widely recognized standards in our industries of operation. Our Manufacturing facility situated at Bangalore, Karnataka supports CAD/CAM-based design, process development, and precision machining

Our product offering caters to a specific niche segment of the aerospace, defence and healthcare industries. These include machined parts compliment the complex systems deployed in the aerospace, defence and healthcare industry. These products are manufactures as per client supplied designs and requirements.

For further details, please refer to the chapter titled "Our Business" beginning on page 157 of this Red Herring Prospectus.

The following table sets forth a breakdown of our revenue from operations, as well as other key performance indicators, for the Financial years and period indicated:

(Rs. in Lakhs except percentages)

Key Financial Performance	For the period ended September 30, 2025	For the financial year ended March 31, 2025	For the financial year ended March 31, 2024	For the financial year ended March 31, 2023
Revenue from operations (1)	1,365.11	2,049.06	1,686.69	1,037.00
EBITDA (2)	477.70	1,020.46	409.51	192.73
EBITDA Margin (3)	34.99%	49.80%	24.28%	18.59%
PAT(4)	312.28	663.76	255.43	102.52
PAT Margin (5)	22.88%	32.39%	15.14%	9.89%
EBIT	422.38	912.77	347.91	146.86
RoE(%)(6)	25.75%	91.60%	96.36%	73.13%
RoCE (%)(7)	25.62%	65.79%	64.04%	42.18%
Capital Employed(7)	1,648.68	1,387.42	543.27	348.18
Debt (8)	232.66	283.72	132.23	207.14

KPI disclosed above is certified by M/s YCRJ & Associates, Chartered Accountants the statutory auditors of our Company pursuant to their certificate dated February 18, 2026.

Notes:

(1) Revenue from Operations means the Revenue from Operations as appearing in the Restated Financial Statements

(2) EBITDA (inclusive of Other Income) is calculated as Profit before tax + Depreciation + Amortization+ Interest Expenses

(3) EBITDA Margin is calculated as EBITDA divided by Revenue from operations

(4) PAT is calculated as Profit after tax for the period/year.

(5) PAT Margin is calculated as PAT for the period/year divided by Revenue from operations.

(6) Return on Equity is Calculated as Net Profit after Tax divided by Average Shareholder Equity.

(7) Return on Capital Employed is calculated as EBIT divided by capital employed, which is defined as shareholders equity plus total debts plus deferred tax liabilities(net) minus Intangible asset.

(8) Debt includes long term borrowings and short-term borrowings.

Explanation for KPI metrics:

Key Financial Performance	Explanations
Revenue from Operations	Revenue from Operations is used by our management to track the revenue profile of the business and in turn helps to assess the overall financial performance of our Company and volume of our business
EBITDA	EBITDA provides information regarding the operational efficiency of the business
EBITDA Margin (%)	EBITDA Margin (%) is an indicator of the operational profitability and financial performance of our business
PAT	Profit after tax provides information regarding the overall profitability of the business
PAT Margin (%)	PAT Margin (%) is an indicator of the overall profitability and financial performance of our business
RoE(%)	RoE provides how efficiently our Company generates profits from shareholders funds.
RoCE (%)	RoCE provides how efficiently our Company generates earnings from the capital employed in the business.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of Statement of Significant Accounting Policies, please refer to the chapter titled "Restated Financial Statements" beginning on page 224 of this Red Herring Prospectus.

Factors Affecting our Results of Operations

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factors" beginning on page 38 of this Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

1. General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies;

2. Our ability to respond to technological changes;

3. Adverse natural calamities having significant impact on regions where we have our business operations;

4. Our ability to attract and retain qualified personnel;

5. Inability to promptly identify and respond to changing customer preferences or evolving trends;

6. Any change in government policies resulting in increases in taxes payable by us;

7. Changes in laws and regulations that apply to the industries in which we operate.

8. Our ability to grow our business;

9. General economic, political and other risks that are out of our control;

10. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

11. Companys ability to successfully implement its growth strategy and expansion plans;

12. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

13. Inability to successfully obtain registrations in a timely manner or at all;

14. Occurrence of Environmental Problems & Uninsured Losses;

15. Conflicts of interest with affiliated companies, the promoter group and other related parties;

16. Any adverse outcome in the legal proceedings in which we are involved; and

17. Concentration of ownership among our Promoters.

Our Result of Operations

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements for the period ended September 30, 2025 and financial years ended on March 31, 2025, March 31, 2024 and March 31, 2023.

(Rs. in lakhs)

Sr. No.	Particulars	Period Ended Septembe r 30, 2025	% of Total Incom e	March 31, 2025	% of Total Incom e	March 31, 2024	% of Total Incom e	March 31, 2023	% of Total Incom e
A.	Income:
	Revenue from operations	1,365.11	99.61	2,049.0 6	99.63	1,686.6 9	99.94	1,037.0 0	99.59
	Other income	5.32	0.39	7.68	0.37	1.05	0.06	4.28	0.41
	Total Income (A)	1,370.43	100.00	2,056.7 4	100.00	1,687.7 4	100.00	1,041.2 8	100.00
B.	Expenditure:
	Cost of material consumed	501.02	36.56	598.79	29.11	786.48	46.60	463.94	44.55
	Changes in inventories of work-inprogress & finished Goods	(43.36)	(3.16)	(161.31)	(7.84)	(6.58)	(0.39)	(48.08)	(4.62)
	Employee benefits expense	285.05	20.80	372.19	18.10	309.39	18.33	254.58	24.45
	Finance costs	8.93	0.65	25.52	1.24	14.49	0.86	13.48	1.29
	Depreciation and amortization expense	55.32	4.04	107.69	5.24	61.60	3.65	45.87	4.41
	Other expenses	146.12	10.66	220.18	10.71	180.32	10.68	173.89	16.70
	Total Expenditure (B)	953.08	69.55	1,163.0 6	56.55	1,345.7 0	79.73	903.68	86.79
C	Profit before tax (A-B)	417.35	30.45	893.68	43.45	342.04	20.27	137.60	13.21
D	Tax Expense:-
	(i) Current tax	105.11	7.67	204.86	9.96	72.74	4.31	28.71	2.76
	(ii) Deferred tax expenses/(credit )	(0.03)	(0.002)	25.06	1.22	13.87	0.82	6.37	0.61
	Total Tax Expenses (D)	105.07	7.67	229.92	11.18	86.61	5.13	35.08	3.37
E	Profit after tax for the period/ year (C-D)	312.28	22.79	663.76	32.27	255.43	15.13	102.52	9.85

OVERVIEW OF REVENUE AND EXPENSES INCOME:

Revenue from operations:

Revenue from operations mainly consists of revenue from sale of products (Export & Domestic) and sales of services (Job work).

Other Income:

Our other income primarily comprises of Interest Income on Fixed Deposits, Discount Received, Forex Gain, Sundry balance written off and Miscellaneous Income.

EXPENSES:

Companys expenses consist of Cost of material consumed, Changes in inventories of work-in-progress & finished Goods, employee benefits expense, finance costs, depreciation and amortization expense and other expenses.

Cost of material consumed

This represents Opening stock plus purchase during the year/period less closing stock

Changes in inventories of work-in-progress & finished Goods

This represents Changes in inventories of work-in-progress & finished Goods.

Employee benefits expense

Our employee benefits expense primarily comprises of Salaries and wages, Director Remuneration, Contribution to PF and ESIC, Gratuity Expense, Leave Encashment Expense and Staff Welfare Expenses.

Finance costs

Our finance cost includes Interest on Borrowings, Interest on Late Payment of Statutory Dues, Other borrowing costs and Interest on Lease Liability.

Depreciation and amortization expense

Depreciation and amortization on tangible and intangible assets.

Other expenses

Our other expenses include Audit Fees, Business Promotion, Bad Debts, Commission, Courier Charges, Electricity Charges, Factory Rent, Freight Charges, Fuel Charges, Clearing & Forwarding Charges, Fixed Assets written-off, Insurance, Local Testing Charges, Job Work, Loss on Exchange Rate, Loss on Sale of Assets, Office Maintenance, Professional & Consulting Charges, Printing and Stationary, Provisions for slow and non-moving stocks, Rates and Taxes, Repair and Maintenance, Security Charges, Subscription Charges, Transportation Charges, Travelling Expenses, Water Charges, Website Maintenance and Miscellaneous expenses.

Financial Performance Highlights for the period ended September 30, 2025

Revenue from Operations:

Revenue from operations for the period ended September 30, 2025 stood at Rs.1,365.11 Lakhs.

Other Income:

Other Income for the period ended September 30, 2025 stood at Rs.5.32 Lakhs.

Total Expenses:

Total Expenses for the period ended September 30, 2025 stood at Rs.953.08 Lakhs.

Cost of Material Consumed-:

Cost of Material Consumed for the period ended September 30, 2025 stood at Rs. 501.02 Lakhs.

Changes in inventories of work-in-progress & finished Goods

Changes in inventories of work in progress & finished goods for the period ended September 30, 2025 stood at Rs (43.36) Lakhs.

Employee benefits expense:

Employee benefits Expenses for the period ended September 30, 2025 stood at Rs.285.05 Lakhs.

Finance costs:

Finance Costs for the period ended September 30, 2025 stood at Rs.8.93 Lakhs.

Depreciation and Amortization Expenses:

Depreciation and Amortization Expenses for the period ended September 30, 2025 stood at Rs.55.32 Lakhs.

Other Expenses:

Other Expenses for the period ended September 30, 2025 stood at Rs. 146.12 Lakhs.

Restated Profit/ (Loss) after tax:

Restated Profit/ (Loss) after tax for the period ended September 30, 2025 stood at Rs.312.28 Lakhs.

Comparison of Financial Year 2025 with Financial Year 2024 Revenue from Operations:

During the financial year ended March 31, 2025, our revenue from operations stood at Rs. 2,049.06 Lakhs as compared to Rs. 1,686.69 Lakhs in the previous year, representing a growth of 21.48%. The increase in revenue was primarily attributable to higher customer demand, receipt of orders for more complex and value-added components, and the expansion of our manufacturing capacity through the addition of new machinery. These factors enabled us to enhance our production capabilities, improve efficiency, and cater to a larger volume of orders, thereby contributing to the overall increase in revenue. During the financial year 2025, revenue from the healthcare segment declined due to selective order acceptance based on strategic and profitability considerations, while other segment, particularly high margin precision component, contributed to overall growth and improved operational efficiency.

Other Income:

During the financial year ended March 31, 2025, our other income stood at Rs. 7.68 Lakhs as compared to Rs. 1.05 Lakhs in the previous financial year, reflecting a significant increase of 631.43%. This growth was primarily on account of higher interest income earned on fixed deposits maintained with banks and an increase in miscellaneous income during the year. The rise in interest income was a result of higher surplus funds being deployed in fixed deposits.

Total Expenses:

The Total Expenses for the financial year ended March 31, 2025 stood at Rs. 1,163.06 Lakhs. The total expenses represented decrease of 13.57 % as compared to previous year which is Rs. 1,345.70 Lakhs due to the factors described below: -

Cost of Material Consumed:

Our cost of material consumed for the financial year ended March 31, 2025 was Rs. 598.79 Lakhs as compared to Rs. 786.48 Lakhs in the previous financial year, reflecting a decrease of 23.86%. This reduction was primarily attributable to the transition of certain previously outsourced operations to in-house production through investment in new machinery. By enhancing our in-house capabilities, we were able to reduce reliance on external job-work charges and achieve better control over production costs. Additionally, the Company benefited from sourcing raw materials at more competitive rates, further contributing to the decline in material consumption costs.

Analysis of Cost of Materials Consumed and Impact on Margins

The Increase in the margin in the FY 2024-25 is on account of reduced cost of materials consumed as explained below in detail:

(a) Reduction in Job Work Charges

Particulars	For the financial year ended
	March 31, 2025		March 31, 2024		March 31, 2023
	Amount (Rs. in Lakhs)	% of the total purchase	Amount (Rs. in Lakhs)	% of the total purchase	Amount (Rs. in Lakhs)	% of the total purchase
Domestic Purchases	281.48	45.10%	394.93	50.96%	248.21	59.54%
International Purchases	45.40	7.27%	26.58	3.43%	13.75	3.14%
Job Work Charges	297.27	47.63%	312.35	40.31%	144.15	34.58%
Other Direct Expenses	Nil	-	41.08	5.30%	10.69	2.74%
Total Purchase	624.15	100.00%	774.94	100.00%	416.85	100.00%

Job work charges primarily relate to outsourced machining and specialised manufacturing processes, including machining, heat treatment, coating, anodizing, and other advanced processes undertaken by third-party vendors.

In January 2024, the Company invested in two advanced imported 5-axis CNC machining centres, which were installed in March 2024 and April 2024, with an aggregate capital outlay of Rs224.28 lakh, representing approximately 28.02% of the Companys total Property, Plant and Equipment. These high-precision machines have enabled the Company to undertake complex and high-value machining in-house and have resulted in reduced idle time, improved accuracy and quality, lower rejection rates, optimisation of raw material usage, and enhanced overall productivity. Accordingly, machining-related job work costs declined during FY 2024-25. Further, the increased level of in-house value addition contributed positively to operating margins as well as the Companys profitability and PAT margin.

(b) Decline in Domestic Purchases

Domestic purchases declined from Rs394.93 lakh in FY 2023-24 to Rs281.48 lakh in FY 2024-25. This reduction is attributable to improved material planning, optimisation of procurement processes, and closer alignment of purchases with revised production schedules.

Further, following the commissioning of the 5-axis machining capabilities, the Company began executing complex, high-value components in-house. By way of illustration, for products such as the HMR (Homodyne Receiver) Housing, while the raw material cost is below Rs20,000, the total selling price, inclusive of complex machining, is approximately Rs2.1 lakh. This enhanced in-house value addition resulted in a reduction in material cost as a percentage of revenue.

(c) Reduction in Direct Expenses

Direct expenses declined by Rs41.08 lakh in FY 2024-25 as compared to FY 2023-24. This reduction was primarily due to decreased reliance on external engineering solution services and process optimisation consultants. Following the successful implementation and stabilisation of improved production methodologies, the Companys dependence on such external services reduced during FY 2024-25, resulting in lower direct expenses.

Changes in inventories of work-in-progress & finished Goods

Changes in inventories of work-in-progress and finished goods for the financial year ended March 31, 2025 amounted to Rs. (161.31) Lakhs as compared to Rs. (6.58) Lakhs in the previous financial year. The variance was primarily on account of higher turnover during the year, which led to a increase in inventory levels, as well as the accumulation of certain non-saleable stock reflected in the closing inventory that is expected to be realized in the subsequent financial year.

Employee benefits expense:

Our Company incurred Rs. 372.19 Lakhs towards employee benefits expense for the financial year ended March 31, 2025, as compared to Rs. 309.39 Lakhs in the previous financial year, representing an increase of 20.30%. The increase was primarily attributable to a rise in employee headcount and the recruitment of qualified professionals to support the Companys future growth plans. Consequently, there was an increase in salaries and wages, director remuneration, contributions to provident fund (PF) and employees state insurance (ESIC), as well as higher gratuity and leave encashment expenses.

Finance costs:

Finance costs for the financial year ended March 31, 2025 amounted to Rs. 25.52 Lakhs, as compared to Rs. 14.49 Lakhs in the previous financial year, reflecting an increase of 76.12%. The rise was primarily on account of higher interest expenses due to an increase in borrowings availed to support business operations and capital expansion. In addition, the recognition of interest on lease liabilities contributed to the overall increase in finance costs.

Depreciation and Amortization Expenses:

Depreciation and amortization expense for the financial year ended March 31, 2025 was Rs. 107.69 Lakhs, as compared to Rs. 61.60 Lakhs in the previous financial year, representing an increase of 74.82%. The increase was primarily attributable to the purchase of plant and machinery, furniture and fixtures, computers and computer software, and a car during FY 2024-25. In addition, plant and machinery acquired through a finance lease in the last quarter of FY 2023-24 attracted a full years depreciation charge in FY 2024-25, thereby contributing to the higher depreciation expense.

Other Expenses:

Other Expenses for the financial year ended March 31,2025 amounted to Rs. 220.18 Lakhs, compared to Rs. 180.32 Lakhs for financial year ended March 31,2024, reflecting an increase of 22.11 %. The rise is mainly due to increase in Audit Fees, Courier Charges, Electricity Charges, Factory Rent, Clearing & Forwarding Charges, Insurance, Loss on Sale of Assets, Office Maintenance, Professional & Consulting charges, Provisions for slow and non-moving stocks, Rates and Taxes, Security Charges, Subscription Charges, Transportation Charges, Travelling Expenses and other expenses.

Restated Profit/ (Loss) after tax:

The Companys Restated Profit After Tax increased to Rs. 663.76 Lakhs for the financial year ended March 31, 2025, as compared to Rs. 255.43 Lakhs in the previous year, reflecting a growth of 159.86%. This significant improvement was primarily driven by the Companys strategic focus on securing customer orders for more complex and value - added parts, which yielded higher margins and enhanced overall profitability. Further, the transition of certain outsourced operations to in-house production through investment in new machinery helped reduce job-work charges, optimize cost efficiency, and enable raw material procurement at more competitive rates, collectively contributing to the improvement in profitability.

Comparison of Financial Year 2024 with Financial Year 2023 Revenue from Operations:

During the financial year ended March 31, 2024, our revenue from operations stood at Rs. 1,686.69 Lakhs as compared to Rs. 1,037.00 Lakhs in the previous financial year, representing a growth of 62.65%. The increase was primarily

driven by higher customer orders, supported by an expansion in our manufacturing capacity through the addition of new machinery. The enhanced production capabilities enabled the Company to execute a greater volume of orders, improve delivery timelines, and cater to growing customer demand, thereby contributing to the significant increase in revenue.

Other Income:

For the financial year ended March 31, 2024, the Company recorded other income of Rs. 1.05 Lakhs, compared to Rs. 4.28 Lakhs in the previous financial year ended March 31, 2023, representing a decrease of 75.47%. The decline in other income was primarily attributable to a reduction in discounts received from suppliers as well as lower gains from foreign exchange fluctuations during the year.

Total Expenses:

The Total Expenses for the financial year ended March 31,2024 stood at Rs. 1,345.70 Lakhs. The total expenses represented an increase of 48.91 % as compared to previous year which is Rs. 903.68 Lakhs due to the factors described below: -

Cost of Material Consumed-:

For the financial year ended March 31, 2024, the Companys cost of material consumed amounted to Rs. 786.48 Lakhs, as compared to Rs. 463.94 Lakhs for the financial year ended March 31, 2023, representing an increase of 69.52%. This increase was primarily driven by the growth in revenue from operations during FY 2023 -24, which led to higher production requirements and, consequently, greater consumption of raw materials. The rise also reflects the Companys efforts to meet increased customer demand while maintaining quality standards.

Changes in inventories of work-in-progress & finished Goods

Our changes in inventories of work-in-progress & finished Goods for the financial year ended March 31, 2024 amount to Rs. (6.58) Lakhs, as compared to Rs. (48.08) Lakhs for the financial year ended March 31, 2023. The reduction in inventories during FY 2023-24 is primarily attributable to the implementation of a Just-In-Time (JIT) system and enhanced inventory management practices, which optimized stock levels while ensuring timely availability of materials for production.

Employee benefits expense:

For the financial year ended March 31, 2024, the Company incurred employee benefits expenses of Rs. 309.39 Lakhs, as compared to Rs. 254.58 Lakhs for the financial year ended March 31, 2023, representing an increase of 21.53%. The increase in employee benefits expense was primarily due to a rise in employee headcount and the recruitment of additional professional personnel. This led to higher salary and wages, director remuneration, contributions to Provident Fund (PF) and Employee State Insurance Corporation (ESIC), as well as increased gratuity, leave encashment, and staff welfare expenses. The growth in these expenses reflects the Companys focus on strengthening its human resources to support business expansion and operational efficiency.

Finance costs:

For the financial year ended March 31, 2024, the Companys finance costs amounted to Rs. 14.49 Lakhs, compared to Rs. 13.48 Lakhs for the financial year ended March 31, 2023, reflecting an increase of 7.49%. The increase in finance costs was primarily attributable to upfront fees associated with finance leases and interest expenses on borrowings. This reflects the Companys strategic utilization of financing arrangements to support its operational and capital requirements during the year.

Depreciation and Amortization Expenses:

For the financial year ended March 31, 2024, the Company recorded depreciation and amortization expenses of Rs. 61.60 Lakhs, compared to Rs. 45.87 Lakhs for the financial year ended March 31, 2023, representing an increase of

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34.29%. The increase was primarily driven by the acquisition of new assets, including plant and machinery which includes leasehold machinery, furniture and fixtures, computers and computer software, servers and networking equipment, and vehicles. This reflects the Companys continued investment in expanding its operational and technological infrastructure.

Other Expenses:

Other Expenses for the financial year ending March 31,2024 amounted to Rs. 180.32 Lakhs, compared to Rs. 173.89 Lakhs for financial year ended March 31,2023, reflecting an increase of 3.70 %. The rise is mainly due to increase in Business Promotion expense, Commission, Electricity Charges, Factory Rent, Freight Charges, Fuel Charges, Clearing & Forwarding Charges, Fixed Assets written-off, Insurance, Local Testing Charges, Loss on Exchange Rate, Office Maintenance, Professional & Consulting charges, Printing and Stationary, Security Charges, Subscription Charges, Transportation Charges, Travelling Expenses, Water Charges, Website Maintenance and other expenses.

Restated Profit/ (Loss) after tax:

For the financial year ended March 31, 2024, the Companys restated profit after tax increased to Rs. 255.43 Lakhs, compared to Rs. 102.52 Lakhs for the financial year ended March 31, 2023, representing a growth of 149.14%. The significant improvement in profitability was primarily driven by higher production volumes and increased sales of more profitable products compared to FY 2022-23. Additionally, the Company achieved better operational efficiency, reflected in a reduction in employee costs and other expenses as a percentage of turnover, which further contributed to the growth in net profit.

Liquidity & Debt Service Coverage Ratio

Current Ratio

The Companys Current Ratio remained below 1.0 during the financial years ended March 31, 2023 and March 31, 2024. This was primarily attributable to higher current liabilities and elevated working capital requirements during the relevant periods. The key factors contributing to the lower Current Ratio during these years included: Higher trade payables and other current liabilities arising from increased operational activity; and relatively lower levels of trade receivables and inventory during the relevant periods, which impacted the overall current asset base. These factors resulted in a temporary mismatch between current assets and current liabilities, and consequently, the Current Ratio remained below conventional benchmarks during the said financial years.

Debt Service Coverage Ratio

The Debt Service Coverage Ratio ("DSCR") for the financial year ended March 31, 2023 was below 1.0. This was primarily due to higher borrowings undertaken during the year to meet working capital requirements, coupled with relatively lower earnings before interest, tax, depreciation and amortisation ("EBITDA") during the period. As a result, earnings available for debt servicing were comparatively lower, leading to a DSCR below 1.0 for FY 2022-23.

Management Actions and Improvement in Subsequent Periods

The management has taken focused measures to strengthen the Companys liquidity position and debt servicing capability. These measures included: Improved efficiency in utilisation of working capital borrowings; and Enhanced capacity utilisation, resulting in higher internal accruals supported by improved operational performance. Consequent to the above measures, the Company recorded an improvement in earnings available for debt servicing as well as an improvement in its current asset position in subsequent periods. Accordingly, both the Current Ratio and the Debt Service Coverage Ratio showed improvement.

Working Capital Efficiency Ratios and Liquidity Impact

Inventory Turnover Ratio

The Inventory Turnover Ratio declined during FY 2024-25, indicating a slower movement of inventory as compared to the previous year. This deterioration is primarily attributable to:

- Higher work-in-progress and finished goods inventory: The Company executed complex, customised components involving longer manufacturing, inspection, and approval cycles, resulting in inventory being held for extended periods.

- Timing mismatch between production and dispatch: Certain orders completed towards the latter part of FY 2024-25 were scheduled for dispatch in FY 2025-26, leading to higher closing inventory balances.

The decline in inventory turnover as a transitional outcome associated with growth, product complexity, and order execution timelines, rather than inefficiencies in inventory management. Measures are being implemented to improve production planning, optimize batch sizes, and reduce inventory holding periods.

Trade Receivables Turnover Ratio

The Trade Receivables Turnover Ratio deteriorated significantly during FY 2024-25, reflecting an increase in average collection days. This trend was driven by:

- Change in customer mix: A higher proportion of revenue was derived from large OEM customers, for whom extended acceptance and credit cycles are customary. For certain customers, the standard 30-day credit period commences from the date of quality approval post-delivery.

- Higher billing towards year-end: A significant portion of sales was invoiced during the latter part of the financial year, resulting in higher outstanding receivables as at March 31, 2025.

The deterioration in the receivables turnover ratio is therefore timing-related and reflective of customer profiles and billing patterns during the year. There has been no material increase in doubtful or non-performing receivables, and the Company continues to follow prudent credit assessment and monitoring practices.

Impact on Liquidity and Operational Efficiency

The combined impact of reduced operating cash flows and deterioration in inventory and receivables turnover ratios resulted in temporary liquidity pressures during FY 2024-25. These were managed through internal accruals, prudent utilization of working capital facilities, and disciplined cost management.

From an operational perspective, while working capital efficiency ratios reflected short-term stress, the Companys core manufacturing capabilities, execution capacity, order book, and customer relationships remained stable. Management believes that the working capital-intensive phase experienced during FY 2024-25 is linked to scale-up and execution of complex orders, rather than any structural inefficiency.

CASH FLOW

The table below summaries cash flows from our Restated financial statement for the period ended September 30, 2025 and financial year ended March 31, 2025, March 31, 2024 and March 31, 2023:

(Rs. in lakhs)

Particulars	For the period ended September 30, 2025	For the year ended March 31, 2025	For the year ended March 31, 2024	For the year ended March 31, 2023
Net Cash Flow from/ (used in) Operating Activities (A)	288.03	163.29	575.58	128.61
Net Cash Flow from/ (used in) Investing Activities (B)	(243.55)	(365.76)	(491.43)	(45.03)
Net Cash Flow from/ (used in) Financing Activities (C)	(25.61)	1.09	15.05	1.70
Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C)	18.87	(201.38)	99.20	85.28
Cash & Cash Equivalents as at Beginning of the Year/period	6.77	208.15	108.95	23.67
Cash & Cash Equivalents as at End of the Year/period	25.64	6.77	208.15	108.95

Operating Activities

For the period ended September 30, 2025

Our net cash generated from operating activities was Rs 288.03 lakhs for the period ended September 30, 2025. Our operating profit before Working Capital Changes was Rs. 486.72 lakhs which was primarily adjusted against an increase in inventories by Rs 60.69 lakhs, trade receivable by Rs. 115.11 lakhs, short term loans and advances by Rs

0.67 lakhs, Other Non-current & Current Assets by Rs 29.42 Lakhs, Other bank balance by Rs 97.11 lakhs, other current liabilities by Rs 137.27 lakhs, trade payable by Rs 53.85 lakhs and decrease in Provisions by Rs 15.29 Lakhs respectively which was adjusted by Rs 71.52 lakhs income tax paid during the period ended September 30, 2025.

For the year ended March 31, 2025

Our net cash generated from operating activities was Rs 163.29 lakhs for the financial year ended March 31, 2025. Our operating profit before working capital changes was Rs.1,024.50 lakhs which was primarily adjusted against an increase in inventories by Rs 174.11 lakhs, trade receivable by Rs. 278.24 lakhs, Other Non-current & Current Assets by Rs 39.25, other bank balances by Rs 104.12 lakhs, other current liabilities by Rs 59.41 lakhs and decrease in short term loans and advances by Rs 4.90 lakhs, trade payable by Rs 131.54 lakhs. These adjustments were further offset by income tax paid of Rs. 198.26 Lakhs during the year.

Explanation for Divergence between Profitability and Operating Cash Flows in FY 2025

During the financial year ended March 31, 2025, the Company recorded a significant increase in profitability, with Profit After Tax increasing by 159.86% to Rs663.76 lakh. However, net cash flow from operating activities declined to Rs163.29 lakh as compared to Rs575.58 lakh in the previous financial year. This divergence between profitability and operating cash flows was primarily attributable to timing-related working capital movements, particularly increases in trade receivables and inventories, as explained below:

Increase in Trade Receivables

As at March 31, 2025, the Companys trade receivables increased by 282.07%, while revenue from operations for FY 2024-25 increased by 21.48% compared to the previous financial year. Consequently, receivable days increased from approximately 21 days in FY 2023-24 to 67 days in FY 2024-25. This increase in trade receivables is primarily attributable to timing differences between invoicing and collection cycles and does not reflect any deterioration in the Companys credit quality, customer profile, or collection practices.

The Company generally extends a standard credit period of approximately 30 days to its customers. The increase in trade receivables as at March 31, 2025 was primarily due to the timing of invoicing and collections and does not indicate any deterioration in credit management.

In particular, during February and March 2024, the Company recorded sales aggregating to Rs262.64 lakh, whereas during February and March 2025, sales increased to Rs371.43 lakh. A significant portion of the invoices raised during February and March 2025 became due on or after March 31, 2025 in accordance with agreed credit terms. In addition, certain timing-related delays in collections contributed to higher receivable balances at the year end. Accordingly, the increase in trade receivables was driven by higher sales volumes and timing differences in collections rather than any weakening in the Companys credit policy or collection mechanism.

Inventory Management

As at March 31, 2025, the Companys total inventory increased by 182.74% as compared to the previous financial year, primarily driven by a 909.79% increase in Work-in-Progress inventory and an increase in Finished Goods inventory. This increase is attributable to the Companys customised, build-to-print manufacturing operations and customer-specific delivery schedules.

Finished Goods Inventory

As at March 31, 2025, the Company held finished goods inventory amounting to Rs128.32 lakh, comprising products manufactured during the year but pending dispatch due to customer-specific delivery schedules and order rescheduling. This resulted in an increase in finished goods inventory at the year end.

The Company operates in a customised manufacturing environment, wherein components are produced strictly in accordance with customer-approved drawings and technical specifications. Due to the customised nature of production, manufacturing cycles and cost structures vary significantly across products. Certain components require specialised outsourced processes such as heat treatment, coating, surface finishing and precision grinding, while others involve extended in-house machining cycles. Consequently, the time required to convert raw materials into finished goods and the associated job work costs differ materially.

Work-in-Progress Inventory

The work-in-progress inventory as at March 31, 2025 predominantly comprised process-intensive and timeconsuming components that were at advanced stages of completion but had not yet reached final completion as at the balance sheet date. Accordingly, the higher inventory levels reflect the nature and stage of completion of customised orders and the related job-work costs, and do not indicate any operational inefficiency, production delays or abnormal accumulation of inventory.

Accordingly, the divergence between profitability and operating cash flows in FY 2025 was largely attributable to timing differences in collections and inventory build-up linked to customer-specific delivery requirements. The Company does not consider this divergence to reflect any structural or operational concern.

Non-Saleable Inventory

Certain Finished Goods have been classified as "non-saleable" due to temporary timing differences in dispatch. Such inventory is otherwise fully saleable and compliant with customer specifications.

As at March 31, 2025, Finished Goods inventory amounted to Rs128.32 lakh. Subsequent to the year end, Finished Goods inventory aggregating Rs48.48 lakh was dispatched by September 30, 2025. Out of the remaining Finished Goods inventory of Rs79.83 lakh, the Company expects to realise more than 90% during the balance period of FY 2025-26, based on confirmed customer delivery schedules and ongoing discussions with customers.

Valuation of Inventory

The Company confirms that all inventory, including raw materials, Work-in-Progress, and Finished Goods, has been valued at the lower of cost and net realisable value in accordance with applicable Accounting Standards. Cost is determined on a FIFO basis and includes raw material costs, direct labour, direct expenses, and an appropriate allocation of manufacturing overheads and job work charges. Management has assessed the net realisable value of inventory as at the reporting date and is of the view that no material provision for diminution in value is required.

Based on the foregoing, management believes that the increase in inventory during FY 2024-25 is temporary, operationally explainable, and not indicative of any deterioration in demand, execution capability, or inventory management practices.

For the year ended March 31, 2024

Our net cash generated from operating activities was Rs 575.58 lakhs for the financial year ended March 31, 2024. Our operating profit before Working Capital Changes was Rs. 420.34 lakhs which was primarily adjusted against an increase in short term loans and advances by Rs 16.35 lakhs, Other Non-current & Current Assets by Rs 15.19 lakhs, other current liabilities by Rs 22.72 lakhs, trade payable by Rs 159.75 lakhs and decrease in inventories by Rs 4.96 lakhs, trade receivable by Rs.81.49 lakhs, respectively which was adjusted by Rs 82.14 lakhs income tax paid during the financial year ended March 31, 2024.

For the year ended March 31, 2023

Our net cash generated from operating activities was Rs 128.61 lakhs for the financial year ended March 31, 2023. Our operating profit before Working Capital Changes was Rs. 210.40 lakhs which was primarily adjusted against an increase in inventories by Rs 0.99 lakhs, trade receivable by Rs. 179.58 lakhs, short term loans and advances by Rs 7.13 lakhs, other current liabilities by Rs 31.33 lakhs, trade payable by Rs 98.45 lakhs and decrease in Other Noncurrent & Current Assets by Rs 3.56 Lakhs, Provisions by Rs 14.08 Lakhs respectively which was adjusted by Rs 13.35 lakhs income tax paid during the financial year ended March 31, 2023.

Investing Activities

For the period ended September 30, 2025

Our net cash used in investing activities was Rs 243.55 lakhs for the period ended September 30, 2025. It was on account of purchase of property, plant & equipment and intangible assets including capital advances of Rs 339.90 lakhs, Sale of Property, plant & equipment Rs 93.10 lakhs and interest income received of Rs 3.25 lakhs.

For the year ended March 31, 2025

Our net cash used in investing activities was Rs 365.76 lakhs for the financial year ended March 31, 2025. It was on account of purchase of property, plant & equipment and intangible assets of Rs 230.24 lakhs, Advance for capital goods of Rs 160.79 lakhs, Sale of Property, plant & equipment Rs 19.35 lakhs and interest income received of Rs 5.92 lakhs.

For the year ended March 31, 2024

Our net cash used in investing activities was Rs 491.43 lakhs for the financial year ended March 31, 2024. It was on account of purchase of property, plant & equipment and intangible assets of Rs 477.26 lakhs, Advance for capital goods of Rs 14.96 lakhs and interest income received of Rs 0.79 lakhs.

For the year ended March 31, 2023

Our net cash used in investing activities was Rs 45.03 lakhs for the financial year ended March 31, 2023. It was on account of purchase of property, plant & equipment and intangible assets of Rs 45.03 Lakhs.

Financing Activities

For the period ended September 30, 2025

Our net cash used in financing activities was Rs 25.61 lakhs for the period ended September 30, 2025. It was on account of Net Repayment of Borrowings of Rs 51.05 lakhs and interest cost paid of Rs 5.03 lakhs adjusted against lease liabilities of Rs 30.47 lakhs.

For the year ended March 31, 2025

Our net cash generated from financing activities was Rs 1.09 lakhs for the financial year ended March 31, 2025. It was on account of Net Proceeds of Borrowings of Rs 151.49 lakhs adjusted against lease liabilities of Rs. 131.31 lakhs and interest cost paid of Rs 19.09 lakhs.

For the year ended March 31, 2024

Our net cash generated from financing activities was Rs 15.05 lakhs for the financial year ended March 31, 2024. It was on account of Net Repayment of Borrowings of Rs 74.91 lakhs and interest cost paid of Rs 5.87 lakhs adjusted against lease liabilities of Rs 95.83 lakhs.

For the year ended March 31, 2023

Our net cash generated from financing activities was Rs 1.70 lakhs for the financial year ended March 31, 2023. It was on account of Net Repayment of Borrowings of Rs 6.40 lakhs, Withdrawal from Partners of Rs 20.00 lakhs and interest cost paid of Rs 9.26 lakhs adjusted against lease liabilities of Rs. 37.36 lakhs.

Information required as per Item (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations:

An analysis of reasons for the changes in significant items of income and expenditure is given hereunder:

1. Unusual or infrequent events or transactions

There has not been any unusual trend on account of our business activity except as disclosed in this Red Herring Prospectus.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

Other than as described in the chapter titled "Restated Financial Information " and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations ", beginning on page 224 and 226 respectively of this Red Herring Prospectus, to our knowledge there are no significant economic changes that may materially affect or likely to affect income from continuing operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Other than as described in the section titled "Risk Factors" and the chapter titled "Managements Discussion and Analysis of Financial Conditions and Result of Operations" beginning on page 38 and 226 respectively of this Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues

Our Companys future costs and revenues will be determined by factors such as demand and supply dynamics, changes in customer preferences, and government policies.

5. Total turnover of each major industry segment in which our Company operates

We are engaged in the business of manufacturing of high precision mechanical components catering to the aerospace, defence and healthcare industries. Please refer in the chapter titled "Our Business beginning on page 157 of this Red Herring Prospectus. Therefore, there are no separate reportable segments.

6. Status of any publicly announced New Products or Business Segment

Except as disclosed in the chapter titled "Our Business" beginning on page 157 of this Red Herring Prospectus, our Company has not announced any new product or business segment.

7. Seasonality of business

Our business is not seasonal in nature. For further information, please refer to the chapters titled "Industry Overview" and "Our Business" beginning on pages 128 and 157 respectively of this Red Herring Prospectus.

8. The extent to which material increases in revenue or income from operations are due to increased volume, introduction of new products or services or increased prices

Changes in revenue are as explained in the part "Comparison of Financial Year 2025 with Financial Year 2024 and Comparison of Financial Year 2024 with Financial Year 2023" above.

9. Dependence on single or few customers

Our business is dependent upon few customers. For further details, please refer to the section titled "Risk Factors" beginning on page 38 of this Red Herring Prospectus.

10. Competitive conditions

Competitive conditions are as described under the chapters "Industry Overview" and "Our Business" beginning on pages 128 and 157 respectively of this Red Herring Prospectus.

11. Details of material developments after the date of last balance sheet i.e. September 30, 2025.

Except as mentioned in this Red Herring Prospectus, no circumstances have arisen since the date of last financial statement until the date of filing the Red Herring Prospectus, which materially and adversely affect or are likely to affect the operations or profitability of our Company, or value of its assets, or its ability to pay its liability within next twelve months. Our Company has approved the Red Herring Prospectus vide resolution in the Board Meeting dated March 04, 2026.