Astra Microwave Products Ltd Management Discussions

Astra is engaged in design, development, manufacture and supply of high value-added RF and microwave super components, sub-systems and systems finding application in Defense, Space, Telecom, Meteorology and Civil communication markets.

The financial statements have been prepared in accordance with the guideline as laid out in the Companies

Act, 2013 and Indian Accounting Standard-(Ind-AS) in India. The management of Astra accepts responsibility for the integrity and objectivity of these financial statements. The financial statements reflect in a true and fair manner, the form and substance of transactions and reasonably present the companys state of affairs andprofitsfor the year.

We are delighted to share with you that the FY 25 has been an excellent year for the company as we have grown exponentially in multiple parameters including financial performance, developing capabilities and improving quality of product mix. We have registered our highest ever financial performance across all metrics, Revenue, EBITDA, PAT. We have also witnessed good margin expansion driven by improvement in the sales mix. This performance is in line with our expectations and guidance.

Your Company has also achieved good order booking performance during the year which stands at Rs.1,952 crores at the end of the year and order win continues to be healthy. Major order booking is from domestic defence segment and within this good number of orders are booked in Radars, EW segment, Missile electronics followed by metrology and hydrology.

R&D is our cornerstone of our growth and this year, we have spent close to about Rs.53 crores in R&D which was focused mainly on radar systems, critical subsystems for radar, seekers, SSPAs and EW subsystems.

We appraise this performance within the context of a structural shift with long-term implications and positive outcomes. We see the industry uptrend not as a fleeting reality; we see it as a multi-decade opportunity. In view of this, we foresee that the health of the companys business will remain robust and growth momentum likely to sustain.

The companys performance growth is the result of its prudent long-term investment in addressing the growth coming of Indias defence and space sectors. The growth of these sectors has been driven by a structural shift. This shift comprises the decision of the government to ban the import of specific widening the market for Indian companies. Besides, the growth of these sectors is being driven by the companys commitment to deepen national security and science.

The Company has invested extensively, backed by our understanding that prospects in these spaces will be irreversible and can only deepen across the foreseeable future. The prospects in these spaces are being driven by sub-continental security concerns as well as international competitiveness being by advances in the space sector. The products or business chosen by are influenced by the prospects of the respective industry segments of our presence.

The growth of Indias defence sector is being principally catalyzed by a governmental priority that

India manufactures a growing proportion of defence products (under the Make in India initiative). Indias private sector is addressing this unprecedented opportunity with the singular objective of deepening skills and competencies. This point cannot be over-emphasized; as the world is touched with advanced and futuristic technologies, the priority of the day is to create talent pools within companies equipped to absorb, upgrade and replicate cutting-edge technologies.

At our company, we had two alternatives when challenged by evolving technologies. The company could have entered into a strategic collaboration to access international defence technologies. On the contrary, the company walked the road less travelled; it selected to build on a home-grown approach, which was more challenging.

The result is that the company studied global developments, comprehended technologies, adapted its approach wherever needed and customized around customer needs. Besides, the company curated different competencies and technologies in line with customized needs. The result is that over the three decades of our existence, we have developed a respect for working backwards from customer needs and delivering desired (sometimes better) quality within time and cost. I am happy to communicate that in the last few years, we have helped develop systems, sub-systems and components that have helped

India moderate imports and reduce its dependance on international suppliers. The result is that we now generate recall that ‘If it is challenging, go to

Astra Microwave.

In the area of space sector opportunities, we again possess a multi-decade experience. The company was first engaged in a partnership with ISRO around 25 years ago in the areas of ground-based cum satellite-based electronics. Over time, our engagement with ISRO deepened; when RISAT was developed by ISRO in 2015, partner Astra Microwave accounted for around 90 per cent of all the electronics that went into the project.

Over time, the company has strengthened its understanding, experience and coverage of critical subsystems and satellite payloads. This investment has proved opportune; Indias space sector has opened wider for private Indian industry. The company has bid for satellite launch projects, partnering specialised Indian engineering companies. In doing so, the company has positioned itself as a responsible project owner with the capacity to own core capabilities and curate complementary alternativecompetencies. would be to insource At Astra Microwave, the spaces we address are transforming with speed in terms of project scale, number, complexity and completion speed. This reality is putting a premium on the ability to address all, generate superior realizations, reinvest and graduate to the next orbit.

In the past, the company enriched its sectorial understanding by supporting OEM needs for components and sub-systems. Even as this represented the lower end of the value chain, the company developed a granular understanding of standalone technologies and their related compatibility. In doing so, the company gained an insight into building a sub-system from scratch; thereafter, it developed an insight into the manufacture of other sub-systems. Even as much of the companys exposure in the defence sector was back-ended and playing a role comprising low value-addition, what it gained was a comprehensive understanding of granular systems, processes and outcomes.

The company recognised the need to enhance product value, graduating from the fabrication and assembly of sub-systems to complete systems. There was a corresponding transformation: the company enhanced its competence to address scale, complexity, margins and respect; besides, it began to attract talent by the virtue of being recognised now as a growing systems fabricator.

The time has come to take this competence (as expressed through an increase in the proportion of revenues derived from the fabrication of complete systems) to the next level. The company intends to engage in the select recruitment of subject matter experts across engineering and fabrication capabilities. It intends to deepen a culture of innovative research and a passion-driven embrace of projects of engineering complexity and scale. In doing so, the company intends to build proprietary capabilities in addressing defence sector prospects. The company expects that this patient investing should translate into 50 per cent of the companys revenues being generated from the development of systems in the next three to five years. This transformation in the revenue mix is expected to strengthen revenues, margins and capital efficiency. In addressing the space sector, the company will seek a more collaborative approach. The space comprises room for a range of advanced technologies. To be able to provide for all technologies from within the company would consume time; a more functional and profitable core technologies and outsource others, creating a comprehensive eco-system. We believe that in the space sector, this collaborative approach will prove effective. The company will play the role of an active curator of technologies, selecting eco-system-strengthening partners with validated competencies.

As you are aware, your Company has incorporated a subsidiary company to undertake space related business and has started recruiting personnel and setting up basic infrastructure for satellite integration at its Bangalore facility. The objective is to get qualified for satellite integration and launching business. In this endeavor, it is preparing itself to launch its own basic satellite in the next two to three years

With strong R&D capabilities built over three decades, we have delivered products with cutting-edge technology for defence and Aerospace applications.

To name a few, we are the first company to deliver AAAU for Uttam Radar being developed by DRDO, AESA Seeker Head, high-power SSPA in high-frequency bands, Digital Multi channel RFSOC based transceiver for Naval based radar being developed by DRDO. We have also successfully executed AAAU of SBR and

PPTR which is unique for a private sector Company. We feel proud to announce that, we developed Doppler weather Radar (DWR) in various frequency bands in FY25.

We also would like to state that, development of few more critical new technologies like photonics radar subsystems, sub-marine communication subsystems and systems like APS radar are in the advance stage of development phase.

We are indeed excited by this set of opportunities that we see and excited to partner with the Defense

Labs and the Defense PSUs under whose tutelage we have blossomed and have reached the stage where we are developing new exciting products and have emerged as a systems-level entity with systems integration capabilities.

For JV Company, ARC, it was a breakout year, which we have been waiting for some time and its bottom line has improved in a big way. For the year ended it has bagged close to about INR 386 crores of orders and has a healthy order book of about INR 456 crores at end of the year. There is potential to bag big orders in the coming years to the extent of about INR 900 crores and will record at least about 10% to 15% year-on-year growth in the next few years with a PBT of around 10% to 15%. As you are aware, Astra owns 50% of this JV Company and has earned about INR 12 crores of profit as its share from the JV company for the year gone by. SDR back pack radio, which is under development at the JVC under NCNC basis is due for final technical trials in the next couple of months and the company is gearing up for the same.

Other two wholly owned subsidiary Companies are also doing well though they continue to serve the parent companies to a large extent.

And lastly, for the coming years, we are targeting order book in the range of Rs.1,400 crores and the top line in the range of about Rs.1200+ crores while maintaining the existing profit margins. Well continue to grow our capabilities strategically and achieve our targets step by step.

Our order book as on 31st March, 2025 stood at Rs. 1,95,153 Lakhs (stand alone) as shown below which is executable in the next 12 to 30 months period. Our current order book is around 2 times of our FY25 revenue, which gives considerable visibility for next few years revenues. During FY25, we have received orders worth Rs. 1,096 Crores and following is the details of overall orders on hand at the end of the year.

Sector wise sales are as follows

To augment present operations, we have budgeted to spend Capital Expenditure of about Rs. 45 cr which is mostly used for purchase of RF and Microwave Test equipment and special testing tools and Rs.45 cr for building additional space for production purposes .This capex will be funded through internal accruals and term loans.

The Companys main source of revenues lies in Defence market. Most of these projects are initiated, designed and developed by DRDO labs and driven by Govt., policies and priorities. Though technically we can project and complete the product development on the time lines indicated, conversion of that to a recognizable quantum of orders lies mainly on the Government decisions. This results in an uneven and skewed pattern of sales for the Company, which is beyond the control of the Company.

Defense export business is driven by offset provisions of Govt., of India which is project based and hence generally lumpy in nature and is controlled by export regulations where time delays could happen in granting necessary permissions. This export business is also high precision and skilled job involving specialized inputs from across the globe which has a bearing on timely execution and uniform billing.

1. Share Capital

At present, the company has only one class of shares-equity shares of Rs.2 each, par value. The paid up capital as on 31^st March, 2025 is Rs. 18.99 cr.

2. Reserves and Surplus

The change in reserves and surplus represents the profits made during the year after making provisions for taxation.

3. Loan Funds

Following are the details of secured loans maintained during the year.

4. Deferred tax

The deferred tax liability pertains to difference in the depreciation claimed in the books and tax purposes.

5. Fixed Assets

The Company added assets worth Rs.93 crores to the gross block during the year. This increase is primarily attributable to the capitalization of a new building block at Unit 3. A Significant software relates to the procurement of advanced test equipment and software tools. These additions have directly and indirectly enhanced the companys productivity and operational efficiency.

6. Investments

Investments represent amount invested in equity share capital of wholly owned subsidiary companies, Joint Venture Companies and Associates.

7. Sundry Debtors.

Sundry debtors amount to Rs.783 cr at the end of the year as compared to Rs. 503 cr for the previous year. They are at 64% of revenue for the year as compared to 49% for the previous year representing an outstanding of 274 days and 203 days of revenues for the respective years. However, the outstanding days are to be read with skewed pattern of sales with majority of billing happening in the last quarter. More than Rs.400+cr worth of sales are done in last quarter which shows level of skewness in sales execution. In addition, about Rs.50+cr worth of sales are deferred sales which are collectable in the next 5 years. We have to consider these two extreme conditions while analysing debtors turnover ratio to understand the real picture.

The company reviews health of receivables on monthly basis and has policy of writing off debts as bad after the review and recommendation by the management review committee. Through Estimated Credit loss mechanism, the Company is providing provision for financial loss for long outstanding dues though such debts may not be categorized as bad.

8. Cash and cash equivalents

The company is operating with multiple banks and the surplus funds if any are parked with them or with their associates. For meeting certain statutory requirements, the company is maintaining current accounts with couple of other nationalized banks. The companys cash and cash equivalents are as follows.

The advances paid for supplies, services and expenses represent the amount paid to both domestic and foreign vendors for supply of materials and services.

The advances also include un-availed GST both on capital goods and raw materials.

The amount of income-tax paid represents the advance tax and TDS deducted less provision for tax.

Sundry creditors for capital works, supplies represent the amount due at the end of the year for the capital goods and raw material supplied. Sundry creditors for services and expenses represent the amount due and payable for various expenses including the accrued salaries and other benefits of the employees.

Advances from customers represent the amount received as per the terms of purchase orders from the Defence and Space establishments and on export orders.

Provisions represent provisions made for taxation, gratuity, leave encashment etc., Taxation provisions are shown net of advance tax for the years for which the assessments are pending.

The provision for gratuity and leave encashment is provided on the basis of actuarial valuation at the end of the financial year.

We treat human resource as the most valuable asset.

Employee satisfaction is essential to us. We commit to improve the quality of work life and employee satisfaction, while aligning the individual aspirations with the company objectives.

Towards creating a vibrant and performance-oriented culture in the organization, several interventions are initiated. Online HR portal facilities employee interactions with HR department for all their requirements. Company has introduced on line leave approvals, annual appraisals, training programs etc., through the online portal. Overall employee relations are cordial and productive.

The Company is committed to maintaining an effective system of internal control. The Company is conducting all its operations on ERP-SAP system. Successful usage of ERP-SAP system has facilitated managements objective of establishment of accurate, reliable and speedy compilation of financial information, safeguarding the assets and interest of the Company and ensuring compliance with laws and regulations.

The Company functions with well-defined an effective management information system to enable the management to regularly review actual performance. The Company has also put in place a well-defined organization structure, clear authority levels and internal guidelines for conduction of business transactions.

M/s. Kirtane & Pandit LLP Chartered Accountants, conducts Companys internal audit program which supplements the Companys internal control systems. To achieve full effectiveness, the scope of the internal audit function has an unrestricted range of coverage of the organisations operations and the internal auditor was given sufficient authority to access such records, assets and personnel as are necessary for proper fulfilment of his responsibilities. The Audit committee of the Board of Directors reviews the Internal Audit Reports at regular intervals and suggests implementation of best practices based on observations therein.