Astra Microwave Products Ltd Management Discussions

 

Overview:

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

A. Financial Analysis:

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 company?s state of affairs and profits for the year.

a) Operational Performance and Outlook for the future:

This has been a milestone year for us as we have successfully completed our QIP and registered our best financial performance across all metrices. We closed the year with a top line of Rs. 807 Cr and EBITDA of 18.5%. Our order book position is also very healthy at Rs. 1,544 Cr. We are also very happy at the note of confidence expressed in our abilities by the leading institutional investors in India and outside-in our capabilities and growth prospects.

Overall there are various tailwinds in the defence space for players like us. Globally, the countries are increasing their military budgets. Our government which spends roughly 3% of GDP on defence every year is highly focused on increasing self-reliance. This mission is driven by an increase in the R&D spends by DRDO and by encouraging private sector to invest in developing on NCNC model. With our longstanding relationships with our customers and several years of experience in high tech-oriented products, Astra stands to benefit immensely from this boost.

With a strong order book and inflow, for FY24 we maintain our top line target of Rs. 900 to 950 crores and the bottom line at PBT level of about 140 to 150 crores. We have improved our profitability compared to the last financial year, mainly due to the change in sales mix. We will further improve our profitability and efficiency as we utilize our QIP proceeds. Funds raised through the QIP to the tune of Rs. 225 cr will give a strong boost to our future growth by investing in newer technologies and develop newer products. Company has identified about 10 projects/products which are part of government negative list to invest proactively and expect to come-out successfully in the next 3 to 4 years. This proactive investment should present a gamut of opportunities and help the Company to sustain and improve its top and bottom line in the long run. The Company is also in discussions with start-ups and small size companies with unique expertise to jointly development newer products with joint ownership and sharing of profits. The idea is to have larger pool of products to target wider market space within Defence and Aerospace.

At this point in time we also wish to focus on creating multiple solutions, Astra branded solutions around our core competencies in RF and microwave domains. We want to transition from merely supplying radar subsystems and systems to possibly supplying complete solutions, which will encompass radars, subsystems and components as their core and around which solutions will be built, leveraging our extensive R&D capabilities as well as in-house expertise supplemented by externally sourced capabilities through collaborations. An exercise is on within the company to identify strategic growth areas with large total addressable markets where we can identify specific market opportunities and issues where specific solutions can be offered.

Work has commented on this and this transition from almost exclusively -- being a tender-based business to on-demand ready solutions company comes at a very opportune time where we have the required skill set and the technology within the company to achieve higher margins and an extended product range, which will give a further significant boost to our top line. We expect to start seeing results from these initiatives over the next couple of years and expect that our solutions will become a significant contributor to our overall revenues over a period of time.

We further intend to undertake a few initiatives to link Astra with various research-based institutions of higher learning and harness resources and the technology being developed there for our solutions besides extending this collaborative framework to other defense companies and early stage companies.

Major product deliveries made during the year are:

o LRUs supplied to 3D-CAR and Ashlesha Radars

o Developed & supplied Radar & EW Systems Test & Evaluation Facility (50 MHz - 40 GHz) to DLRL to carry out T&E of EW systems in Radiation mode.

o Supplied TR Modules & Control Units for LRDE?s Long Range Radar (LRR)

o Developed & supplied a Land-based 7.3m Ground Telemetry Station which is designed to acquire and track airborne targets using five different carriers simultaneously

o Proto Development & Production of Digital Transmit Receive Units (DTRUs) and Digital Receive Units (DRUs) for Digital Active Phased Array (DAPA) Technology Demonstrator Project

o Shakti Project Submodules

o Nayan Project Submodules

o Developed Active Array Antenna Unit (AAAU) For Uttam AESA Radar for LCA Mk1A fighter aircraft.

o Delivered S-Band FHDR and X-Band FHDR which are CW Radars deployed in close proximity of gun/

launcher at Firing Test Range(s) and operated from blockhouse to measure muzzle velocity and range of the projectile after exit from the muzzle.

Business Highlights:

o Exclusive MoU signed with Eldis for all civil Airport Surveillance Radars opportunities in India

o Developed Counter-Drone Radar based on DRDO Technology. This can be integrated with any Jammer

& RF Sensor to form a complete Counter Drone System.

o Have bid for Netra Space Debris Radar for ISTRAC along with our partner who is a global Radar OEM. This Radar can detect space debris as small as 10 cm at 2000 km range.

o Signed MoU with Sisir Radar for jointly build SAR payload for defence application

o We are one of the ToT partner of DRDO for Low-level Transportable Radar (LLTR) for which limited tender is expected in near future.

Major projects due for delivery during the year 2023-24:

o 6 Mtrs S-Band AAAU for strategic Naval application of DRDO

o Space Group CTRiM, XTRiM & X-TRIB, Anvesha Project

o Nayan Project Sub Modules

o Pulsed Phased Array Tracking Radar (PPTR).

o Shakti Project Submodules

o 16 Elements AATRU for ASPJ Pod (LCA Mk1A)

o C- Band Doppler Weather Radar For IMD

o Ku-Band AESA Seeker Head for future version of Astra missiles.

o X-Band AESA Seeker Head for Naval missiles

o Compact Telemetry System (CTS).

o X-Band Doppler Weather Radar.

b) Order Book:

The company has been able to create a solid diversified order book on the back of our deep domain expertise. With our proven track record, we are well placed to capture a bigger pie of Indian defence sector market which is growing at a fast pace on the back of various government initiatives like IDDM, MAKE-II. We see opportunities coming in from various programs planned by Government through Defense Research labs (DRDO) and from the Make-II opportunities from Ministry of Defence (MoD). Many of these are, especially in radar and electronic warfare systems where we have proven expertise. We believe going forward, our revenue mix will increase in the domestic area as compared to last three previous years which should give improved bottom line.

Our order book as on 31st March, 2023 stood at Rs. 1,544 crores (as shown below) which is executable in the next 12 to 30 months? period. Our current order book is 2 times of our FY23 revenue, which gives considerable visibility for next few years revenues. During FY23, we have received orders worth Rs. 760 Crores.

Sector	Rs. In Lacs
Defence/Public Sector Products	91,403
Space	21,107
Meteorological & Other Products	5,534
Exports	36,355
Total	1,54,399

c) Sales performance:

Sector wise sales are as follows

Business Sector	FY 2022-23	FY 2021-22
	Rs. Lacs	%	Rs. Lacs	%
Defence	44,933	55	33,308	45
Space	804	1	896	1
Metrology/Civil Telecom/Others	2,855	4	4,585	6
Exports (including deemed exports)	31,923	39	34,472	47
Other Operating Revenue	212	1	235	1
Total	80,727	100	73,496	100

d) Expansion Plans:

The company will continue to look at organic and in-organic options to stabilize top line performance as present business is project driven and hence lumpy in nature.

To augment present operations we have budgeted to spend Capital Expenditure of about Rs. 45 cr which will be funded through internal accruals and term loans.

e) Risks & Concerns:

The Company?s 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.

Defence 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.

B. Financial Condition:

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, 2023 is Rs.17.32 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

The company has enhanced its working capital loan during the year by Rs. 30 Crs. Following are the details of secured loans maintained during the year.

Particulars	As of March 31 (Amount Rs.)
	2023	2022
Working capital loans:
Open cash credit including WCDL
Sanctioned amount	235,00,00,000	205,00,00,000
Outstanding amount	150,52,76,426	45,23,94,758
Long Term Loans:
Outstanding at the beginning of the year	14,60,41,225	-
Additions during year	14,97,69,785	14,60,41,225
Repaid during the year	11,25,00,000	-
Amount outstanding at the end of the year	18,33,11,010	14,60,41,225

4. Deferred tax

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

5. Fixed Assets

Particulars	As of March 31 (Amount Rs.)
	2023	2022
Original cost
Land	23,56,21,666	20,51,85,713
Buildings	79,18,78,295	79,10,09,999
Plant & Machinery	176,21,87,072	152,09,85,534
Electrical Installation	4,87,73,837	4,91,48,265
Air Conditioners	4,93,31,843	4,76,68,518
Office Equipment	3,88,28,248	3,79,58,987
Furniture and Fixtures	5,38,31,742	4,89,29,619
Software	4,97,16,372	4,41,85,573
Computers	12,98,23,832	11,52,67,305
Vehicles	98,28,982	88,91,880
Solar Power Generating System	6,69,18,781	6,69,18,781
Wind Electric Generating System	12,45,47,464	12,45,47,464
Capital work-in-progress	1,98,87,471	8,22,839
Less: Accumulated Depreciation	170,94,30,553	148,30,11,588
Net Block	167,17,45,051	157,85,08,889
Net Fixed Assets	167,17,45,051	157,85,08,889
Depreciation as % of total revenue	2.86	2.91
Accumulated depreciation as a % of gross block	50.55	48.44

During the year the company added assets (net) worth Rs. 32 crores to the gross block. Most of the plant and machinery additions pertain to cost of Test equipment?s. Addition of these equipment and facilities has improved the productivity of the Company directly and indirectly.

6. Investments

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

Particulars	As At
	31.03.2023	31.03.2022
	Rs.	Rs.
i) Equity instruments of subsidiaries (unquoted): 1. Bhavyabhanu Electronics Private Limited 49,75,998 (2022: 49,75,998) equity share of INR 10/- each fully paid up	6,89,87,980	6,89,87,980
Deemed investment in Bhavyabhanu Electronics Private Limited on account of corporate guarantee	2,63,37,500	2,10,70,000
2. Aelius Semiconductors Pte. Ltd, Singapore 1,11,700 (2022: 1,11,700) equity shares of SGD 10 each fully paid up	5,52,41,674	5,52,41,674
3. Astra Foundation 9,990 (2022: 9,990) equity shares of INR 10/- each fully paid up	99,900	99,900
ii) Eauitv Instruments of Joint Venture (unquoted): Astra Rafael Comsys Private Limited 2,00,00,000 (2022: 2,00,00,000) equity shares of INR 10/- each fully paid up	20,00,00,000	20,00,00,000
Deemed investment in Astra Rafael Comsys Private Limited on account of corporate guarantee	14,73,630	-
Investments carried at FVTPL
i) Equity Instruments of Associate (unquoted): Janyu Technologies Private Limited 1 (2022:1) equity share of INR 10 each fully paid up	188	188
ii) Preference Shares of Associate (unquoted) Janyu Technologies Private Limited 1,06,436 (2022: 1,06,436) Series E Compulsorily convertible preference shares of INR 10 each fully paid up	2,00,00,000	2,00,00,000
iii) Investment in share warrants of Associate (unquoted) 1. Janyu Technologies Private Limited 30,00,000 (2022: 30,00,000) Investor Series 1 Share warrants		5,000
2. Janyu Technologies Private Limited 20,00,000 (2022:20,00,000) Investor Series 2 Share warrants	-	5,000
Total	37,21,40,872	36,54,09,742

7. Sundry Debtors

Sundry debtors amount to Rs. 282 cr at the end of the year as compared to Rs. 202 cr for the previous year. They are at 35% of revenue for the year as compared to 28% for the previous year representing an outstanding of 127 days and 101 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.

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 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 company?s cash and cash equivalents is as follows.

Particulars	2023	2022
Cash and cash equivalents as a % of total assets	4.57	2.24
Cash and cash equivalents as a % of revenues	5.93	2.92

9. Loans and Advances

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.

10. Current liabilities

Sundry creditors for capital works, supplies represents 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.

11. Provisions

Provisions represents 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.

C. Others

Human Resources

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.

Internal Control Systems & Adequacy

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 management?s 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 budgets and has 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 Company?s internal audit program which supplements the Company?s 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.

	For and on behalf of the Board of Directors
	S. Gurunatha Reddy	M.V. Reddy
	Managing Director	Joint Managing Director
Place: Hyderabad Date: July 14, 2023	DIN:00003828	DIN:00421401