Avalon Technologies Ltd Management Discussions

ECONOMY OVERVIEW Global Economy

The global economic landscape continued to shift in 2024, shaped by evolving geopolitical events, shifting trade patterns and adjustments in monetary policy. The global economic outlook has shown modest improvement in CY2024, with the world economy growing at around 3.3%. Monetary policy responses diverged across countries, with some central banks beginning to cut interest rates and others maintaining tight stances to control inflation. Trade dynamics also played a key role – some nations imposed tariffs to protect domestic industries, while others moved to reduce trade barriers. Amid these shifts, advanced economies recorded modest growth of 1.8% in 2024. The United States led among major advanced economies with a 2.8% expansion, while the euro area and Japan grew merely at 0.9% and 0.1%, respectively. Emerging market and developing economies (EMDEs) grew at a stronger pace of 4.3% in 2024. Within this region, India posted strong growth at 6.5%, while China grew by 5.0%. The ASEAN-5 economies, including Indonesia, Malaysia, the Philippines, Thailand and Vietnam also contributed positively, recording a collective growth of 4.6% in 2024.

World Economic Outlook (%)

	2024	2025P	2026P
World Output	3.3	2.8	3.0
Advanced Economies	1.8	1.4	1.5
United States	2.8	1.8	1.7
Euro Area	0.9	0.8	1.2
Japan	0.1	0.6	0.6
United Kingdom	1.1	1.1	1.4
Canada	1.5	1.4	1.6
Other Advanced Economies	2.2	1.8	2.0
Emerging Market and Developing Economies	4.3	3.7	3.9
Emerging and Developing Asia	5.3	4.5	4.6
India	6.5	6.2	6.3
China	5.0	4.0	4.0
ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam)	4.6	4.0	3.9

P - Projected

Sources: IMF April 2025 report

Looking ahead, global growth is expected to ease to 2.8% in 2025, before edging up to 3.0% in 2026. Growth in advanced economies is projected to remain modest at 1.4% in 2025 and 1.5% in 2026, as consumer demand stays muted and businesses hold back on new investments amid ongoing economic uncertainty. Meanwhile, EMDEs are projected to maintain relatively stronger growth rates of 3.7% in 2025 and 3.9% in 2026, though at a slower pace than in previous years. Inflation is anticipated to continue its declining track globally, reaching 4.3% in 2025 and 3.6% in 2026. In advanced economies, inflation is expected to ease more quickly, returning to target levels around 2.2% by 2026. However, in many EMDEs, inflation is projected to remain above central bank targets, partly due to currency volatility and supply-side constraints.

Geopolitical tensions, including conflicts and trade disputes, continue to pose risks to economic stability, impacting supply chains. Recent tariff increases by the United States, particularly on imports from China and several other countries, have prompted retaliatory measures, raising the risk of trade disruptions, inflation and greater global economic fragmentation. In this environment, international cooperation and sustained dialogue will be essential to safeguard stability and promote shared growth. Despite these challenges, opportunities from technology and reform offer potentialupside,makingadaptabilityanddiversification essential for policymakers and businesses navigating this delicate global environment.

US Economy

In 2024, the United States economy expanded by 2.8% compared to 2.9% growth in 2023, operating above its potential on the back of strong domestic demand, with private consumption growing at 2.8% which is well above its 2000 to 2019 historical average of 2.4%. Early in the year, growth was buoyed by easing inflation and robust job creation, particularly in services and construction. However, as the year progressed, momentum began to slow amid tighter financial conditions, policy normalisation and global trade frictions. Business investment weakened and hiring started to decelerate in response to higher interest rates and shifting external demand.

Looking ahead, the economy is projected to grow by 1.8% in 2025 and 1.7% in 2026, indicating a phase of moderation after the considerable expansion in 2024. The anticipated slowdown reflects the cumulative effects of greater policy uncertainty, trade tensions, and a softer demand outlook, given slower-than-anticipated consumption growth.

Trade-related headwinds have intensified, with protectionist policies and higher tariffs contributing to a marked drop in imports and weakening both manufacturing and services output. Inflation concerns have resurfaced, with forecasts pointing to renewed upward pressure on consumer prices in the second half of 2025.

Despite these challenges, the labour market has shown underlying strength and financial markets continue to reflect cautious optimism, underpinned by expectations that economic fundamentals may still support stability in the near term.

Indian Economy

Indias economy continues to grow at a steady and confident pace, standing out as the fastest growing major economy in the world. In 2024–25, real GDP growth was estimated at 6.5%. This performance comes at a time when the global economy faces uncertainty, making Indias steady momentum all the more significant. It is also supported by continued government efforts to attract foreign investment, positioning India as a key destination for global capital. The consistent interest from international investors reflects confidence in Indias long-term potential, even as other economies experience more subdued growth.

Private consumption and public expenditure registered huge gains during the year. On June 6, 2025, the Reserve Bank of Indias Monetary Policy Committee (MPC) reduced the repo rate by 50 basis points to 5.50%, marking the third rate cut. The rate cut is intended to enhance liquidity and stimulate economic momentum. Nonetheless, the MPC maintained a neutral policy stance to retain flexibility in navigating future economic and financial developments. Consumer Price Index (CPI) inflation is expected to ease to 3.7% in 2025-26, down from 4.6% in 2024-25.

Indias share of global GDP, measured in purchasing power parity (PPP) terms, reached 8.25% in 2024 and is projected to rise to 10% by 2030. This upward trend highlights the countrys economic expansion, aided in part by the relatively low purchasing power of the rupee, which enhances its position in PPP-based rankings.

Indias share of global gross domestic product (GDP)*

Household consumption is projected to remain robust, supported by the tax relief measures introduced in the Union Budget for FY2026. Fixed asset investment is also expected to rise, supported by improved capacity utilisation, healthier balance sheets of banks and corporations and the governments continued emphasis on capital expenditure. With a strong focus on self-reliance, adaptability and integration into global markets, India is well-positioned for sustained growth. The Reserve Bank of India projects GDP growth of 6.5% in FY2026, underpinned by initiatives like "Make in India," large-scale infrastructure investments and ongoing policy reforms to enhance competitiveness and support long-term development.

While India faces some external risks, such as weaker global demand and broader geopolitical uncertainties, its domestic fundamentals remain strong. Inflation is under control, employment trends are stable, and infrastructure investments are set to deliver long-term benefits. Political stability and economic reforms are further strengthening investor confidence, reinforcing Indias growing role as a major player in the global economy

Exports

In FY2025, Indias merchandise exports reached a cumulative value of USD 437.42 billion, reflecting a marginal growth of 0.08% compared to USD 437.07 billion recorded in FY2024. Nevertheless, the electronics sector emerged as a standout performer in Indias merchandise exports, recording a growth of 32.47%. Exports of electronic goods rose from USD 29.12 billion in FY2024 to USD 38.58 billion, reflecting the sectors growing global competitiveness.

Indias strategic focus on electronics as a key sector under the Production Linked Incentive (PLI) Scheme, "Make in India" programme and improved supply chain ecosystems also played a pivotal role. The impressive growth in electronics not only contributed significantly to the overall export performance but also underscored Indias strengthening position in the global electronics value chain.

Source: PIB PIB Statista PIB

INDUSTRY OVERVIEW Global EMS Industry

The global Electronic Manufacturing Services (EMS) industry is poised for consistent growth over the next decade. The EMS market is expected to grow steadily, with a CAGR of 6.9% from 2025 to 2032.This upward trajectory is being shaped by the need for cost-effective production, rapid technological progress and increasingly sophisticated electronic components used across a range of industries.

Electronics Manufacturing Services (EMS) encompasses a broad spectrum of solutions provided by specialised firms to support Original Equipment Manufacturers (OEMs) throughout the entire lifecycle of electronic products. EMS providers collaborate closely with OEMs through contractual partnerships, supporting multiple stages of production. These partnerships often go beyond manufacturing to include services like design assistance, engineering support, product testing, quality and logistics. The integration of automation, smart factory technologies and digital tools is allowing EMS firms to enhance operational efficiency, maintain high-quality standards and expand capacity with greater agility. Strong demand from key sectors like consumer electronics, power, rail, aerospace, clean energy, automotive, telecommunications, and industrial equipment is creating significant growth opportunities for the EMS market. Despite the promising outlook, the industry is not without its challenges. Heavy reliance on a limited number of component suppliers could lead to supply chain vulnerabilities. Additionally, geopolitical uncertainties, trade restrictions and volatile raw material prices also pose operational risks. Concerns over intellectual property protection and data security are also expected to persist, especially while outsourcing to third-party manufacturers.

Advancements in connected mobility and smart energy systems are expected to create new pathways for diversification and long-term value creation.

Source: Future Market Insights Fortune Business Insights

US EMS Industry

The North American EMS market is expected to witness healthy growth, with its size projected to increase from USD 177.27 billion in 2025 to USD 229.50 billion by 2030, at a CAGR of 5.3%. This upward trend is being supported by the rising cost of in-house manufacturing, the growing complexity of electronic systems and an increasing reliance on EMS providers for end-to-end product development and manufacturing solutions.

North America EMS Industry Market Size (in USD Billion)

The United States is expected to continue to be one of the leading markets for electronic manufacturing services in the North American region. The primary factor behind this is the presence of many OEMs engaged in the research and design of electronic devices and components. The widespread adoption of advanced manufacturing practices such as smart factories, Industrial Internet of Things (IIoT) and Industry 4.0 technologies is transforming the EMS landscape. The deployment of 5G, IoT and (Long Range) LoRa networks has reinforced digital infrastructure, creating a favourable environment for EMS growth.

However, North American EMS firms must contend with high capital investment requirements and stringent regulatory compliance, particularly regarding environmental standards and the safe handling of hazardous materials such as lead dust. Adherence to safety norms adds operational complexity but also drives innovation in cleaner and more sustainable manufacturing practices.

Source: Mordor Intelligence

Indian EMS Industry

Indias Electronic Manufacturing Services (EMS) industry is experiencing rapid growth, fuelled by strong domestic demand, proactive government policies and a growing preference for localised production. India Electronics Manufacturing Services (EMS) Market Application was estimated at USD 61.85 billion in 2024. During the forecast period between 2025 and 2031, the India Electronics Manufacturing Services (EMS) Market Application is projected to boom at a robust CAGR of 28% reaching a value of USD 348.17 billion by 2031. This growth is driven by increasing domestic demand for semiconductor components, governmental initiatives to bolster local manufacturing, and a growing focus on advanced technologies, including AI and IoT.

A prominent driver of market growth is rising disposable incomeamongtheexpandingmiddleclasshouseholds. The use of EMS is also expanding across a wide range of sectors. In rail, Indias push for modernisation is expanding the electronics opportunity. The railway signalling systems market is valued at around USD 2 billion in 2025. Roll-out of Kavach 4.0 (ATP) is accelerating, with fresh allocations and deployments across priority corridors. These developments directly translate into opportunities for EMS providers, given that safety systems such as Kavach, advanced signalling, and engine control electronics all require high-reliability manufacturing partners. In the telecommunications industry, the demand for electronics is increasing due to rising mobile penetration and the gradual rollout of 5G technology. In the automotive sector, the transition towards connected mobility is accelerating the need for intelligent electronic systems. Additionally, sectors such as industrial automation, medical electronics, and smart energy are gaining momentum, supported by the broader wave of digital transformation.

The semi-conductor manufacturing equipment market in India has become a critical driver of technological advancement and innovation, playing a pivotal role in the production of electronic components and integrated circuits (ICs). As India positions itself as a key player in technology and manufacturing, the semiconductor manufacturing equipment market is poised for significant growth. Apart from this, the continuous evolution of electronic devices, coupled with the countrys emphasis on innovation and digitisation, reinforces the importance of advanced manufacturing equipment in shaping Indias technological landscape.

Indias EMS landscape is evolving at a rapid pace, characterised by technological innovation, enhanced manufacturing capabilities, and a focus on global competitiveness. With the adoption of sustainable practicesanddeeperintegrationofdigitaltechnologies, the country is well-positioned to emerge as a global hub for advanced electronics manufacturing.

Source: Medium Blue Weave Consulting Imarc Group 6w Research

Key Drivers shaping the Indian EMS Industry

• Government Support: Strong government initiatives such as the Production Linked Incentive (PLI) schemes, Make in India for Defence, SPECS (Scheme for Promotion of Manufacturing of Electronic Components and Semi-Conductors) and Digital India are driving growth in the electronics manufacturing sector. These policies aim to increase local value addition, encourage component production and support innovation. The PLI schemes provide financial incentives to attract investments in key areas like electronics, while the Atmanirbhar Bharat initiative focusses on building self-reliance by promoting domestic manufacturing and reducing import dependence. Efforts under the Semiconductor Mission are also underway to develop a domestic semiconductor ecosystem, further strengthening Indias overall electronics manufacturing landscape.

• Increase in Domestic Demand: Indias robust and expanding domestic demand for electronics, spanning industrial systems, consumer appliances and IT hardware has become a critical growth engine, with the electronics manufacturing output surging from around 5 Lakhs Cr in FY2020 to 9.52 Lakhs Cr in FY2024. This strong internal demand base not only supports economies of scale but also incentivises greater investment in local value chains, reducing import dependence and enhancing Indias global competitiveness in electronics manufacturing.

(Source: Outlook Business)

• Supply Chain Diversification and ‘China+1 Strategy: Amid geopolitical uncertainties and post-pandemic resilience strategies, India is increasingly seen as a reliable alternative to China for electronics manufacturing. Global OEMs are expanding their sourcing footprint by partnering with Indian EMS firms, leading India to capacity expansion, technology transfer and greater participation in global value chains. Indias competitive advantage lies in its labour & talent arbitrage, low penetration with larger domestic market and supportive government policy, positioning it as a significant beneficiary of the "China+1" strategy.

• Emerging High-Value Segments: The rapid advancements in technologies such as Internet of Things (IoT), Artificial Intelligence (AI), 5G, and electric vehicles (EVs) are driving demand for innovative electronic products and solutions. EMS companies that can adapt to these technological trends and offer specialised manufacturing and engineering services are well-positioned to capitalise on emerging opportunities.

• Rising Demand for Flexible, Low-Volume Manufacturing: Indian EMS providers are seeing increased demand for flexible production capabilities, especially in segments like IoT devices, wearables and industrial electronics. As more OEMs focus on niche markets with customised products, Indian manufacturers are adapting by offering high-mix, low-volume solutions that provide agility and cost efficiency.

• Surge in Domestic Data Centres and Digital Infrastructure: Indias growing digital economy and increasing demand for AI, cloud computing and hyperscale data centres are boosting the need for complex hardware systems. EMS companies are now supporting the manufacture of servers, power modules and high-performance computing components, strengthening their role in the countrys evolving tech infrastructure. It supports Indias broader goals around digitisation, artificial intelligence and regulatory initiatives like data protection laws, thereby strengthening the countrys position as an emerging global hub for digital infrastructure.

• Strategic Role in Defence and Aerospace Electronics: Supported by the ‘Make in India for Defence initiative, Indian EMS providers are increasingly involved in developing electronics for drones, surveillance systems and other critical applications. Their partnerships with defence PSUs and private OEMs are helping improve local value addition and reduce reliance on imports.

OPPORTUNITIES

• EmergenceofIndiaandtheU.S.asManufacturing Powerhouses: India and the U.S. have emerged as major global manufacturing hubs, driven by shifting supply chains and strategic investments. India is attracting global companies with its cost-effective labour, government initiatives like Make in India 2.0 and growing infrastructure, especially in electronics. Meanwhile, the U.S. is revitalising its manufacturing sector through investments in semiconductors, clean energy and automation, supported by policies like the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act. Together, both nations are playing key roles in reshaping global manufacturing dynamics. This shift presents a significant opportunity for supply chain diversification, high-value job creation and deeper bilateral trade partnerships.

• Trends in the Industrial Segment: Industrial customers are increasingly seeking tailored solutions to address their unique operational requirements. In response, EMS providers are delivering customised manufacturing services, including specialised design and production processes. Additionally, there is a growing adoption of Internet of Things (IoT) technologies within industrial applications. This involves the development of smart sensors, connected equipment and automated systems aimed at boosting efficiency and enabling real-time data insights. The shift is largely driven by the demand for enhanced monitoring and control in industrial settings.

• Growing Opportunities in the Automotive Industry: The U.S. automotive sector is poised for continued transformation, with a strong emphasis on sustainability, innovation and responsiveness to evolvingmarketdynamics.Theadoptionofcutting-edge technologies such as artificial intelligence, IoT and smart manufacturing is improving vehicle performance, safety and production efficiency - creating substantial opportunities for Electronics Manufacturing Services (EMS) companies.

• Advancements in the Communication Sector:

The deployment of 5G networks has become a key area of focus for EMS providers within the communications industry. Companies are playing a growing role in manufacturing components and equipment essential for 5G infrastructure, such as base stations, antennas and network modules. This transition is driven by the rising demand for higher data speeds, reduced latency and enhanced connectivity.

• Initiatives for Clean Energy: In the US, clean energy storage systems, especially battery-based and long-duration setups present a compelling opportunity for Electronic Manufacturing Services (EMS) industries. Battery storage for renewable energy will open new doors and allow for clean energy to become even more reliable, accessible and readily available.

• Progress in the Medical Industry: Indias medical device sector is emerging rapidly, currently standing as the fourth-largest market in Asia after Japan, China and South Korea. The industry is experiencing notable changes driven by the adoption of advanced specifications, growing focus on setting up innovation hubs for diagnostics and tighter regulatory frameworks. The digital transformation of medical devices continues to accelerate, as OEMs increasingly embed digital technologies into both their products and operational workflow.

Source: WRI PIB

COMPANY OVERVIEW

Avalon Technologies Limited ("Avalon" or "the Company") is a leading Electronics Manufacturing Services (EMS) provider with over 25 years of experience in delivering comprehensive, vertically integrated solutions. As a trusted one-stop partner for global OEMs, Avalon specialises in high-mix, flexible volume manufacturing with deep engineering capabilities for complex product requirements.

The Company serves diverse industries, including industrial automation, communications, healthcare, clean energy, mobility & defence. Avalon specialises in manufacturing complex products with a flexible manufacturing system and serves a wide range of industries worldwide, offering a suite of solutions from individual product capabilities to complete system integration with a special focus on design-for-manufacturing and assembly for their customers.

Avalons hybrid delivery model caters to customers globally by leveraging their manufacturing capabilities inthehigh-growthmarketsofUSandIndia.Itsintegrated global footprint enhances agility, responsiveness and proximity to customer markets.

Manufacturing Presence

Avalons manufacturing strength is anchored in its expansive infrastructure, comprising over 575k sq. ft. of design and production space. With 16 facilities and 65 production lines operating in two shifts, the Company maintains additional buffer capacity to support scale-ups.

Avalon stands out as an Indian EMS provider with fully operational manufacturing units in both India and the United States, reinforcing its commitment to localised manufacturing for global clients. Its facilities adhere to globally recognised quality standards including ISO 9001:2008, AS 9100C (aerospace and defence), ISO/ TS 16949:2009 (automotive) and ISO 13485 (medical devices). Avalon follows a ‘Build Local. Serve Global. approach, with plants in India serving both the domestic market and exports, and facilities in the U.S. focussed on production for the U.S. market.

SEGMENT OVERVIEW AND PERFORMANCE

The Companys segment-wise revenue stood as depicted below:

The Industrials segment, which covers power and automation, remained the largest contributor to Avalons revenue. The segments share increased from 28% in FY2024 to 30% in FY2025, showcasing the Companys strong capabilities and focus in industrial automation and power solutions. The revenue from the Mobility / Transportation segment, comprising railways, automotive and aerospace, also saw a marginal increase from 26% in FY2024 to 27% in FY2025, indicating stable growth in the sector. The share of clean energy segment rose from 18% in FY2024 to 20% in FY2025. Avalons revenue share from communications segment dropped from 13% in FY2024 to 8% in FY2025. The revenue contribution from the Medical & Others segment, covering medical technologies, defence and miscellaneous categories, remained unchanged at 15% for both FY2024 and FY2025. Avalons consistent performance and diverse industry presence highlights Avalons stable positioning in these markets.

MOBILITY

Avalon Technologies is leading progress in the mobility sector by developing the creation of durable and sustainable systems for the future. The Company works closely with partners in the air, rail and automotive industries to deliver solutions that align with the fast-changing demands of the sector.

It specialises in the production of intricate sheet metal structures, precision-machined parts and injection-molded plastic components, primarily for the aerospace industry. Avalon also specialises in complex sheet metal fabrications, machining, and injection-molded plastics. Certified to AS9100D standards and NADCAP accredited for fusion and resistance welding, Avalon supports a range of applications including aircraft seating, cargo systems, smoke detectors, and engine components. Initially focussed on producing complex engine parts, Avalon has since broadened its capabilities to include a diverse array of aerospace components. Their vertically integrated manufacturing capabilities ensure high precision, stringent quality control, faster turnaround times, and scalable production, making them a trusted partner in the aerospace sector.

Avalon collaborates with global OEMs and rail operators to advance railway infrastructure. As a manufacturer approved by the RDSO, it supports global rail transport manufacturers operating in India. Avalons expertise in braking systems, interlocking systems, engine controls, and its deep knowledge of electronic control systems and telematics provide customers with a strong technological edge. Currently, Avalon is actively progressing on the railway Kavach systems, which are currently in the prototyping stage and nearing final approval. Commercial production is expected to commence next year. These advancements reflect our commitment to deepening customer engagement and expanding our presence across critical and high-potential end markets.

Product offerings:

• Aerospace: Seating system, Cabin systems, Smoke detectors, Combustion liners, Engine parts, Wiper assemblies, Lighting enclosure

• Railway: Electronic Interlocking system, Anti-collision system (Kavach), Braking system, Wheel Slide Protection Systems, Engine control systems, Emergency braking systems, Traction systems

• Automotive: GPS trackers for trucks, Camera systems, electronic dashboard, actuation systems, 2W controller systems, battery management systems, converters and controllers, Motion control systems

INDUSTRIAL

Avalons end-to-end design and manufacturing capabilities enable innovation in technologies such as power electronics and transformers. By combining deep domain expertise with strong capabilities in electronics, communication and technology, Avalon supports leading players across the power value chain including generation, transmission, distribution, storage and conditioning. This integrated approach helps customers develop advanced solutions for a more connected and intelligent energy ecosystem.

Product offerings:

The Companys main offerings in this segment include PCBAs, magnetics used in CNC machines, power cables, controllers for power pumps, control panels, piston assemblies, fuel dispenser systems and more.

COMMUNICATION

Avalon supports 5G network equipment manufacturers with end-to-end solutions, from concept development to full-scale production. Its vertically integrated manufacturing capabilities cover components such as antenna boxes, remote radio heads (RRH) and baseband units (BBU), catering to the evolving needs of the 5G sector. Additionally, Avalon collaborates with industry leaders and innovators by leveraging its proficiency in telemetry and geolocation technologies, along with integrated manufacturing, to deliver satellite-enabled location-based solutions.

Product offerings:

• Telecom, 5G: Remote Radio Head (RRH), Antenna, Base Band Unit (BBU)

• Satellite: Base Station Antenna System, Digital Antenna, Control Panel System

• Digital Infrastructure: Fleet Management, Vehicle Tracking System, Vision System

CLEAN ENERGY

The Company is engaged in major product segments within the clean energy sector, such as Solar, Hydrogen and Electric Vehicles (EVs). Avalon is actively strengthening its presence in the clean energy sector, a rapidly growing segment within the EMS industry. Key drivers such as the increasing adoption of electric vehicles, supportive government schemes and incentives and the global transition toward carbon neutrality are accelerating demand in this space. Battery storage capacity in the U.S. nearly doubled in 2024, reaching close to 29 GW, and is projected to grow by another 47% in 2025. Avalon is well-positioned to cater to these emerging requirements. The robust expansion of the clean energy sector is creating additional demand for electronic products, which in turn is contributing to the growth of the EMS industry and reinforcing Avalons market relevance.

Product offerings:

• Solar: Solar Trackers, Solar Inverters, Solar Chargers, Solar Pump Controllers, Energy Storage System.

• Hydrogen: DC Power Supply, AC/DC Converter, Inverter, Sub System for Electrolyser.

• EVs: Onboard Charging Unit, Converters, Motor Controllers, Electronic Dashboard, Management System, Sensor Boards.

MEDICAL AND OTHERS

Avalon is well-positioned to handle the complexities of medical device prototyping through advanced technology, strict regulatory adherence and collaborative development. This approach ensures that every prototype delivers innovative medical solutions while maintaining the highest standards of patient safety and care. In this space, the Company provides products such as PCBAs for oxygen concentrators and blood analysers, as well as cables for flow meters. Additionally, Avalon is working with the Centre for Development of Advanced Computing (CDAC) to enhance its server offerings by integrating advanced technologies aimed at improving performance and scalability for its clients.

GEOGRAPHY MIX

In FY2025, Avalons revenue from U.S. customers rose to 57%, compared to 54% in FY2024, showing stronger traction in international markets. The share from Indian customers was 43% during FY2025.

Revenue split based on Customer Geography

Business Highlights

• Revenue from operations grew by 26.6% year-on-year, increasing from 867.2 Cr in FY2024 to 1,098.1 Cr in FY2025.

• Net Working Capital improved by 37 days year-on-year, reducing from 161 days in FY2024 to 124 days in FY2025.

• Strategic business wins were secured across both established and emerging sectors.

• A new export-focussed manufacturing plant was completed in Chennai. Phase-II of the brownfield expansion in Chennai is underway and expected to be completed by H2 FY2026 to meet growing domestic demand.

• The Industrial vertical, our largest segment, is sustaining steady growth supported by robust demand and a healthy order pipeline.

• The Mobility vertical, driven mainly by rail and aerospace, is recording the fastest growth, backed by a widening customer base and product portfolio.

• The Clean Energy vertical is gathering pace with advancements in energy storage system solutions.

• The Communication vertical is also promising, reinforced by our proven expertise in manufacturing 5G boards.

• Avalon expanded into new high-technology verticals; one example is our partnership with a global semiconductor equipment company for complex subsystem manufacturing.

• Avalon became a strategic manufacturing partner for C-DAC under the ‘RUDRA High-Performance Computing programme.

• Avalon has entered into a strategic partnership with Zepco Technologies to strengthen offerings in motors, drives, controllers, and power solutions for drones, EVs, and defence.

BUSINESS OUTLOOK

Avalon Technologies delivered a strong performance in FY2025, marked by broad-based growth across sectors. The Company continues to witness robust demand from customers in both India and the US, reinforcing confidence in its strategy focussed on sustainable and profitable expansion. In FY2025, the Indian manufacturing operations, which serve both domestic and global clients, accounted for 87% of the Companys revenue. EBITDA margins improved to 10.5%, up from 7.2% in FY2024, while PAT margins rose to 5.7% from 3.2% in FY2024, reflecting efficiency and scale. Avalons US business continues to remain a pivotal beachhead in attracting customers. Further, over 50% of US customers were successfully transitioned to Indian manufacturing, resulting in significant reductions in fixed costs.

Avalons growth continues to be driven by three key pillars: the existing business, new business wins across verticals, and the growing pipeline business opportunities. Multi-year programmes anchored by strong customer relationships continue to provide recurring revenues in the existing business. Expanded capacity and customer focus have driven new business wins across verticals, many of which are now moving into production, aided by our dual-shore model and the new Chennai export facility. Several prospects are also in advanced stages across industries and geographies, aligned with our strategic priorities, and hold the potential to meaningfully expand our revenue base in the years ahead. We have also grown our India business share with the increasing adoption of electronics in rail, aerospace, industrial, and power infrastructure.

India continues to benefit from strong industry tailwinds, and we are seeing sourcing decisions increasingly moving towards Indias favour. Avalons dual manufacturing presence in both US and India positions us well to navigate these shifts. On one hand, higher tariffs on imports from select countries are driving opportunities to India to emerge as a preferred manufacturing hub, resulting in an increased engagement from global customers aiming to diversify their supply chains. At the same time, our US manufacturing facility offers strategic flexibility to support customers looking to localise production and meet regional requirements. We are cognizant of the policy uncertainty and its impact on US economy and will ensure continued agility and disciplined planning. The Company is closely tracking shifts in global trade dynamics, including tariffs and macroeconomic developments that could impact global manufacturing trends.

Avalon continues to strengthen its position through ongoing investments in capacity expansion & emerging technologies. It remains committed to scaling operations, deepening customer relationships and nurturing long-term partnerships. Looking ahead to FY2026, Avalon approaches the year with measured optimism. The order book stands at

1,761 Cr as on FY2025, up from 1,366 Cr at the end of

FY2024, with an execution cycle of 12–14 months.

FINANCIAL OVERVIEW Financial Performance

Some of the key financial highlights for the Fiscal Year 2024-25 are provided below:

Particulars	FY2025	FY2024	YoY Change
Revenue from Operations	1,098	867	26.6%
Gross Margin	393	315	24.7%
Gross Margin (%)	35.8%	36.3%	-55 bps
EBITDA	115	63	83.7%
EBITDA (%)	10.5%	7.2%	325 bps
Depreciation	29	23	24.8%
Finance Cost	17	16	1.8%
Profit before tax (PBT)	87	38	127.9%
Profit after tax (PAT)	63	28	126.7%
PAT (%)	5.7%	3.2%	252 bps

The Company delivered a strong financial performance in FY2025, driven by robust revenue growth and increased profitability. Revenue from operations grew by 26.6% to 1,098 Cr, up from 867 Cr in FY2024, mirroring continued business momentum. Gross profit increased by 24.7% to 393 Cr, though the gross margin eased slightly to 35.8% from 36.3%. The Company delivered strong operational performance with EBITDA rising sharply by 83.7% to

115 Cr. The EBITDA margin also improved by 325 basis points to 10.5%, driven by improved cost control and gains from operating leverage.

Profit before tax was at 87 Cr, marking a 127.9% increase and profit after tax surged by 126.7% to

63 Cr. The PAT margin increased significantly to 5.7%, compared to 3.2% in the previous year. Overall, the Company showcased strong execution and financial resilience, setting a strong foundation for continued growth in the years ahead.

Financial Ratios

Particulars	FY2025	FY2024	Explanation
ROCE (%)	15.7	10.0	The significant improvement in the ratio was due to better utilisation of capital and enhanced profitability, driven by improved operating margins and efficient capital allocation.
Asset Turnover (x)	7.5x	8.3x	The slight decline in the ratio was due to a relatively higher capital investment during FY2025. However, the ratio remains strong, indicating efficient use of assets.
Net Debt to EBITDA (x)	0.1x	-0.3x	The ratio improved due to a healthy balance sheet and almost negligible debt level.
Inventory Days	86	118	Inventory days improved to 86 days in FY2025 compared to 118 days in FY2024 due to easing of supply chain issues and our conscious effort to optimise inventory.
Trade Receivables Days	84	79	Trade receivable days increased slightly to 84 days from 79 days in FY2024.
Trade Payables	46	36	The improvement in payable days reflects improved credit terms with suppliers.
Net Working Capital Days	124	161	The reduction in net working capital days highlights enhanced operational efficiency and better working capital cycle management, supported by lower inventory and improved supplier terms.

RISK MANAGEMENT

Avalon remains dedicated to proactive risk management through careful planning, strategic collaborations, diversification, forward-looking investments and a continuous emphasis on technology and innovation. Together, these measures strengthen the Companys ability to withstand uncertainties and support long-term growth in an ever-evolving market landscape. The key risks faced by the Company, along with the measures taken to mitigate them are outlined below.

Impact	Mitigation
An economic slowdown, rising inflation and other macroeconomic conditions could potentially weaken demand for electronics and electronics manufacturing services (EMS), while also negatively affecting the Companys import and export activities.	Although global macroeconomic challenges present risks to the Indian EMS industry, Indias economic momentum and easing inflation are likely to drive growth across various sectors. The ongoing push for digital transformation remains a key driver, creating substantial opportunities for EMS providers in India. Despite prevailing uncertainties, the Company maintains a positive growth outlook, supported by a robust customer base and conducive market dynamics. Avalon also prioritises consistent engagement with its customers to ensure a smooth and convenient collaboration experience.
Frequent changes or non- compliance with the statutory norms and regulations may impact the business potential, reputation and operations of the company. While certain regulatory benefits and incentives can positively influence our business, there is always a possibility that these may be delayed, blocked, or altered due to changes in the regulatory environment.	We are constantly ensuring that our products and factories meet and exceed established standards of quality, hygiene, work conditions and sustainability. Avalon maintains a diversified business portfolio across multiple products, markets, and revenue streams. This strategic diversification reduces dependence on any single regulatory benefit, helping to protect the companys reputation and ensure stable operations even if some incentives are disrupted.
The availability, quality and cost of raw materials such as metals, electronics, polymers and specialised components play a critical role in Avalons production processes. Price volatility due to supply chain disruptions, geopolitical conflicts,changes in trade policies, or supplier monopolies can directly impact cost structures. Delays or shortages in critical inputs may halt or slow production, leading to missed deadlines, contractual penalties and customer dissatisfaction.	To manage this risk, Avalon employs a strategic sourcing framework with multiple suppliers across geographies to reduce dependency on single vendors. The Company enters into long- term procurement contracts to lock in prices and ensure stable supply. Avalon also continuously explores opportunities to substitute high-risk materials with more stable alternatives without compromising quality or compliance standards.
Avalons global presence and cross- border transactions, fluctuations in foreign exchange rates, especially USD, EUR and other key currencies can impact the Companys revenue realisation, cost of imports and profit margins. Volatile currency movements can distort financial planning, affect pricing strategies and create translation losses in consolidated financial statements. Unhedged exposures may result in significant forex losses in a volatile economic environment.	Avalon follows a comprehensive foreign exchange risk management approach that includes natural hedging through matching inflows and outflows in the same currency, forward contracts and other derivative instruments. The finance team works closely with business units to monitor exposure and align cash flows with currency movements. Multi-currency invoicing and pricing adjustments in long-term contracts help manage volatility.
Operational risks may arise from disruptions in manufacturing processes, supply chain inefficiencies, machinery breakdown, quality control lapses, IT system failures, or workforce- related issues. Such disruptions can lead to delayed deliveries, cost overruns, regulatory non-compliance and reputational damage, affecting overall productivity and profitability.	Avalon has developed a strong operational framework supported by clear standard operating procedures across all departments. The Company invests in advanced automation and emphasises workforce training and cross- functional skill development to maintain seamless business operations. Periodic audits and continuous improvement initiatives such as lean manufacturing and Six Sigma are regularly implemented to identify inefficiencies and enhance overall performance. These measures help the Company to maintain consistent productivity.
of A significant Avalons revenue comes from a limited number of key clients. Heavy reliance on a few customers can expose the Company to revenue volatility, pricing pressures and potential loss of business in case of customer churn or contract discontinuation.	Avalon actively manages customer concentration risk by focussing on broadening its customer base across diverse industries. The Company focusses on building long-term client relationships by delivering integrated, value-added solutions tailored to their needs, thereby enhancing retention. Avalon also targets growth by exploring new customers in emerging and high-potential market segments and geographies. This approach helps reduce dependency on a few key clients and supports revenue stability.
Avalons business operations and revenue streams may be concentrated in certain regions. Adverse economic	Avalon is committed to expanding its global presence through strategic market entries, and forging partnerships worldwide. This geographical
conditions, helps reduce reliance policy changes, on any single trade diversification restrictions, or geopolitical instability in these geographies can impact business continuity and growth prospects.	region and spreads business risk.

HUMAN RESOURCES

Avalon values its employees as its most important asset and credits them for much of its progress. The Company strives to maintain a workplace that is respectful, inclusive and supportive - where every individual is treated with fairness and dignity.

Avalon expanded its workforce across multiple verticals during FY2025 in line with projected business growth and strategic expansion plans. The Company not only scaled its team strength but also enhanced several people practices to nurture a cohesive and highly engaged workforce across its manufacturing facilities. Avalon maintained a strong focus on Environment, Health, and Safety (EHS), reinforcing its commitment to promoting a safe, inclusive, and progressive workplace. The Company sustained a diverse talent base across both white-collar and blue-collar roles, with the diversity ratio improving by 2 percentage points compared to FY2024, reaching 18%.

Commitment to Continuous Learning and Development

Avalon considers continuous learning as an important attribute of holistic organisational growth, with a strong emphasis on enhancing employee capabilities through structured internal and external training programmes.

Internal Programmes

• The Company designed technical induction programmes for new hires across both white-collar and blue-collar roles.

• Trainers from different verticals regularly delivered updates on products, processes, and certifications in line with industry standards.

• "Wisdom Wednesday" sessions were conducted weekly on the shop floor, promoting interactive knowledge-sharing in an engaging format.

External Programmes

• The Learning & Development (L&D) team partnered with technical bodies and external experts to deliver customised training interventions.

• These programmes addressed both technical and behavioural competencies, strengthening Avalons talent pool.

• In total, Avalon delivered 12,000 man-hours of training during FY2025.

Strengthening Workplace Safety, Inclusion, and Well-being

• Emergency Preparedness and Awareness o The Company conducted training and appreciation sessions across all units to strengthen emergency response capabilities. o Initiatives included fire safety drills, mock emergency exercises, and preparedness workshops. o Avalon participated in National Safety Week and World Environment Day, underlining its commitment to safety and environmental responsibility.

• Respect and Inclusion o The Company organised bi-annual workshops to raise awareness of Prevention of Sexual Harassment (POSH) guidelines. o These sessions focussed on building gender sensitivity and fostering a safe, respectful, and inclusive workplace culture.

• Wellness at Work o Avalon placed special emphasis on ergonomics by conducting sessions on proper posture, workstation optimisation, and incorporating movement into daily routines. o Occupational Health Centres (OHCs) across facilities continued to deliver proactive health screenings and wellness programmes for employees throughout the year.

Nurturing Collaboration, Innovation, and Excellence

• People-Centric Culture o Avalon fosters an environment that encourages innovation, collaboration, and camaraderie among employees. o The Company promotes engagement through people-centric initiatives, celebrations of festivals, cultural events, and recognition of team successes across its units.

• Rewards and Recognition: Celebrating Excellence o Avalon places strong emphasis on recognising and celebrating employee achievements as an integral part of its culture. o The Company encourages individuals and teams to showcase their skills and innovations on national platforms.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Company has designed and instituted a robust internal control system that comprises well-defined organisation structure, roles and responsibilities, documented policies and procedures to reduce business risks through a framework of internal controls and processes. These controls are structured to offer reasonable assurance regarding the accuracy and reliability of financial and operational reporting, compliance with applicable laws and regulations, protection of assets from unauthorised access or loss, proper authorisation of transactions, adherence to corporate policies and efficient conduct of its operations. The Internal control framework covers the following key areas:

• Protection and proper use of Company assets

• Accuracy and legitimacy of business transactions

• Compliance with applicable laws, regulations and Company policies

• Control over capital and operating expenses as per approved budgets

During the year, the Company strengthened its Internal Financial Control Framework by integrating process-level assessments, improving the overall control environment. Internal controls are tested periodically on a sample basis to ensure their effectiveness. The Internal audit function operates independently and follows established governance standards. To ensure efficient internal control systems and in compliance with the applicable regulations, M/s Grant Thornton was appointed as the internal auditor of the Company during FY2025, for performing internal audit of the Company. The internal audit framework is designed to assess the adequacy and effectiveness of internal control mechanisms and covers all key operational areas of the Company. It enables the Company to regularly review and monitor the effectiveness of internal controls, operational performance and risk management. This helps ensure that risks are well-managed and operations remain efficient and compliant.

The Audit Committee examines the reports submitted by the internal auditors and reviews their recommendations for improvement. Additionally, the committee engages with the Companys statutory auditors to understand their assessment of the adequacy of the internal control systems. The statutory auditors have also independently audited the internal financial controls over financial reporting as of March 31, 2025, and opined that adequate internal controls over financial reporting exist and such controls were operating effectively throughout the year.

CAUTIONARY STATEMENT

The Management Discussion and Analysis and any other contents of the Annual Report may contain certain statements describing the Companys objectives, goals, projections, estimates and expectations which may be ‘forward-looking statements within the meaning of applicable laws and regulations. Such statements are based on informed judgements and estimates. Actual results may differ substantially or materially from those either expressed or implied in the forward-looking statements depending on various risks and uncertainties including but limited to, political, technological, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in government regulations and policies, tax laws, raw material availability and prices, competitive pressures, Forex risks and other incidental factors. The Company undertakes no responsibility to publicly amend, modify or revise any forward-looking statements, whether as a result of any subsequent developments, new information, future events, or otherwise.