Avalon Technologies Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy navigated a complex operating environment in FY2026 as the momentum seen in 2025 supported by technology-led investment, fiscal expenditure, and moderating inflation was disrupted by rising geopolitical tensions, shifts in trade policies, and tighter financial conditions. According to the International Monetary Fund, global GDP growth moderated from approximately 3.4% in 2025 to about 3.1% in 2026, reflecting varied regional dynamics. Growth in advanced economies remained subdued at around 1.8% in 2026, with the U.S. economic growth projected to remain relatively resilient, edging up from 2.1% in 2025 to 2.3% in 2026. Emerging market and developing economies are projected to maintain relatively stronger growth, although growth is expected to moderate from 4.4% in 2025 to 3.9% in 2026. A major escalation of conflict in the Middle East, including disruptions to energy transit through the Strait of Hormuz, led to sharp volatility in oil, gas, fertilizer, and logistics costs, interrupting the global disinflation trajectory. Concurrently, the global economy navigated significant trade realignments alongside the continued build-out of artificial-intelligence-related infrastructure investment, which partly offset broader macroeconomic headwinds. Despite near-term challenges, the medium-term global outlook continues to be supported by sustained public investment in infrastructure, energy security, and transportation networks, which remain central to economic resilience and long-term growth.

Sources:

IMF World Economic Outlook (April 2026)

World Economic Outlook, April 2026: Global Economy in the Shadow of War, World Economic Outlook - All Issues

World Economic Outlook (%)

Real GDP, annual percent change	2025	2026	2027
World Output	3.4	3.1	3.2
Advanced Economies	1.9	1.8	1.7
United States	2.1	2.3	2.1
Euro Area	1.4	1.1	1.2
Emerging Market and Developing Economies	4.4	3.9	4.2
Emerging and Developing Asia	5.5	4.9	4.8
China	5.0	4.4	4.0
India	7.6	6.5	6.5

UNITED STATES ECONOMIC OVERVIEW

The United States economy remained resilient during 2025 despite heightened policy uncertainty and evolving global geopolitical conditions. Economic activity was supported by continued investment in technology-related sectors, while domestic demand remained broadly stable. The GDP growth in the United States remained at 2.1% during 2025. The U.S. economy is projected to expand by 2.3% in 2026, supported by fiscal measures and the lagged effects of monetary policy easing undertaken in 2025.

The U.S. economy also continued to navigate a changing trade environment. The ongoing realignment of global supply chains and trade relationships remained evident during the year, with shifts in import sourcing patterns and continued investment in technology and digital infrastructure. Strong demand for semiconductors and related technologies supported trade activity, while technology-driven investment remained an important contributor to economic performance.

Private consumption remained a key pillar of economic activity. According to the IMFs Statistical Appendix, private consumer expenditure in the United States is estimated at 2.6% in 2025, reflecting continued household spending despite a more moderate growth environment. The IMF notes that while higher trade barriers introduced since April 2025 are expected to continue weighing on activity, this impact is likely to be partially offset by stronger productivity growth, a rebound in economic activity following the conclusion of the federal government shutdown, and the carryover effects of stronger-than-previously- anticipated growth momentum. While technology- driven growth is expected to moderate from recent levels, it is projected to continue contributing positively to economic activity over the forecast period. The IMF also expects productivity gains to gradually converge towards historical norms over the medium term.

Source: World Economic Outlook (IMF), WEO- April (IMF)

INDIAN ECONOMIC OVERVIEW

India continues to remain one of the worlds fastest- growing major economies, supported by resilient domestic demand, strong investment activity, and ongoing structural reforms.

Private consumption continues driving growth, supported by declining inflation and rising real incomes that enhance household purchasing power. Public capital expenditure of E 12.2 Lakhs Cr, as allocated in the Union Budget 2026-27, catalyses infrastructure development while stimulating manufacturing, construction, and energy sectors; government initiatives like Viksit Bharat 2047 further promote self- reliance and capacity enhancement amid global pressures. Private consumption and public expenditure registered healthy gains during the year. Following a total of 125 basis points of calibrated rate cuts delivered during the previous easing cycles to enhance liquidity, the Reserve Bank of Indias Monetary Policy Committee (MPC) held the benchmark repo rate steady at 5.25%. The MPC maintained a neutral policy stance to retain operational flexibility.

Looking ahead into FY2027, the RBI has projected a real GDP growth rate of 6.9%. This calculation reflects a cautious baseline accounting for external supply shocks, such as the West Asia conflict and its subsequent pressure on global shipping routes and raw material costs. Concurrently, full-year CPI inflation for FY2027 is projected to rise to 4.6% due to unfavorable base effects, volatile global crude assumptions (pegged at USD 85 per barrel), and potential climate risks like El Nino. In a first, the RBI also introduced a Core CPI inflation forecast of 4.4% for FY2027, signaling that underlying non-food, non-fuel inflation pressures remain comfortably range-bound.

The conclusion of the India-EU Free Trade Agreement is expected to strengthen Indias export competitiveness and deepen its integration with European value chains, with preferential access covering over 99% of Indian exports by trade value. This positions India and the European Union as trusted partners committed to open markets, predictability, and inclusive growth.

Indias share of global GDP, measured in purchasing power parity (PPP) terms, has reached 8.25% and is structural on its path to cross 10% by 2030. This upward trend highlights the countrys economic expansion, aided in part by the competitive positioning of the rupee, which enhances its structural status in PPP- based global rankings.

Sources:

• Macro Policy & Yield Impact Trackers: Finnovate Markets Insights (April 2026 Policy)

• I nstitutional Credit & Economic Risk Analysis: Acuite Macro Research - RBI Review

• PIB, PIB 2, MoSPI

• India-EU Free Trade Agreement Concluded

Exports

Indias export sector demonstrated notable structural resilience during the year, despite a challenging global trade environment and persistent logistical constraints. Total cumulative exports reached over USD 860.09 billion, underscoring the economys capacity to sustain external demand through a diversified and evolving export base.

A key highlight of the year was the strong growth in electronics exports. Electronic goods exports surged by 40.31% year-on-year to USD 5.18 billion in April 2026, reflecting robust momentum in the sector.

Indias electronics and semiconductor industry is increasingly emerging as a critical growth driver. Supported by targeted government initiatives, including the Production Linked Incentive (PLI) schemes and broader ecosystem development measures, the sector has witnessed accelerated investments and capacity expansion. These developments have strengthened Indias integration into global value chains, while enhancing both domestic manufacturing resilience and export competitiveness.

Sources:

Indias total exports hit record USD 863 billion in FY2026, services surge 8.7%

India Electronics Exports Surge 40% in April 2026

Union Budget 2026: Electronics is one bet India just cant underplay - The Economic Times

INDUSTRY OVERVIEW Global EMS Industry

The Electronics Manufacturing Services (EMS) industry forms an integral part of the global electronics value chain, providing a broad range of manufacturing and support services to original equipment manufacturers (OEMs) across industries. EMS providers undertake activities spanning electronics manufacturing, engineering services, testing and development, logistics management and supply chain support, enabling customers to focus on product design, innovation and market development.

The global EMS market has witnessed steady expansion as manufacturers increasingly outsource production activities to specialized partners capable of delivering scale, quality and operational efficiency. The industry supports a diverse range of end-use sectors, including information technology and telecommunications, automotive, aerospace and defence, healthcare, consumer electronics, semiconductor manufacturing, robotics and industrial applications.

The global EMS market was valued at USD 617.90 billion in 2025 and is projected to increase from USD 661.34 in 2026 to USD 1,201.16 billion by 2035, registering a CAGR of

6.87% during the forecast period from 2026 to 2035. The sustained growth reflects the increasing integration of electronics across industries and the growing complexity of electronic products, which continue to drive demand for specialized manufacturing and engineering capabilities.

The industry is evolving beyond traditional contract manufacturing towards higher-value services encompassing engineering support, product development, testing and supply chain management. Electronics manufacturing services are expected to be among the fastest-growing service segments over the forecast period.

Sources:

Fortune Business Insights: Electronic Manufacturing Services Market Report

Precedence research: EMS Market Analysis

US EMS Industry

The United States Electronics Manufacturing Services (EMS) industry represents a critical component of the countrys electronics and advanced manufacturing ecosystem.

The U.S. EMS market was valued at USD 172.85 Billion in 2025 and is estimated to reach USD 185.30 Billion in 2026. The market is projected to grow to USD 267.44 Billion by 2031, registering a CAGR of 5.91% during the period from 2026 to 2031. The growth outlook reflects increasing demand for sophisticated electronic systems across industrial, automotive, communications, medical and defence applications, alongside the expanding role of EMS providers in supporting product development and manufacturing activities.

The industry is witnessing a gradual transition towards higher-value manufacturing services, supported by growing demand for advanced assembly technologies and integrated manufacturing solutions. Surface-mount technology (SMT) continues to represent a significant share of manufacturing activity, while advanced packaging solutions are gaining prominence as electronics systems become more compact and performance requirements increase. EMS providers are also expanding their engineering, testing and supply chain capabilities to address evolving customer requirements and support increasingly complex product architectures.

The U.S. EMS industry remains an important manufacturing hub for customers requiring advanced engineering capabilities, high-quality manufacturing standards and specialized production expertise. The continued expansion of electronics content across industrial and technology-driven sectors is expected to support sustained demand for EMS services over the medium term.

Source: Mordor Intelligence

Indian EMS Industry

The Indian Electronics Manufacturing Services (EMS) industry has emerged as an important component of the countrys electronics manufacturing ecosystem, providing end-to-end manufacturing solutions to original equipment manufacturers (OEMs) across a broad range of industries.

Indias electronics growth since 2019 represents one of the most rapid capacities build-outs in the sectors modern history. The PLI scheme for large-scale electronics and IT hardware has been the primary catalyst, attracting both domestic conglomerates and global EMS players to scale manufacturing operations. Indias EMS market has expanded from USD 10-12 billion in FY20 to USD 40-45 billion in FY25, driven by domestic demand, export growth and outsourcing trend. Indias share of global EMS manufacturing remains relatively modest at 5-6 %. However, this is set to expand over the coming decade as manufacturing investments accelerate, and export capacity expands.

Source: KPMG-Indias-electronic-manufacturing-services- ems-opportunity

Indias Electronics Boost

India has rapidly evolved into a major centre for electronics production, achieving exceptional growth in both output and exports. Successive policies like the National Policy on Electronics, SPECS, EMC 2.0, and PLI have reshaped electronics manufacturing. Schemes such as Electronics Components Manufacturing Scheme (ECMS) further strengthened Indias Electronics ecosystem, driving growth and competitiveness. Electronics production rose from E 11.32 Lakhs Cr in FY 2024-25 to E 13.11 Lakhs Cr in FY 2025-26, a 15.8% year-on-year increase.

Indicator	2014-15	2025-26	Growth
Production of electronics goods	E 1.9 Lakhs Cr	E 13.11 Lakhs Cr	7 times
Exports of electronics goods	E 38,000 Cr	E 4.24 Lakhs Cr	11 times

Source: PIB-Manufacturing Momentum:Building a Self-Reliant India

Semiconductors

The Government of India (GoI) has taken decisive steps through the India Semiconductor Mission (ISM) to build domestic capabilities across semiconductor design, manufacturing and the broader ecosystem. Initial traction has emerged in mobilizing investments across fabrication, assembly and testing, while leveraging Indias established strength in semiconductor design and engineering talent. Building on this momentum, the Union Budget 2026 announced ISM 2.0 with a total budget outlay of E 1,27,500 Cr, signalling a shift from ecosystem creation towards deeper capabilities, greater scale and long-term competitiveness. ISM 2.0 places greater emphasis on advanced packaging, compound semiconductors, critical design infrastructure, policy stability and sustained capital mobilization.

Indias semiconductor demand trajectory is underpinned by strong surge in demand from electronics manufacturing, accelerated rollout of data centres and cloud infrastructure, rising semiconductor content in automotive, particularly electric vehicles and ADAS and the widespread adoption of AI across consumer devices and enterprise workloads.

Our opportunity is further supported by the broadening and deepening of semiconductor content across key end-use sectors:

• In automotive, the transition towards electric and software-defined vehicles, ADAS and vehicle connectivity is driving demand for power semiconductors, automotive microcontrollers, sensor ICs and AI-enabled chips.

• In telecom, the transition towards 5G and emerging 6G networks is increasing demand for RF and baseband chips, high-speed connectivity solutions and advanced photonic technologies. At the same time, the rapid expansion of data centres and AI infrastructure is accelerating demand for AI accelerators, high-bandwidth memory, chiplets and high-speed interconnects.

• I ndustrial and manufacturing applications, driven by Industry 4.0 and automation, are creating opportunities for industrial microcontrollers, edge-AI solutions and motor-control and power- management chips.

Source: Future of Indias Semiconductor Industry

OPPORTUNITIES

Emergence of India and the U.S. as Manufacturing Powerhouses: The ongoing diversification of global supply chains, driven by geopolitical shifts and friend- shoring strategies, is strengthening the position of India and the U.S. as key manufacturing hubs. Indias cost competitiveness, policy support, and improving infrastructure, along with the U.S. focus on domestic high-tech manufacturing, are creating significant growth opportunities for EMS companies to integrate into global value chains.

Source: India Electronics Manufacturing Services Market Size, Share & 2031 Growth Trends Report

Increasing Outsourcing by OEMs: Original equipment manufacturers (OEMs) are increasingly outsourcing manufacturing activities to specialized partners, creating opportunities for EMS providers offering integrated manufacturing, engineering, testing and supply-chain solutions. The adoption of turnkey and product lifecycle support services is further expanding the scope of outsourced manufacturing.

Trends in the Industrial Segment: The industrial electronics segment is experiencing robust growth driven by increasing automation, Industry 4.0 adoption, and digital transformation across manufacturing environments. Companies are investing in smart factories, robotics, IoT-enabled systems, and predictive maintenance technologies to enhance operational efficiency and productivity. This shift is driving demand for complex electronic assemblies and control systems, positioning the EMS industry as a key enabler of industrial modernization. The segments focus on reliability, precision, and customization is also fostering long-term, high-margin opportunities for EMS providers.

Growing Opportunities in the Automotive Industry: The automotive sector is undergoing a transformational shift toward electrification, connectivity, and autonomous technologies, significantly increasing the electronics content per vehicle. Electric vehicles (EVs), in particular, require advanced electronic systems such as battery management systems, power electronics, and onboard computing units. Additionally, the rise of connected vehicles and advanced driver assistance systems (ADAS) is further driving demand for high- performance electronics. This evolution is expanding the opportunity landscape for EMS players to participate in next-generation mobility ecosystems.

Advancements in the Communication Sector:

The communication sector is witnessing rapid advancements driven by the rollout of 5G networks, expansion of data centres, and increasing adoption of cloud and edge computing. These trends are driving demand for telecom infrastructure, networking equipment, and high-speed data processing systems. As digital connectivity becomes a critical backbone of the global economy, the EMS industry is playing a vital role in manufacturing the hardware that supports communication networks, enabling faster, more reliable, and scalable connectivity solutions.

Advancement in the Medical Industry: The medical electronics segment is witnessing steady growth driven by increasing healthcare expenditure, technological advancements, and the adoption of digital health solutions. Demand for diagnostic equipment, wearable devices, remote monitoring systems, and advanced medical instruments is rising globally. These products require high precision, reliability, and compliance with stringent regulatory standards, creating opportunities for EMS providers to cater to this specialized and high-value segment. The increasing integration of electronics in healthcare delivery systems is expected to further expand the scope of EMS participation in the medical industry.

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 end-to-end, vertically integrated solutions. The Company acts as a trusted one-stop partner to global OEMs, specializing in high-mix, flexible volume manufacturing supported by strong engineering capabilities for complex and mission-critical product requirements.

Avalon serves a diversified set of industries, including industrial, communications, clean energy, mobility, defence and others. Its capabilities span the entire value chain from individual component manufacturing to full system integration underpinned by a strong focus on design-for-manufacturing (DFM) and design- for-assembly (DFA) to enhance efficiency, reliability, and time-to-market for customers.

The Companys flexible manufacturing systems and integrated service offerings enable it to deliver customized, high-quality solutions across a broad spectrum of applications globally. Avalon operates through a hybrid delivery model, leveraging its manufacturing footprint in both India and the United States - two high-growth and strategically important markets. This global presence enhances operational agility, strengthens customer proximity, and enables the Company to effectively support evolving customer needs across geographies.

Manufacturing

Avalons manufacturing strength is supported by over 575K+ sq. ft. of design and production space across 15 facilities and 65 production lines, with built-in capacity for scale-up.

The Company maintains a unique dual-shore presence in India and the United States, enabling localized manufacturing for global customers. Its facilities meet key international quality standards, including AS 9100, IATF 16949, and ISO 13485.

Guided by a Build Local. Serve Global. approach, Avalons India operations cater to both domestic and export markets, while its U.S. facilities focus on serving local customers, enhancing agility and proximity.

SEGMENT OVERVIEW AND PERFORMANCE

The Industrials segment, which covers power and automation, remained the largest contributor to Avalons revenue. The segments share increased from 30% in FY2025 to 34% in FY2026, reflecting the Companys strong execution capabilities and growing focus on industrial automation and power solutions. The revenue contribution from the Mobility / Transportation segment, comprising railways, automotive, and aerospace, also witnessed a marginal increase from 27% in FY2025 to 28% in FY2026, indicating sustained momentum across transportation-related industries. The Clean Energy segment maintained a stable contribution at 20% in FY2026, unchanged from FY2025, supported by continued opportunities in solar, electric vehicle, and hydrogen-related applications. Avalons revenue share from the Communications segment remained stable at 8% in FY2026, reflecting consistent demand from telecom, satellite, and digital infrastructure markets. The revenue contribution from the Medical & Others segment, covering medical technologies, defence, and miscellaneous categories, declined from 15% in FY2025 to 10% in FY2026. Despite this moderation, Avalons diversified industry presence continues to reinforce its resilience and balanced positioning across end-user markets.

MOBILITY

Avalon continues to strengthen its presence in the mobility sector by developing durable and technologically advanced systems for the railways, automotive, and aerospace industries. The Company collaborates closely with global OEMs and transportation partners to deliver high-performance solutions aligned with evolving mobility requirements. Avalons expertise spans precision manufacturing, electronic systems integration, and mission-critical applications, enabling it to address increasing demand across transportation infrastructure and next-generation mobility platforms.

In the railways segment, Avalon collaborates with global rail operators and transport manufacturers to support railway modernization and safety enhancement initiatives. The Company caters to braking systems, interlocking systems, engine controls, and electronic safety systems. Progress in advanced railway technologies, including Kavach systems, further strengthens Avalons positioning within Indias rapidly expanding rail ecosystem.

In the aerospace sector, Avalon specializes in intricate sheet metal structures, precision-machined components, and injection-moulded plastic parts for mission-critical applications. With certifications including AS9100 and NADCAP accreditation for fusion and resistance welding, the Company supports diverse aerospace applications such as aircraft seating, cargo systems, smoke detectors, and engine components. Its vertically integrated manufacturing capabilities ensure high precision, stringent quality control, and scalable production.

Product offerings

• Aerospace: Seating systems, cabin systems, smoke detectors, combustion liners, engine parts, wiper assemblies, and lighting enclosures.

• Railway: Electronic interlocking systems, anti- collision systems (Kavach), braking systems, wheel slide protection systems, engine control systems, emergency braking systems, and traction systems.

• Automotive: GPS trackers, camera systems, electronic dashboards, actuation systems, battery management systems, converters, controllers, and motion control systems.

INDUSTRIALS

Avalons end-to-end design-led manufacturing capabilities enable innovation across industrial applications, including power electronics, automation systems, transformers, and energy infrastructure solutions. By combining deep domain expertise with advanced electronics manufacturing capabilities, the Company supports leading players across the power value chain, including generation, transmission, distribution, storage, and conditioning.

The Industrials segment remained the largest contributor to Avalons revenue in FY2026, with its share increasing from 30% in FY2025 to 34% in FY2026. The growth reflects increasing demand for industrial automation, power management systems, and precision electronic solutions, reinforcing Avalons strong positioning in the industrial ecosystem. The Companys integrated manufacturing approach enables customers to develop advanced and intelligent energy systems while enhancing operational efficiency and reliability.

Product offerings

The Companys key offerings in this segment include PCBAs, magnetics for CNC machines, power cables, controllers for power pumps, control panels, fuel dispenser systems, and power management solutions.

COMMUNICATION

Avalon supports telecom, satellite, and digital infrastructure customers through end-to-end manufacturing solutions ranging from concept development to full-scale production. Its vertically integrated capabilities cover mission-critical communication components such as antenna boxes, remote radio heads (RRH), baseband units (BBU), and digital communication systems, catering to the evolving requirements of the telecom and satellite ecosystem.

The Communication segment contributed 8% to total revenue in FY2026, remaining stable compared to FY2025. This performance reflects consistent demand from telecom infrastructure, satellite communication systems, and digital connectivity solutions. Avalon continues to collaborate with industry leaders by leveraging expertise in telemetry, geolocation technologies, and integrated manufacturing to deliver reliable communication-enabled solutions.

Product offerings

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

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

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

CLEAN ENERGY

Avalon remains actively engaged in the rapidly evolving clean energy sector, serving high-growth applications such as electric vehicles (EVs), and energy storage system. The global transition towards clean energy, favourable policy support, and increasing adoption of sustainable technologies continue to create strong demand for advanced electronics manufacturing solutions.

Avalon continues to strengthen its presence in this segment by supporting customers with critical components and systems used across renewable energy and EV ecosystems. The Company remains well-positioned to benefit from growing investments in energy transition and decarbonization initiatives.

Product offerings

• Solar trackers, solar inverters, solar chargers, solar pump controllers, energy storage systems

• DC power supply, AC/DC converters, inverter systems, subsystem solutions for electrolysers home electrification systems, power drivers.

• Onboard charging units, converters, motor controllers, electronic dashboards, management systems, and sensor boards

MEDICAL & OTHERS

Avalon is well-positioned to address the complexities of medical device manufacturing and high-reliability electronic applications through advanced engineering capabilities, strict regulatory adherence, and collaborative product development. The Company delivers precision-engineered solutions that support high standards of safety, reliability, and performance.

The Medical & Others segment contributed 10% to total revenue in FY2026, compared to 15% in FY2025. The moderation in contribution reflects a changing revenue mix, while the Company continues to maintain a diversified presence across medical technologies, defence, and specialized industrial applications. Avalon remains focused on expanding capabilities in advanced electronics and high-value precision manufacturing to cater to evolving customer requirements.

Product offerings

The Company provides products such as PCBAs for oxygen concentrators and blood analysers, cables for flow meters, defence-related electronic solutions, and advanced server technologies through strategic collaborations.

GEOGRAPHY MIX

Avalons revenue from U.S. customers rose to 62%, compared to 57% in FY2025, showing stronger traction in international markets. The share from Indian customers was 38% during FY2026.

Business Highlights FY2026

• Revenue from operations grew by 46% year-on-year, increasing from E 1,098 Cr in FY2025 to E 1,603 Cr in FY2026.

• Net Working Capital improved by 12 days year on- year, reducing from 124 days in FY2025 to 112 days in FY2026.

• Added three large U.S.-based customers during the year, with programs progressing from prototype to commercialization.

• Maintained a strong order visibility with an order book of E 2,196 Cr and long-term contracts of E 1,245 Cr.

• Achieved strong progress in energy storage system (BESS) programs, positioning the Company to benefit from increasing clean energy adoption.

• Advanced aerospace programs, with cabin subassemblies moving toward volume production and new opportunities in cockpit and landing gear components.

• Progressed railway mobility solutions, including developments in the Kavach anti-collision system and locomotive subsystem programs.

• Strengthened presence in Europe and Southeast Asia, supporting customer diversification and export growth.

• Increased share of high-value box-build solutions, reflecting a strategic shift toward complex and value-added manufacturing.

• Expanded manufacturing and engineering capabilities through capacity additions and strategic technology collaborations.

• Awarded Best Performer for Lean Electrical production by the ACMA Engineering Excellence Cluster

• ISM 2.0 aligns with our recent wins in semiconductor equipment manufacturing for Industry 4.0 compliant complex systems

• Won supplier of the year award by a leading railway OEM for driving significant cost reduction initiatives

• Progressing steadily in semiconductor equipment manufacturing space partnering with a global major to deliver industry 4.0 compliant complex box-build systems

• AS9100D (Aerospace quality certification for PCBA and chemical processing) secured

• IPC A-610 J, A-600 K & WHMA-A-620 E (Assembly & wiring harness quality) Certifications secured

Business Outlook

Avalon Technologies delivered a resilient performance in FY2026, supported by diversified growth across key industry verticals and continued momentum in new business wins. The Company witnessed robust customer engagement across India and international markets, reinforcing confidence in its strategy focused on sustainable and profitable growth. During the year, Avalon continued to strengthen its presence across industrials, clean energy, mobility, aerospace, communication, medical, and defence sectors, while also advancing into high-technology segments such as semiconductor equipment.

In FY2026, the Indian manufacturing operations, which serve both domestic and global clients, accounted for 79% of the Companys revenue. EBITDA margins improved to 10.8% in FY2026, while PAT margins rose to 6.9% from 5.7% in FY2025, reflecting efficiency and scale.

Growth continues to be supported by three key pillars ? expansion of existing customer relationships, new business wins across verticals, and conversion of a strong opportunity pipeline into production programs. The Company also onboarded new global customers, particularly in industrial and defence sectors, creating a strong foundation for medium- term growth.

Avalons diversified manufacturing presence across India and the U.S. continues to position the Company favourably amidst evolving global supply chain dynamics and increasing preference for geographically resilient sourcing models. The Company is also expanding its market presence in Europe and Southeast Asia, further diversifying its customer base and strengthening export opportunities.

The Company continues to benefit from structural tailwinds in sectors such as clean energy, railways, aerospace, industrial automation, and defence. Progress in energy storage systems (BESS), railway safety systems including Kavach, advanced aerospace components, and communication solutions is expected to support future growth. Additionally, Avalons entry into the semiconductor equipment segment represents a significant long- term opportunity, with validations progressing and volume production expected from FY2027.

Avalon remains focused on strengthening its capabilities through investments in advanced manufacturing, high-value box-build solutions, precision engineering, and capacity expansion initiatives. Supported by a strong order pipeline and long-term customer programs, the Company remains well-positioned to drive sustainable growth while deepening customer relationships and enhancing operational efficiencies. As of FY2026, the order book stood at E 2,196 Cr, with an execution cycle of 12-14 months, in addition to long-term contracts of E 1,245 Cr, providing strong revenue visibility over the medium term.

FINANCIAL OVERVIEW Financial Performance

Some of the key financial highlights for the Fiscal Year 2025-26 are provided below:

Particulars ( in Cr.)	FY2026	FY2025	YoY Change
Revenue from Operations	1603	1098	46%
Gross Margin	550	393	40%
Gross Margin (%)	34.3%	35.8%	-143 bps
EBITDA	173	115	51%
EBITDA (%)	10.8%	10.5%	35 bps
Depreciation	34	29	17.6%
Finance Cost	15	17	-10.2%
Profit before tax (PBT)	154	87	77%
Profit after tax (PAT)	113	63	78%
PAT (%)	6.9%	5.7%	123 bps

The Company delivered another strong year of financial performance in FY2026, driven by robust revenue growth, strong execution, and continued ramp-up of key programs.

Revenue from operations grew significantly by 46% to 5 1,603 Cr, compared to 5 1,098 Cr in FY2025, reflecting sustained business momentum and strong customer traction.

Gross profit increased by 40% to 5 550 Cr, led by higher volumes and improved project execution. However, gross margin moderated slightly to 34.3% from 35.8%, primarily due to business mix and scaling of new programs.

The Company continued to deliver strong operational performance, with EBITDA rising by 51% to 5 173 Cr. EBITDA margin improved to 10.8% from 10.5%, demonstrating operating leverage benefits and cost efficiencies as revenues scaled.

Profitability saw a sharp improvement, with:

• Profit before tax (PBT) increasing by 77% to 5 154 Cr

• Profit after tax (PAT) rising by 78% to 5 113 Cr

The PAT margin expanded to 6.9%, compared to 5.7% in FY2025, reflecting improved operating performance, better cost absorption, and enhanced margin profile. Overall, Avalon delivered a strong and well-rounded performance in FY2026, marked by robust revenue growth, improving profitability, and stable margins.

Financial Ratios

Particulars	FY2026	FY2025	Explanation
ROCE (%)	20.6	15.7	Improved due to higher profitability and better capital utilization.
Asset Turnover (x)	9.9x	7.5x	Increased due to higher revenue generation from existing asset base.
Net Debt to EBITDA (x)	0.2x	0.1x	Slight rise due to marginal increase in borrowings; remains low and comfortable.
Inventory Days	84	86	Inventory days improved due to easing of supply chain issues and our conscious effort to optimize inventory.
Trade Receivables Days	72	84	Trade receivable days decreased to 72 days from 84 days in FY2025.
Trade Payables	45	46	Slight decrease due to stable supplier terms and normalized payment cycle.
Net Working Capital Days	112	124	The reduction in net working capital days highlights enhanced operational efficiency and better working capital cycle management, supported by lower inventory and improved collection efficiency.

HUMAN RESOURCES

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

During the Financial Year, Avalon continued to maintain a diverse and capable workforce across technical, operational and support functions. Our focus on inclusive hiring, talent retention and employee development contributed to a balanced workforce that supports organizational growth and business objectives.

Key Metrics

	Male	Female
Headcount (As on 31.03.2026)	2,538	592
Total Headcount	3,130
Diversity (%)	81%	19%

NURTURING TALENT

People Transformation across Talent, Culture and Safety

a. Hiring, Campus & Diversity

Our workforce grew by 15.8% during the year, with strategic hiring initiatives, including campus, helping strengthen our employee base to aid business growth. Our focus remained on attracting diverse talent, enhancing candidate experience, and building an inclusive workforce to support long-term organizational success.

Workforce diversity and inclusion remained a standing priority across white-collar and blue- collar roles.

b. Capability Building

Over 40,000 manhours of training were clocked in FY2026, enhancing employee capability across technical, functional, behavioural and leadership development areas.

Internal Training: In-house learning programs were conducted across technical topics, various functional processes, safety operations, and behavioural competencies, enabling employees to build role-specific competence and strengthen day-to-day performance.

External Training: As part of our efforts to build a future-ready organization, we continued to invest in equipping our managerial workforce with key behavioural and leadership competencies.

1. Functional Work Groups - Competencies targeted through this initiative focused on enhancing stakeholder relationship and inter-personal effectiveness while effectively managing customer expectations. Intense 2-day experiential learning workshops were conducted throughout the year, covering major functional groups like Program Management, Supply Chain, Quality, Finance, HR & Engineering.

2. Enabling People Managers for Scale and

Impact - Focused L&D interventions were rolled out for ~120 people managers across all levels to strengthen leadership effectiveness. The program covered: building high-performance teams, managing diverse and millennial talent, and applying structured feedback and review frameworks. It also emphasized expectation management to enable more consistent, inclusive, and outcome-driven people leadership.

These interventions were designed with leading L&D practitioners and customized, to Avalons needs.

Culture Build - Performance-driven & Value- based

As part of its 2025 strategic agenda, Avalon has tweaked its Performance Management Process that connects individual ambition to the Companys strategic momentum and foundational values. The framework evaluates talent across two complementary dimensions ? the measurable business outcomes our people achieve, and the behavioural competencies through which such outcomes are earned. This approach ensures that results are delivered with commensurate integrity, accountability, collaboration, and customer focus. By applying transparent and consistent standards across every level of management, Avalon reinforces the operational discipline and governance culture that empower teams to raise the bar, scale what works, and convert everyday performance into compounding, long-term value. More than a policy, this initiative is a deliberate investment in the talent, culture, and execution capability that will power Avalons next phase of sustainable growth while upholding the principles essential to preserving stakeholder confidence.

Life @ Avalon

Celebrating our people, culture, and milestones

• VIBE25 - an organization-level engagement initiative to promote innovation across Engineers - was launched to channel young engineers ideas into process improvements.

• Beyond the workplace, Avalons calendar was rich with moments that brought colleagues together - from Diwali, Pongal, Christmas, Independence Day, Republic Day, Navaratri, Karnataka Rajyotsava, Ayudha Pooja, Factory Day, Womens Day and birthday celebrations. These moments of celebration and connection continue to shape a workplace culture our people are proud to be part of.

• Service Anniversary Awards honoured employees for long-term commitment and loyalty across the organization.

• Avalon continued to strengthen its culture of innovation, and drove continuous improvement through participation in multiple national and industry forums. These efforts were recognized with several prestigious awards and accolades, reflecting the organizations commitment to operational excellence, employee-driven innovation, and best practices.

RISK MANAGEMENT

The Company follows a structured approach to risk management, with a focus on identifying, assessing and mitigating risks that may affect its operations, financial performance and strategic objectives. This approach is supported through business planning, customer and market diversification, technology investments and collaboration with key stakeholders. The key risks faced by the Company and the corresponding mitigation measures are outlined below.

Risk	Impact	Mitigation
Macroeconomic Risk	An economic slowdown, elevated inflation and other adverse macroeconomic conditions could affect demand for electronics products and electronics manufacturing services (EMS). Such developments may also impact the Companys import and export activities, potentially affecting business volumes and operational performance.	While global macroeconomic conditions continue to present challenges for the EMS industry, Indias economic growth and moderating inflation provide a supportive environment for sectoral expansion. The continued adoption of digital technologies across industries is creating opportunities for EMS providers. The Company remains focused on strengthening customer relationships and maintaining regular engagement with its customers to support business continuity and address evolving market requirements.
Regulatory Risk	Changes in applicable laws, regulations and statutory requirements, or any instance of non-compliance, could affect the Companys operations, business prospects and reputation. In addition, regulatory benefits and incentive schemes available to the industry may be delayed, modified or withdrawn due to changes in the regulatory environment, which could impact the Companys business and financial performance.	The Company maintains processes to monitor compliance with applicable regulatory requirements and industry standards across its operations. Avalon also benefits from a diversified business portfolio spanning multiple products, markets and revenue streams, which helps reduce reliance on any single regulatory incentive or benefit. This diversification supports operational stability and mitigates the potential impact of changes in the regulatory landscape.
Raw Material Risk	The availability, quality and cost of raw materials, including metals, electronic components, polymers and specialized inputs, are critical to the Companys manufacturing operations. Price volatility arising from supply chain disruptions, geopolitical developments, changes in trade policies or supplier concentration may increase procurement costs and affect margins. In addition, shortages or delays in the supply of critical materials could disrupt production schedules, impact order fulfilment, and affect customer commitments.	The Company follows a strategic sourcing approach and maintains relationships with multiple suppliers across geographies to reduce dependence on any single vendor. Avalon also enters into long- term procurement arrangements, where appropriate, to support supply continuity and manage input cost volatility. In addition, the Company continuously evaluates alternative materials and sourcing options to mitigate supply risks while maintaining product quality and compliance requirements.
Currency Fluctuations Risk	Given the Companys global operations and cross-border transactions, fluctuations in foreign exchange rates, particularly in the U.S. Dollar, Euro and other key currencies, may affect revenue realization, import costs and profitability. Adverse currency movements can impact financial planning, pricing decisions and the translation of foreign currency transactions and balances. Unhedged exposures may also result in foreign exchange losses during periods of heightened currency volatility.	The Company follows a structured foreign exchange risk management framework that includes natural hedging by aligning foreign currency inflows and outflows, as well as the use of forward contracts and other derivative instruments, where appropriate. The finance team regularly monitors currency exposures and works closely with business units to align cash flows and manage foreign exchange risks. In addition, multi-currency invoicing arrangements and pricing adjustment mechanisms in long-term contracts help mitigate the impact of currency fluctuations.
Operational Risk	Operational risks may arise from disruptions in manufacturing processes, supply chain inefficiencies, equipment breakdowns, quality control issues, information technology system failures or workforce-related challenges. Such events could result in production interruptions, delays in order fulfilment, increased operating costs, regulatory non-compliance and reputational impact, thereby affecting operational efficiency and financial performance.	The Company has established operational processes and standard operating procedures across its manufacturing and business functions. Avalon continues to invest in automation and workforce development initiatives, including training and cross-functional skill enhancement programs, to support operational continuity. In addition, the Company undertakes periodic audits and implements continuous improvement initiatives, including lean manufacturing and Six Sigma practices, to identify process inefficiencies and enhance operational performance. These measures support productivity, quality and operational reliability.
Customer Concentration Risk	A significant proportion of the Companys revenue is derived from a limited number of customers. Consequently, the loss of a key customer, reduction in order volumes, changes in customer procurement strategies or termination of commercial arrangements could result in revenue volatility and may adversely affect the Companys business performance.	The Company seeks to mitigate customer concentration risk by expanding its customer base across multiple industries and end markets. Avalon focuses on strengthening long-term customer relationships through the delivery of integrated manufacturing solutions and sustained customer engagement. The Company also continues to pursue opportunities with new customers across existing and emerging market segments and geographies, supporting revenue diversification and reducing dependence on any single customer or customer group.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Company has designed and instituted an adequate internal control system that comprises well-defined organization 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 unauthorized access or loss, proper authorization 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 Protiviti India Member Private Limited was appointed as the internal auditor of the company under section 138 of the Companies act 2013, for conducting internal audit for FY2026. The Internal audit framework is designed to assess the adequacy and effectiveness of internal control mechanisms and covers 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 of the Company reviews the internal audit findings and monitors the implementation of agreed corrective actions. The Committee also engages with the Statutory Auditors to understand their assessment of the adequacy of the internal control systems. The Statutory Auditors have independently audited the internal financial controls over financial reporting as at March 31, 2026, and have issued an unmodified opinion, confirming that adequate internal controls were in place and that such controls were operating effectively.

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.