avantel ltd Management discussions

[Pursuant to Regulation 34 (2) (e) of Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015]

(A). Business Overview:

Review of Operations:

Your company performed well during FY 2021-22 and recorded the highest turnover since inception by crossing the 100 Crores milestone.Avantel has been witnessing steady growth year on year which is propelled by award of few high value projects. The 1KW HF project for Indian Navy awarded to us in FY 2020-21is currently under execution and 71out of the 125 HF sets have been already delivered to the customer. The company is also executing 5 KW HF transmitters to one of the strategic customers as of now. In view of the growing demand for indigenous HF systems, the companys HF vertical is expected to grow in near future and we expect to offer various configurations of indigenous HF equipment to strategic customers in India. Further, this year Avantel has been awarded with another high value contract from L & T worth Rs 125.68 Crores for supply of 6300 loco units for Real Time Train Information Systems to be supplied to Indian Railways. You will be also happy to note that Avantels SATCOM, Radar and RF subsystems have been witnessing steady growth and new customers are evincing interest in Avantels solutions. As part of diversification strategy, Avantel has floated a fully owned subsidiary M/s. Imeds Global Private Limited in September 2021and established manufacturing facility in Andhra Pradesh Medical Tech Zone (APMTZ),Visakhapatnam.The company envisions itself to offer various indigenous medical devices which are the need of the hour post COVID pandemic. The company has recorded a Profit (before tax) of Rs. 23.64 Crores as against Rs. 18.50 Crores in the previous year with an increase in profit by 27.78% compared to last fiscal.

Outlook for the next year

Indias Defence budget for FY 2022-23 is about Rs 4 lakh Crores after excluding the component of the Defence pensions and is primarily focused towards the upkeep and modernization of Armed Forces. The capital outlay, which focuses towards the modernization of Armed Forces has been increased by 12.82 percent with an allocation of Rs.1.52 Lakh Crores. In recent times, the Defence budget has also been sensitive to the need for establishing a technological framework to advance growth of a vibrant indigenous defence manufacturing infrastructure. For this self-reliance initiative, 68% of the capital procurement has been proposed to be earmarked for domestic industry, up from 58% in 2021-22. Here, a whopping 25% of the R&D budget has been earmarked for industry, start-ups, and academia. (Source: https://www.financialexpress.com/budget/defence-budget-2022-gearing-up-indias- domestic-military-industrial-complex/2430471/)

In a recent initiative, to expedite the process of"Atmanirbharatha" in Defence, MoD has listed around 310 items for indigenization in a phased manner. Three lists [first list (101items) dated 21st August 2020, Second list (108 items) 31st May, 2021and third list (101items) dated 07th April 2022 respectively have been released.The aim of this land mark policy decision to indigenize various items is to create an environment where public, private sector and foreign entities can work together and help India become one of the leading countries in defence manufacturing. It is likely that this policy is expected to stimulate the potential of indigenous Research & Development (R&D) by attracting fresh investment into technology and manufacturing capabilities. It will provide ample opportunities to the domestic industry for understanding the trends and future needs of the Armed Forces. (Source: https://pib.gov.in/PressReleasePage.aspxRs.PRID=l8l4446)

Your company has been contributing to self-reliance in the strategic segment for close to three decades and has been offering fully indigenous solutions through its well spread product offerings. The push given by incumbent government in terms of increased capital overlay and emphasis on domestic sourcing would help us to venture into new technologies, roll out new product lines and strengthen the strategic capabilities of India.

Risks And Concerns:

Risks:

Though there is considerable improvement in COVID 19 pandemic situation, there are still bottlenecks / many challenges in the supply chains due to non-availability, long lead times, rejections due to quality issues etc in component and raw material procurements specially from global OEMs thus severely affecting project schedules. Delays in procurement process of strategic sector impacts revenue growth.

Risk Mitigation:

M/s. Avantel Limited could mitigate the risks posed by COVID pandemic with close involvement of all the stakeholders of the company. The top management has extensively monitored, involved and continuously evolved effective strategies for mitigation of above-mentioned risks. Some of the strategies adopted were identification of alternate supply chains, design changes, optimisation of internal processes and effective coordination with customers. M/s. Avantel Limited is also expanding its product portfolio to offset uncertainties of the strategic segment and has already set in motion various diversification plans to drive growth.

Opportunities And Threats:

Opportunities:

The new DAP (Defence Acquisition Procedure) 2020 has given a stronger push to indigenization. The provisions of DAP 2020 will help your company to expedite the current procurement cases and open new avenues for business.The indigenisation list released recently by the government would further open up many opportunities for the company for diversification / introduction of new product lines.

In the medical segment, there is huge opportunity for indigenous and cost effective medical devices and Imeds is exploring various strategies to arrive at an ideal product mix in line with the emerging market demand.

THREATS:

There is assured business in the next two to three year term and your company is expected to keep up the current momentum in terms of its business projections. No major threats are envisaged and the company is quite optimistic on future growth opportunities.

Internal Control Systems:

Your company has well defined internal control systems.The company has the following certifications:

AS9I00: 2016 and ISO 9001:2015 certified Quality Management System ISO/IEC 27001:2013 certified Information Security Management System.

ISO/IEC 17025:2017 certified and NABL accredited in-house Environmental Test Laboratory. "

The company has a robust Internal & external audit mechanisms which are regularly monitored through the ERP system "Funwork".

All the internal and external audits are completed in time. There are no non-compliances in respect of the processes / systems in place and very well appreciated by the external agencies conducting audit.

An effective control is exercised by the top management who monitors various key performance indicators regularly through Management reviews & other means and ensures that all the critical business functions exceeds expectations with timely interventions as required.

Industrial Relations and Human Resources Management:

Your Company enjoys an excellent rapport and standing among its Customers & Suppliers.There are no pending disputes with any of the stakeholders and the company enjoys very cordial and harmonious relations across the business environment. The companys strength lies in its Human resources and its HR policies.The employees are highly motivated and technically equipped to meet the organizational goals at all times.

Development of new products:

In the current financial year, your Company has developed new variants of Mobile satellite services products including Airborne versions and High Power (5 KW) HF systems. In the medical segment, Imeds has developed Skin Staplers, Removers and Oxygen Concentrators. Further, company is developing Software Defined Radios in line with global standards.

Cautionary Statement:

Statements in the management discussion analysis describing the Companys objectives, projections, estimates, expectations are forward looking within the meaning of applicable security-laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. Actual results may differ materially from these expressed in the statement. Important factors that could make difference to Companys operations include economic conditions, changes in the Government priorities/policies/ regulations, tax laws and other statutes and other incidental factors affecting the business environment.The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements on the basis of any subsequent developments, information or events.

	For and on behalf of the Board of Directors Avantel Limited
Place: Hyderabad Date: 06th May, 2022	Sd/- Abburi Vidyasagar Chairman & Managing Director DIN: 00026524