AVATAR Industries Ltd Management Discussions

Global Economic Overview

The global economy remained resilient during FY2025-26 despite geopolitical tensions, evolving trade policies, commodity-price volatility and uneven monetary conditions. According to the IMFs April 2026 World Economic Outlook, global economic growth is projected at 3.1% in 2026 and 3.2% in 2027. The outlook remains subject to risks from geopolitical developments, trade fragmentation and renewed inflationary pressures.

At the same time, technology-led investment, particularly in artificial intelligence and digital infrastructure, continues to support global economic activity. Businesses are increasingly prioritising productivity, automation and digital transformation to improve efficiency and remain competitive amid an uncertain macroeconomic environment. The OECD has also identified technology-related investment as an important support to global growth.

For AVATAR Industries Limited, this environment presents both challenges and opportunities. While economic uncertainty may result in cautious enterprise spending, the increasing focus on AI adoption, automation, enterprise software and digital transformation provides a favourable structural backdrop for the Companys technology-focused strategy.

Indian Economic Overview

India continued to maintain a strong growth trajectory, supported by domestic consumption, investment activity and the expanding services sector. Indias real GDP growth was 6.5% in FY2024-25, while the GDP growth as per the provisional estimates for the FY2025-26 is stood at 7.7% reflecting the countrys relatively strong domestic economic fundamentals.

A key structural feature of Indias growth is the rapid expansion of its digital economy. Increasing adoption of digital platforms, cloud technologies, artificial intelligence and enterprise software is encouraging businesses to invest in technology to improve productivity and operational efficiency. Indias large technology talent pool and growing presence of Global Capability Centres further strengthen its position in the global digital ecosystem.

These developments create a favourable domestic market for Avatar Industries and its transition towards artificial intelligence, enterprise software, digital transformation, managed technology services and technology talent solutions. The Companys strategic initiatives are therefore aligned with Indias broader shift towards a technology-led and increasingly AI-enabled economy.

Global Technology & IT Industry Overview

Technology spending is entering a strong investment cycle, led increasingly by artificial intelligence, software, cloud computing and digital infrastructure. Global IT spending is projected to reach US$6.31 trillion in 2026, representing a 13.5% increase over 2025. The acceleration reflects rising investment in AI infrastructure and enterprise software.

The industry is also undergoing a structural shift in the way technology services are delivered. AI is moving from experimentation towards enterprise-scale deployment, while technology providers are increasingly adopting outcome-based models rather than relying solely on manpower-led delivery. This is accompanied by greater integration of software, infrastructure and services into technology solutions.

India remains an important part of this global technology ecosystem. With direct technology employment projected at approximately 6 million people. The sector is increasingly shifting from scale-led growth towards value creation, innovation and AI-enabled services.

The technology industry is therefore moving towards an AI-led operating model, with increasing emphasis on enterprise AI, automation, cloud, advanced analytics, cybersecurity and specialised technology talent. This transition is expected to reshape both technology spending and service-delivery models over the coming years.

Indian AI & Digital Economy Opportunity

Indias digital economy is becoming an increasingly important component of overall economic activity. According to the Ministry of Electronics and Information Technologys Annual Report 2025-26, the digital economy was valued at approximately ?31.64 lakh crore (around US$402 billion) and is projected to grow at nearly twice the pace of overall GDP, reaching around 20% of national income by 2030.

Artificial intelligence is emerging as a key layer of this digital transformation. The IndiaAI Mission, approved by the Government in 2024, is building capabilities across AI compute, datasets, foundation models, future skills, startup financing and safe & trusted AI. The IndiaAI Compute initiative is also making GPU-based computing resources available to startups, MSMEs, researchers and industry, supporting wider access to AI infrastructure.

Indias opportunity extends beyond AI infrastructure to the broader technology ecosystem. Global Capability Centres (GCCs) are increasingly undertaking higher-value activities in India, including AI/ML research, product development, engineering, cybersecurity and digital operations. At the same time, the countrys Digital Public Infrastructure, including UPI, Aadhaar, Digi Locker and Account Aggregator, is providing a foundation for further digital innovation.

The combination of a rapidly expanding digital economy, increasing enterprise adoption of AI, government-led AI infrastructure and a large technology talent base is creating a broad opportunity across AI solutions, enterprise software, digital transformation, analytics, technology services and AI skilling.

Company Overview

AVATAR Industries Limited, formerly known as ASL Industries Limited, is a listed company that is undergoing a strategic transformation towards technology and artificial intelligence-led businesses. In April 2026, the Company announced its rebranding as AVATAR Industries Limited, reflecting its intention to develop capabilities across AI-powered software solutions, advanced analytics, digital infrastructure and AI-enabled services and consulting.

The Companys evolving business strategy is focused on building technology capabilities around enterprise applications, artificial intelligence, machine learning, digital transformation and related technology services. The Company is pursuing an asset-light and technology-led business model, with the objective of developing scalable capabilities across emerging technology segments.

During FY2025-26, the Company also recorded a significant increase in operating activity, with Revenue from Operations of ?102.87 crore and Consolidated Total Income of ?103.55 crore.

The Companys technology-focused transition has subsequently been strengthened through the incorporation of AVATAR AI MindLab Private Limited, a wholly owned subsidiary established in July 2026. The subsidiary is focused on enterprise AI adoption, industry skilling, managed services and Talent-as-a-Service. Overall, AVATAR Industries is positioning itself for participation in the expanding technology and AI ecosystem, with its strategy evolving towards a combination of AI solutions, enterprise technology, managed services and technology talent capabilities.

Financial Performance

FY2025-26 marked a significant improvement in the financial and operational performance of Avatar Industries Limited, supported by the commencement of substantial revenue generation and improved execution across its business activities. On a consolidated basis, Revenue from Operations stood at ?10,287.38 lakhs in FY26. Consolidated Total Income increased significantly to ?10,354.97 lakhs from ?36.32 lakhs, representing a 28,414% year-on-year growth. The substantial increase reflects the scale-up of operations and stronger business traction during the year. Consolidated Net Profit also increased to ?37.32 lakhs from ?8.56 lakhs, registering a 336% year-on-year growth, supported by higher business volumes and improving operational execution.

The Company witnessed a particularly strong acceleration during Q4 FY26, with Consolidated Total Income reaching ?10,321.18 lakhs, compared with ?0.16 lakhs in Q4 FY25. Revenue from Operations during the quarter stood at ?10,287.38 lakhs, while Consolidated Net Profit turned positive at ?11.73 lakhs, compared with a net loss of ?2.56 lakhs in the corresponding quarter of the previous year. On a sequential basis, Consolidated Total Income increased sharply from ?33.79 lakhs in Q2 FY26 to ?10,321.18 lakhs in Q4 FY26, highlighting the significant acceleration in business activity towards the close of the financial year.

On a standalone basis, the Company also delivered improved financial performance during FY26. Total Income increased by 86% to ?67.58 lakhs, compared with ?36.32 lakhs in FY25, while Net Profit increased by 406% to ?43.33 lakhs from ?8.56 lakhs. During Q4 FY26, standalone Total Income stood at ?33.79 lakhs, while Net Profit reached ?17.74 lakhs, compared with a net loss of ?2.56 lakhs in Q4 FY25. Overall, FY26 represents an important growth phase for Avatar Industries Limited, characterized by a substantial expansion in consolidated operations, improved profitability and stronger business traction. Going forward, the Company remains focused on sustaining the momentum achieved during FY26, improving revenue consistency, strengthening execution capabilities and building a foundation for sustainable and profitable long-term growth.

Recent Developments

FY2025-26 marked a period of significant transition for the Company, with developments extending from its corporate structure and business strategy to its technology-focused repositioning. The Company also undertook several important initiatives after the close of the financial year that further shaped its current direction.

Strategic Repositioning

The Company initiated a significant strategic transition towards a technology-oriented and AI-led business model, with an emphasis on developing capabilities across AI-powered software solutions, artificial intelligence and advanced analytics, digital infrastructure, and AI-enabled services and consulting. The strategic direction reflects the Companys intent to participate in the growing adoption of AI and digital technologies across enterprises and industries.

The proposed model is focused on building scalable and technology-driven capabilities, enabling the Company to address evolving enterprise requirements in areas such as automation, data-driven decision-making, digital transformation and technology-enabled business processes. This repositioning represents a shift towards emerging technology opportunities and is intended to establish a broader platform for future business growth.

Incorporation of AVATAR AI MindLab

Following the close of FY2025-26, the Company further strengthened its technology strategy through the incorporation of AVATAR AI MindLab Private Limited as a wholly owned subsidiary. The subsidiary has been established as a full-stack AI enterprise, with its focus spanning Enterprise AI Adoption, Industry Skilling, Managed Services and Talent-as-a-Service (TaaS).

AVATAR AI MindLab is intended to address the growing requirement among enterprises to move from AI experimentation towards practical implementation. Its proposed business model combines AI implementation and adoption, workforce skilling, managed technology services and specialised talent solutions, allowing enterprises to access technology capabilities through multiple engagement models.

The establishment of the subsidiary represents an important step in building a dedicated platform for the Companys AI strategy. Over time, these capabilities could support the development of recurring service relationships, enterprise AI implementation opportunities and technology talent solutions, while providing a structured platform for expanding the Companys presence in the evolving AI ecosystem.

SWOT Analysis

The technology and artificial intelligence industry is undergoing rapid structural change, creating significant opportunities while also introducing new competitive, regulatory and technological challenges.

STRENGTHS	WEAKNESSES
Rapid technological innovation is driving productivity, automation and the development of new digital business models.	High dependence on specialised skills, computing infrastructure and access to high-quality data.
Growing adoption of AI, cloud computing, software and digital technologies across industries.	Technology can be deployed across multiple sectors, creating a broad addressable market.
Rapid technological change can shorten product and technology lifecycles.	Increasing availability of AI tools and digital platforms is accelerating enterprise adoption.

OPPORTUNITIES

OPPORTUNITIES	THREATS
Increasing enterprise adoption of AI creates opportunities across AI software, implementation, consulting and managed services.	High concentration in critical AI inputs such as advanced chips, cloud infrastructure and foundation models may limit competition and increase dependency.
AI-driven automation and digital transformation can expand technology spending across traditional industries.	Cybersecurity, privacy, safety and responsible-AI concerns could increase regulatory and compliance requirements.
Growing demand for AI-skilled professionals creates opportunities in technology training and talent services.	Rapid AI development may disrupt existing IT service and software business models.
Expansion of digital infrastructure and cloud computing supports wider technology adoption.	Intense competition among global technology companies, specialised AI firms and emerging start-ups.

Risk & Risk Management

As the Company transitions towards technology, artificial intelligence, software and digital services, its risk profile is evolving alongside its business model. The Company recognises that effective risk management is important for protecting stakeholder interests, maintaining operational resilience and supporting sustainable growth.

Technology & Cybersecurity Risk: Increasing dependence on AI platforms, software, cloud infrastructure and digital systems exposes the business to cybersecurity threats, data breaches, system disruptions and technology failures. The Company needs to maintain appropriate information-security practices, access controls, data protection measures and technology monitoring mechanisms.

AI & Technology Obsolescence Risk: The technology and AI landscape is characterised by rapid innovation. New models, platforms and technologies can quickly change customer requirements and competitive dynamics. Continuous investment in technology capabilities, employee skills and industry knowledge is therefore important to maintain relevance.

Talent & Skill Availability Risk: The Companys technology-led strategy requires access to specialised professionals in AI, software development, analytics and related fields. Shortages of skilled talent or higher employee acquisition and retention costs could affect the pace of execution. The Companys focus on Industry Skilling and Talent-as-a-Service through AVATAR AI MindLab is also intended to address the broader requirement for job-ready technology talent.

Business Execution & Scaling Risk: The Companys transition into new technology businesses involves establishing customer relationships, developing delivery capabilities and converting new initiatives into recurring revenues. Delays in customer acquisition, project execution or scaling could affect revenue visibility and profitability, particularly while the new businesses are being established.

Competition Risk: The global technology and AI services market is highly competitive, with established IT companies, specialised AI firms and emerging technology businesses competing for customers and talent. Differentiation through specialised capabilities, service quality, execution and customer relationships will remain important.

Regulatory & Data Privacy Risk: AI adoption is accompanied by evolving requirements relating to data privacy, cybersecurity, intellectual property, responsible AI and technology governance. Changes in regulations across jurisdictions could increase compliance requirements and operating costs.

Risk Management Approach

The Company seeks to manage these risks through Board-level oversight, internal financial controls, periodic review of business and operational risks, and appropriate governance mechanisms. The audited consolidated financial statements also report that management is responsible for establishing and maintaining adequate internal financial controls over financial reporting.

The Companys governance framework includes an Audit Committee and Risk Management Committee, supporting oversight of key financial, operational and strategic risks. As the Company expands its AI and technology operations, risk management will increasingly focus on cybersecurity, data governance, technology resilience, talent management, regulatory compliance and disciplined execution, alongside conventional financial and operational controls. This approach is intended to enable the Company to pursue growth opportunities while maintaining appropriate safeguards for long-term stakeholder value.

Human Capital & Internal Controls

As the Company moves towards technology and AI-led businesses, human capital and robust internal controls remain important to its ability to execute its strategic plans. The Companys evolving business model requires access to skilled professionals across AI, software, analytics, digital services and technology management. Accordingly, emphasis on specialised talent, continuous learning and industry-skilling will be important to support the Companys growth.

The Company is also strengthening its organisational and governance framework as it expands into new technology businesses. The appointment of Mrs. Richa Rathod as Managing Director in April 2026, subject to shareholder approval, further strengthens the Companys leadership framework. Her experience includes corporate finance, financial planning, regulatory compliance, financial reporting and internal controls.

The Company maintains internal financial controls designed to support the accuracy and reliability of financial reporting, safeguard assets and ensure compliance with applicable policies and regulations. These controls, together with appropriate governance and oversight mechanisms, are intended to support disciplined financial management and operational efficiency.

Going forward, the Company intends to further strengthen its technology capabilities, talent pool, internal processes and control environment in line with the scale and complexity of its evolving business operations.

Future Outlook

AVATAR Industries is entering the next phase of its growth with a greater focus on Artificial Intelligence, enterprise technology and digital services. The Company intends to build capabilities across AI-powered software, advanced analytics, digital infrastructure and AI-enabled consulting, with an emphasis on scalable and asset-light business models.

Going forward, the Company will focus on expanding its technology capabilities, developing enterprise relationships, improving revenue consistency and building recurring business opportunities. The strong scale-up achieved in FY2025-26 provides a foundation for the next phase, while the Companys ability to execute its technology strategy and convert emerging AI opportunities into sustainable and profitable revenues will remain critical.

Overall, AVATAR Industries aims to establish itself as a technology and AI-focused enterprise, leveraging the accelerating adoption of artificial intelligence, digital transformation and enterprise technology to create sustainable long-term value for stakeholders.

1. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company and Percentage increase in remuneration of each Director, Chief Financial Officer, Company Secretary in the Financial Year 2025-26:

Name of the Director	Designation	Ratio to Remuneration Employees	Median of % increase decrease
Kiran Thakore	Chairman & Non-executive Director	NA	NA
Richa Rathod	Managing Director and Chief Financial Officer	NA	NA
Dilip Goyal	Non-Executive Director	NA	NA
Yatish Poojary	Non-Executive Independent Director	NA	NA
Karina Jadhav	Non-Executive Independent Director	NA	NA
Mansi Vora	Company Secretary	1.89	NA

2. No. of Permanent Employees during the FY 2025-26: Four

3. Percentage increase in the median remuneration of employees in the Financial Year 2025-26 is -Nil.

4. The average increase in the salary of the employees other than the managerial personnel in FY 2025-26 is Nil and increase in the salary of managerial personnel is Nil (considered only those who have worked both full years in the company). The increment given to each individual employee is based on the employees potential, experience as also their performance and contribution to the Companys progress over a period of time and also as per market trend.

5. It is hereby affirmed that the remuneration paid during the year is as per the Remuneration Policy of the Company.

For and on behalf of Board of Directors of

AVATAR Industries Limited

(Formerly known as ASL Industries Limited)

Sd/-

Kiran Thakore

Chairman

DIN: 03140791

Sd/-

Richa Rathod

Managing Director

DIN: 10822615

Date: 02nd September 2026

Place: Mumbai