AXISCADES Technologies Ltd Management Discussions

Review of Global Economy

Performance, Opportunities and Emerging Challenges

The global economy in calendar year 2024 grew by an estimated 2.8%1, underscoring its resilience in the face of persistent monetary tightening and geopolitical uncertainty. According to the International Monetary Fund (IMF), global inflation moderated more quickly than anticipated, supporting real wage growth and improved consumption trends. Advanced economies such as the United States (2.7%) outperformed expectations, supported by robust labour markets and consumer confidence. Meanwhile, India (6.5%) and China (4.6%) led growth among emerging markets, driven by domestic investments and renewed export momentum. The services sector remained strong, while manufacturing rebounded modestly due to easing supply chain bottlenecks and stronger industrial output in Asia and select parts of Europe.

A core driver of this recovery was the accelerated integration of digital technologies and Artificial Intelligence (AI) across sectors. AI contributed meaningfully to global productivity gains, especially in manufacturing, logistics, healthcare and professional services. The IMF emphasised that this wave could help reverse the long-standing global productivity slowdown, particularly in economies with strong digital infrastructure. Manufacturing, in particular, is undergoing a paradigm shift, characterized by intelligent automation, smart factories, digital twins and predictive maintenance. These innovations are reshaping production processes, enhancing quality and reducing time-to-market.

Led Growth

Outlook: Navigating the Road Ahead

Looking forward, the global outlook hinges on the ability of the countries and companies to responsibly harness advanced technology. The opportunities are substantial:

Driving productivity through design, simulation and process automation.

Expanding digital capabilities in infrastructure, defence, mobility and energy systems.

Building competitive advantage by offering smart, customised and scalable engineering solutions.

Simultaneously, challenges persist:

• Aligning global regulatory standards.

Ensuring workforce resilience.

Protecting against technological and cybersecurity risks.

The IMF underscores the need for tailored fiscal and education policies. At the same time, the WHO calls for inclusive and equitable deployment strategies, especially in sectors where technology intersects with public well-being.

In this evolving global landscape, businesses that operate at the confluence of engineering innovation, digital transformation and industrial systems thinking are uniquely poised to unlock new value pools. As automation becomes embedded in core sectors, from aerospace to automotive, energy to defence, there is a growing demand for partners integrating domain expertise with digital engineering and lifecycle support. This environment favours companies that combine agility with deep industry know-how, global delivery capabilities and a strong governance foundation. The imperative now is to invest in next-generation talent, foster ecosystem partnerships and remain adaptive to evolving technological and geopolitical currents. By aligning operational priorities with the broader global shift towards more intelligent, more resilient and ethically grounded systems, such organisations can shape the future of smart manufacturing and infrastructure development, enhancing their relevance and resilience in a world transformed by technology.

Review of Indian Economy

India retained its position as the fastest-growing major economy, buoyed by strong public capital expenditure, domestic consumption and a healthy services sector. It emerged as the fastest-growing major economy with a growth rate of approximately 6.5%,2 in comparison to 2.7% in U.S., 4.6% of China and 1.6% in Eurozone. Inflation averaged around 5.3% during the year, easing from FY2024 but still above RBI?s target. RBI held the repo rate at 6.5% through most of the year, focusing on anchoring inflation expectations. Core inflation moderated due to supply chain normalization, though food inflation remained volatile.

The country was not sheltered completely from global slowdown and external shocks like oil prices and geopolitical events. However, at its core, India demonstrated resilience and high growth momentum, with strong macroeconomic fundamentals. Additionally, digital transformation, robust growth and strategic infrastructure investments, particularly in the engineering sectors of aerospace, Defence and artificial intelligence (AI). areas have become pivotal in driving technological advancement, enhancing national security and positioning India as a global leader in innovation.

India?s aerospace sector has witnessed significant developments, underscoring its commitment to self-reliance and global competitiveness like indigenous production, international collaborations and an impressive export growth. The Defence sector has been a focal point of India?s economic strategy, with substantial investments and policy initiatives like focussed budget allocation emphasizing modernization and indigenization efforts, technological advancements including the development and successful testing of the indigenous ‘Bhargavastra? counter-drone system and strategic infrastructural development. AI has become the cornerstone of India?s economic development, with initiatives aimed at harnessing its potential across various sectors which is projected to add USD 500 billion to India?s GDP by 2035. The year was marked with government initiatives like the ‘IndiaAI Mission? and private sector engagement in AI and cloud infrastructure. The concerted efforts in advancing aerospace, Defence and AI sectors have not only fortified economic growth but also enhanced the country?s global standing in technology and innovation. The synergy between government initiatives and private sector participation continues to drive progress, setting the stage for sustained development in the years ahead.

Review of the Industry

Aerospace

Global Outlook

The global aerospace sector in FY2025 is experiencing robust growth, driven by surging demand for commercial aircraft, advancements in Defence technologies and a strong focus on sustainability. Aerospace companies are identifying opportunities to integrate digital technologies in their maintenance, repair and overhaul services to realize value. 2025 has been a pivotal year in the workforce as digital technologies play an increasing role in enhancing traditional talent strategies. The industry is expected to see continued and growing focus on rocket technology, unmanned systems and space capabilities. Many advanced air mobility manufacturers and operators are setting ambitious targets to launch operations, with frontrunners working to achieve flight certification These trends are expected to persist and evolve, paving the way for the broad-based operationalization of transformative technologies such as advanced air mobility (AAM) and unmanned systems. Over the past year, automation has gained significant traction across the aerospace and Defence (A&D) sector, signalling a growing level of maturity and confidence among industry players in adopting and scaling its capabilities. Looking ahead, automation is poised to serve as a catalyst for innovation and in critical functions such as aftermarket service enhancement, predictive maintenance and supply chain optimization. As integration deepens, analytics and automation will likely redefine operational standards, enabling faster decision-making, improved asset utilization and a more agile response to market and mission demands.

Summary

The aerospace industry in FY2025 is characterized by strong growth prospects, driven by a resurgence in air travel, technological advancements and strategic investments. However, challenges such as supply chain disruptions and labour shortages remain. Supply chain visibility is likely to be taking priority, as part shortages, delivery delays, shipping costs and sourcing concerns will likely be impacting in the coming year. Companies are focusing on enhancing supply chain resilience, investing in sustainable technologies and exploring new markets to navigate the evolving landscape. It is likely that, in the near future, aerospace companies will prioritize resiliency and visibility across their supply chains to ensure the future of their technologies, enabling greater agility, risk mitigation and continuity in the face of global disruptions.

India Outlook

India is rapidly establishing itself as one of the world?s most dynamic aviation markets, propelled by a confluence of economic momentum, strategic policy initiatives and domestic consumption growth. The sector?s transformation is creating substantial opportunities across the value chain from airline operators to OEMs, MROs and aerospace engineering firms.

In India, the aerospace industry is growing significantly with the rising activities from both the defence and civil aviation sector. Record aircraft orders, airport modernization and expansion, booming aerospace supply chain and robust engineering and MRO system are some of the key growth drivers. The Indian aerospace particularly & defence (A&D) market is projected to reach USD 70 billion by 20301, driven by the burgeoning demand for advanced infrastructure and government thrust.

Inspite of the phenomenal growth potential, the industry is in a transition phase where OEM-led aircraft development has plateaued, shifting the focus to aftermarket services, retrofitting and digital lifecycle support. This transformation is ushering in demand for MRO, cabin upgrades, aircraft conversions and integrated supply chain solutions. The priority is sustainability, operational efficiency and personalised passenger experience, all of which pivot on advanced engineering and digital solutions.

1 Source: All India Association of Industries

Key Developments

Surge in passenger-to-freighter conversions.

AI adoption in MRO and predictive maintenance.

Interior retrofits for comfort and compliance

Digital twin models transforming supply chain operations.

Opportunities

Firms specialising in structural design, AI-MRO systems, interior fitments and logistics optimisation are ideally placed to scale up in a market shifting from production to intelligent aftermarket services.

Digital MRO twins would drive demand for model-based systems, engineering and data analytics talent.

In advanced air mobility, venture funding and pilot programmes for OEMs for eVTOLs and cargo drones continued to rise and this would open new certification and lightweight materials R&D. OEMs embedded tools would reduce design-cycle time by up to 30% and this . would require up-skilling of aero-design engineers in

ML/physics hybrid modelling.

FY2025 confirmed that aerospace engineering is back on its long-term growth runway, but with new constraints around sustainability, resilience and talent. Companies that invest early in digital engineering, green-propulsion R&D and diversified supplier bases are positioned to lead as the industry targets a net-zero, high-demand future.

Review of the Industry

Defence

Global Outlook

Global defence spending and industrial activity accelerated sharply in FY2025. World military outlays hit a fresh record of USD 2.72 trillion, as every region raised budgets, led by Europe, the Middle East and the Indo-Pacific. At the same time, demand for munitions, air-defence systems, hypersonics and secure electronics kept prime contractors? backlogs at multi-year highs, fuelling a rebound in mergers and acquisitions, while exposing persistent supply chain and labour shortfalls. Looking ahead, re-armament drives from NATO?s proposed 5%-of-GDP goal, the EU?s "Readiness 2030" plan, continued US and Chinese force modernisation and record Asian budgets (Japan, India, Australia) point to another year of robust growth. Nevertheless, capacity bottlenecks, inflation and geopolitics will dictate how quickly the industry can translate orders into deliveries. FY2025 confirmed a broad, multi-regional re-armament cycle. With defence spending at historic highs and governments racing to rebuild stocks, modernise forces and localise technology, global primes enter FY2026 with unmatched demand visibility. The challenges from supply chain, workforce and fiscal constraints remain. Success over the next five years will depend on how quickly industry and governments can convert record budgets into sustainable, resilient capacity.

India Outlook

The Indian context is not substantially different. Defence is emerging as one of the most strategically vital sectors, with heightened geopolitical tensions and renewed focus on self-reliance. India is driving modernisation through indigenous programs such as LCA, Sukhoi upgrades, counter-drone systems and radar networks. In parallel, offset opportunities from foreign defence OEMs are being leveraged to build local capabilities in embedded systems, sub-assemblies and end-to-end integration.

Key Developments

16% rise in India?s defence capital outlay in FY2025.

Domestic radar, missile and aircraft upgrade programs are gaining momentum.

• Counter-drone segment expanding via RFPs and prototypes.

Offset inflows tied to Rafale-M, C295 and other large contracts.

India?s defence-engineering ecosystem delivered its strongest year on record in FY2025, underpinned by Rs. 1.27 lakh-crore domestic production base and defence export growth of 12% to an all-time high of Rs. 23,622 crores. A wave of technology tie-ups drew private primes, start-ups and public-sector giants into closer collaboration than ever before. Against this backdrop the government?s offset, licensing and capital procurement reforms continued to shift value from final assembly to high-end engineering design, systems integration and digital R&D, with aerospace platforms (Tejas Mk1A,

AMCA), smart munitions and electronic-warfare suites at centre stage. The FY 2025-26 Union Budget allocated Rs. 2.52 lakh crore for defence capex, 13% of total Union spending. The Positive Indigenisation Lists and Technology Transfer Policy

2025 compel OEMs to localise design and IP.

Opportunities

There is high-value opportunity for integrators of embedded electronics, radar subsystems, UAV defence platforms and defence grade software-hardware fusion across Indian programs and global partnerships. The sector now faces three near-term priorities: easing supply-chain bottlenecks, scaling a defence-grade semiconductor stack and closing the skilled-engineer gap. However, the outlook remains robust as FY2026 procurement forecasts rise and export orders broaden beyond traditional partners. Capex is likely to exceed Rs. 2.7 lakh crore in FY2026, with 75% reserved for

Indian vendors. Export target set by government of Rs.

40,000 crores by FY2028 looks feasible given the 30+ export-ready platforms (Tejas, BrahMos, Pinaka, UAVs). The engineering focus areas include wide-band GaN radars & seekers (Semiconductor), AI-enabled mission-systems integration and directed-energy and space-situational-awareness payloads.

With record order pipelines, deeper private participation and a concerted push, India?s defence-engineering industry is on course to evolve from build-to-print to design-to-manufacture leadership.

Review of the Industry

Electronics, Semiconductor and

Artificial Intelligence (ESAI)

Global Outlook

Global demand for electronics hardware, Semiconductor and artificial-intelligence (ESAI) technologies surged in FY2025. This was fuelled by EVs, 5G devices and IoT nodes and analysts have flagged micro-controller shortages in automotive and industrial end-markets. The WTO nonetheless cut its 2025 merchandise-trade forecast to 0.2%, citing tariff uncertainty and weaker consumer goods demand, though commercial-services trade (data centres, cloud) continued to expand.

Worldwide electronic-products revenue climbed toward USD 1.5 trillion, semiconductor sales rebounded to a record USD 627 billion and AI-related investment raced toward the USD 360 billion mark, displaying a splendid 60% increase year-on-year. Yet the boom was tempered by supply-chain friction, skills shortages and intensifying geo-economic competition for critical chips and materials.

Source: World Semiconductor Trade Statistics (WSTS), Stanford University, Economic Times

Industry trackers forecast the electronic-products market topping

USD 2 trillion by 2028 provided EV and industrial-automation demand stay on course. Semiconductor equipment makers expect spending to stabilise at the USD 115 125 billion range through 2026 as new fabs ramp. IDC and NASSCOM alike see AI services revenue compounding

>26 % CAGR, driven by Gen-AI workloads, sovereign-compute build-outs and edge-AI silicon.

Source: Future Marketing Insights, SEMI, NASSCOM

In a nutshell, the year marked an inflection in ESAI: demand snapped back, capex and policy support accelerated and AI investment moved from experiment to infrastructure. Sustaining that momentum will be contingent on how quickly the industry solves capacity, talent and geostrategic bottlenecks, setting the stage for an ESAI market that could hover around USD 3 trillion before the decade closes.

Indian Outlook

India?s electronics, semiconductor and artificial-intelligence (ESAI) stack delivered its best year on record in FY2025.

As the semiconductor domain matures, the focus has moved to system-level engineering in post-silicon. ESAI is no longer just about chip design it encompasses productization, AI-edge integration, thermal management and innovative system development for cross-sector applications. This includes Software Defined Vehicles (SDVs), AI-embedded defence electronics and micro data centre infrastructure. Government of India has established the Electronics Manufacturing Clusters (EMCs) and Semicon India Programme to support the semiconductor and electronics ecosystem.

The Semicon India Programme, with an outlay of Rs. 76,000 crores, aims to establish a strong semiconductor and display manufacturing ecosystem in India. The government has also expanded the PLI scheme, allocating USD 2.7 billion to boost electronics manufacturing, aiming to attract investments and create employment opportunities. Private organisations have also launched projects worth crores of rupees in various parts of the country.

Source: GOI

The AI industry in India is expected to reach USD 28.8 billion by end of the year, growing at a whopping CAGR of 45%.

India?s semiconductor market is projected to grow from USD 52 billion in 2024 to over USD 103 billion by 2030, highlighting immense growth potential. With 20% of the world?s semiconductor design talent located in India, we are poised to challenge global leaders in the semiconductor industry and become a global semiconductor hub.

Source: Observer Research Foundation

India?s electronics market is projected to reach USD 300 billion by FY2026, fuelled by domestic consumption and export opportunities. While the challenges of component dependency and supply chain development remain, global partnerships, strategic investments and supportive government policies, would indicate a promising future for India as a global electronics manufacturing powerhouse.

Source: Press Information Bureau

According to recent reports, AI could contribute up to USD 450-500 billion to India?s GDP by 2025, reshaping not just tech, but the foundational sectors of the economy like agriculture, manufacturing, urban planning and healthcare.

Key Developments

• Demand shift to thermal systems and box-build services.

High growth in edge and micro data centres driven by AI.

Strong tailwinds in SDV and connected automotive electronics.

Productized AI modules for defence and telecom are gaining traction.

Strategic Positioning Opportunities

Companies with thermal expertise, post-silicon design capabilities, SDV platforms and micro data centre know-how are poised to lead the shift from services to scalable, intelligent product ecosystems. FY2025 proved that India?s ESAI triad is shifting from aspiration to execution. Exports are scaling, fabs are breaking ground and AI is mainstreaming. Converting this momentum into global leadership now hinges on rapid fab build-out, talent creation and sustained policy certainty. A strategic priority would be bridging the skills and R&D gap, securing critical mineral supply chains and deepening global tech alliances. This will dictate whether India evolves from an assembly hub to a full-stack ESAI powerhouse.

Review of the Industry

Drone Systems and Homeland Security

India?s drone and counter-drone ecosystems are rapidly maturing, driven by rising demand from defence, homeland security, law enforcement and industrial sectors. The future of this segment lies in building scalable, intelligent and compliant UAV platforms along with sophisticated counter-drone systems that integrate sensors, AI and secure communications.

Key Developments

The UAV market is projected to cross Rs. 30,000 crores by 2030 in India.

Anti-drone systems receive government push amid border threats.

International demand for certified drone controllers and systems.

Strategic tie-ups for high-end first-responder drone use cases.

Strategic Positioning Opportunities

Vendors with capabilities in drone electronics, AI integration, secure UAV communication and export-compliant controller platforms are well-aligned to lead domestic and international programs.

The country?s electronic-security demand topped USD 4.9 billion, defence and internal-security agencies floated record tenders for surveillance and counter-drone systems and domestic UAV makers secured fresh capital and export orders. Smartphone-style production incentives, rising border threats and a supportive regulatory reset

(Drone Rules 2023 plus the Rs.120 crore PLI scheme) combined to pull the sector into the mainstream, even while component shortages, skills gaps and a still-nascent counter-UAV supply chain constrained output.

Heavy Engineering & Automotive

Heavy Engineering and legacy automotive sectors are under pressure globally due to digital disruption, electric mobility and cost rationalisation. While traditional engineering services face margin compression, new opportunities lie in transitioning toward high-value, software-defined automotive systems and capitalising on thermal-electromechanical convergence in select heavy equipment segments.

India?s heavy engineering and automotive sectors ended FY2025 on a high-growth note. According to Index of Industrial Production (IIP), capital goods output rose nearly 8% year-on-year. Engineering goods exports hit an all-time high of USD 116.7 billion. The automotive industry set new peaks in domestic sales, exports and electric vehicle adoption.

Engineering-goods exports climbed

6.7% year on year to USD 116.67 billion to create a new record and now form 26.7% of India?s merchandise exports. Government capex (Rs. 11.1 lakh crore), PLI incentives and robust infrastructure spending underpinned demand, although supply chain frictions, tariff uncertainties and skill shortages tempered margins. The outlook remains positive, with double digit order books in heavy engineering and EV penetration accelerating under fresh policy support.

Source: Economic Times

The Indian market for automotive-engineering solutions

(engineering R&D, software, testing and digital-manufacturing services supplied to vehicle-makers and Tier-1s) closed the year with double-digit growth, despite patchy export demand and lingering component shortages. Industry analysts put the value of engineering services delivered from India to global and domestic auto programmes at USD 14-15 billion, up roughly

10 % year on year, sustained by electrification, ADAS/ software-defined-vehicle (SDV) work, Government incentives (FAME II, PLI Auto) and a vibrant start-up ecosystem in e-mobility and AI-driven diagnostics.

Looking ahead, an expanded PLI Auto scheme, a fresh EV-manufacturing push in the FY2026

Union Budget and rising global offshoring of SDV software point to another high-growth year, though talent shortages and tariff headwinds could temper momentum. It is expected that India?s automotive-engineering-services revenues would expand another 10-12% in FY2026, with EV & SDV work generating more than 70% of incremental demand.

Source: Mordor Intelligence

Key Developments

Traditional automotive engineering services face macroeconomic headwinds.

Staffing-led models are declining as OEMs prioritise automation and AI.

Growth in new-age subsegments like SDVs, radar and electric drivetrain electronics.

• OEMs shifting from Tier-2 suppliers to value-led strategic partners.

Opportunities

Businesses that pivot to high-margin ESAI-aligned services in auto electronics, SDVs and electromechanical design can reclaim relevance, while legacy manpower-heavy models may face consolidation or exit.

Energy

The energy sector faces muted demand and high capital intensity, particularly the traditional generation and heavy electrical equipment segments. However, niche growth opportunities exist in power electronics, thermal solutions and innovative grid enablers. Players that realign their offerings to the evolving ESG-compliant energy architecture or integrate with ESAI systems may find paths to reinvention.

Key Developments

Global decline in EPC-based energy projects.

Growth in decentralised, electronics-intensive power solutions (inverters, smart switches).

Green energy shifts favour lean, tech-first models over manpower-heavy ones.

AI in energy monitoring and predictive maintenance is gaining acceptance.

Opportunities

Firms that pivot to embedded power electronics, grid modernisation tools and AI-enabled diagnostics can align with the next wave of clean, efficient and intelligent energy infrastructure.

Consolidated RATIOS

Ratios	31st March 2025	31st March 2024	Variance	Explanation for change
Debtors turnover ratio (days)	107.00	90.00	19%	Higher Receivable days due to increase in defense revenues, which has a higher collection cycle
Inventory turnover days	104.00	136.00	-24%	Consumption of brought forward inventory in Defense Orders
Interest coverage ratio (times)	5.06	2.54	99%	Higher interest coverage due to lower finance cost and repayment of borrowings
Current Ratio	2.22	1.92	15%	Higher current ratio due to decrease in current liabilities
Debt equity ratio	0.39	0.54	-28%	Decrease in debt equity ratio due to increase in equity and decrease in borrowings
Operating Margin (%)	16%	15%	7%	Increase in profitability due to change in revenue mix
Net Profit Margin (%)	7%	4%	75%	Increase in Net profit margin due to increase in profit after tax
Return on Networth	11%	6%	83%	Increase in Return on net worth due to increase profit after tax

Human Resources

The Company considers its people as a vital asset and a key driver of organizational performance. It is committed to fostering a work environment that encourages learning, collaboration, and innovation. The Company continuously invests in training and skill development initiatives to ensure employees are equipped with relevant technical and managerial competencies to meet evolving business needs. A culture of meritocracy, inclusivity, and transparency is promoted across all levels, enabling employees to contribute effectively towards strategic goals. The Company maintains harmonious employee relations and places emphasis on talent retention, leadership development, and employee engagement as part of its long-term growth strategy. As on 31st March 2025, the company had a total of 2891 employees.

Internal Control Systems

The Company has instituted a robust internal control framework designed to safeguard assets, ensure accuracy and reliability of financial reporting, and promote operational efficiency. These controls are aligned with statutory requirements and industry best practices, covering all critical aspects of operations and compliance. The Company regularly reviews and strengthens its internal control systems through independent audits and management oversight. Such measures provide reasonable assurance that business operations are carried out in an orderly, ethical, and efficient manner while risks are identified and mitigated in a timely manner.