Bondada Engineering Ltd Management Discussions

Growth Prospects & Future Outlook

The Company has ample avenues to grow in its business segments

INDIAN TELECOM INDUSTRY

India has the second largest (in terms of subscriber base) and one of the fastest growing telecom markets in the world. The magnitude of the subscriber base can be gleaned by the net subscriber addition monthly. Between October and November of 2022 Indian mobile industry added nearly 24 million subscribers, taking the overall subscriber base to over one billion.

Besides having the second largest subscriber base, the telecom industry also plays a crucial part In driving the economic growth. In India, the sector contributes to nearly 6% of the Gross Domestic Product (GDP). It is playing a vital role in Indias digital transformation.

The industry is classified into four broad segments, based on the type of service provided and contribution to the overall industry. These are telecom service providers who form the crux of the industry as well as its most visible face. Other segments include infrastructure [active & passive), equipment (handsets and networking equipment), and network services.

As on 30th September 2022, the total subscriber base in Indian telecom industry stood at nearly 1.2 billion with nearly 98% being wireless subscribers. The private sector dominates the industry, accounting for nearly 90% of the total subscribers with rest spread among public sector units (PSU). The industry which generates an annual revenue in the range of INR 2,700 billion ended the year 2022 (calendar year) with a total subscriber base of nearly 1.2 billion.

Telecom Infrastructure:

Telecom infrastructure represents the physical hardware that enables smooth functioning of todays telecommunication services, including mobile service as well as internet & other digital services. These include telephone wires, cables (including undersea cables), satellites, telecom towers, and satellites. Based on its position within the telecom ecosystem, telecom infrastructure is broadly divided into Active, Passive and Backhaul. Based on its utility and its role in telecom ecosystem, telecom infrastructure is segmented into active and passive.

¦ Active:

These include spectrum, switches, antenna, receivers, & microwave equipment, all of which form the front end of telecom ecosystem.

FORM NO. AOC -2

Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014

Form for disclosure of particulars of contracts or arrangements entered into by the company with related parties referred to in sub section 0) of section 188 of the Companies Act, 2013 including certain arms length transaction under third proviso thereto:

DETAILS OF CONTRACTS OR ARRANGEMENTS OR TRANSACTIONS NOT AT ARMS LENGTH BASIS:

Not Applicable

Details of material contracts or arrangements or transactions at arms length basis:

• Passive: These include:

• Telecom towers, power supply ecosystem (including battery,

generators, and associated equipment), and all hardware required to maintain tower

• Optical fiber cable

Expected Growth in Telecom Tower Base:

Steep drop in mobile tariffs and availability of affordable smart phones have helped in driving up the mobile subscriber numbers in India, elevating it to one of the biggest telecom markets in the world (in terms of mobile subscriber numbers). On the back of this, the tele density in India has increased manifold to reach approximately 83% as of September 2022. Although this is on the higher side (compared to many developing economies), its skewed in favour of urban markets.

As of September 2022, urban tele-density in India stood at nearly 135% while rural was only 58%. This wide variation shows the disparity in mobile connectivity, with penetration level still low in rural markets. Apart from number of subscribers, the coverage of AC network is lower in rural and smaller towns as compared to metros and tier I towns.

The coming years would be a strong push by telecom service providers to increase their coverage in rural areas. The focus in these markets would mostly be the AG network with 5G rollout happening gradually. To make this push to rural markets, there is a need to broaden the telecom tower infrastructure in those markets. Subsequently, the telecom tower based would witness an organic growth. At present approximately SO to 60 thousand telecom towers are added on an annual basis. Going ahead, the net addition is expected to be slightly higher than that as India tries to extend the tower coverage as well as bridge the gap in tower density.

At present the tower density (number of towers per 1,000 people) in India is near 0.5 which is well below global standards. National Broadband Mission has set a target of reaching a tower density of 1.7 by FY 2025, which if met would translate into a tower base of 1.5 million. Given the current base of nearly 7A0 thousand towers such a rapid ramp up in the next couple of years looks unlikely

As per an estimate, there is more gradual and conservative build up in telecom lowers, with tower density reaching nearly 0.9 to 1.0 by the end of this decade. Based on this, the total telecom tower base in India is expected to reach nearly 13 million by FY 2030, with nearly 70 - 75 thousand telecom towers added on an annual basis.

Expected Growth in Telecom Fiber Base:

Steep drop in mobile tariffs and availability of affordable smart phones have helped in driving up the mobile subscriber numbers in India, elevating it to one of the biggest telecom markets in the world (in terms of mobile subscriber numbers). On the back of this, the tele density in India has increased manifold to reach approximately 83% as of September 2022. Although this is on the higher side [compared to many developing economies), its skewed in favour of urban markets.

As of September 2022, urban tele-density in India stood at nearly 135% while rural was only 58%. This wide variation shows the disparity in mobile connectivity, with penetration level still low in rural markets. Apart from number of subscribers, the coverage of 4G network is lower in rural and smaller towns as compared to metros and tier I towns.

The coming years would be a strong push by telecom service providers to increase their coverage in rural areas. The focus in these markets would mostly be the 4G network with 5G rollout happening gradually. To make this push to rural markets, there is a need to broaden the telecom tower infrastructure in those markets. Subsequently, the telecom tower based would witness an organic growth. At present approximately 50 to 60 thousand telecom towers are added on an annual basis. Going ahead, the net addition is expected to be slightly higher than that as India tries to extend the tower coverage as well as bridge the gap in tower density.

At present the tower density (number of towers per 1,000 people) in India is near 0.5 which is well below global standards- National Broadband Mission has set a target of reaching a tower density of 1.7 by FY 2025, which if met would translate into a tower base of 1.5 million. Given the current base of nearly 740 thousand towers such a rapid ramp up in the next couple of years looks unlikely.

As per an estimate, there is more gradual and conservative build up in telecom towers, with tower density reaching nearly 0.9 to 1.0 by the end of this decade. Based on this, the total telecom tower base in India is expected to reach nearly 13 million by FY 2030, with nearly 70 - 75 thousand telecom towers added on an annual basis.

Technology Upgrades: Roll out of 4G and 5G:

In India, a significant number of 4G sites need to be added to provide the adequate quality and coverage as there are several gaps in terms of network coverage across the country. Similarly 5G networks have just started coming up in India. With higher competition among telecom operators, they are expected to invest in quality data networks and drive tower industry growth. New entrants like Reliance Dio are expected to push the tower industry growth. Telecom companies will have to collectively incur 3 trillion capex spend to adequately fiberize telecom towers and in turn, ensure a meaningful rollout of 5G services across India. Out of which mobile tower companies are planning to invest over l NR 2 trillion by 2025 to meet the target of taking 5G to 50% of the country

SOLAR EPC.

The company has delivered 114 MW solar plants during the year 2022-23 as against 40 MW during the year 2021-22. The delivery capacity has increased multifold compared to previous financial year Based on the vast experience by the management team and successful projects completion, the company is now successful in getting further EPC contracts in this space.

The company is also pursuing orders from other Solar companies like Adanl, Enrich Energy, Greenko. Hinduja Renewables etc for their solar EPC requirements. Apart from private solar companies, the company is also participating in tenders which are getting floated by public sector undertakings like NTPC, BHEL, SECI, Damodar Valley Corporation etc.

As per Government, investments in Indian renewable energy space could be near USD2S Billion, if the aggressive capacity target of 500 GW in renewable space materializes. This includes capex cost of setting up the plant and all other associated investments. Even if the Government targets are not met, the conservative estimates too point to a strong growth in capacity addition in renewable as well as solar space. This is expected to create business for all stakeholders in the industry, including EPC service

providers, plant & equipment manufacturers as well as service providers (deluding technical support & design). In solar space, considering the conservative capacity addition of 237 GW between 2022-2030 period, the consolidated EPC opportunity (between 2023 and 2030) alone is expected to run into nearly Rs.l,10,000 Crore.

Bondada Ecobuild Private Limited

(formerly known as Smartbrix Infra Technologies Private Limited), manufacture Autoclaved Aerated Concrete :‘‘AAC") blocks.

AAC Blocks and other construction materials

Autoclaved Aerated Concrete f‘AAC") blocks are manufactured by the company at its manufacturing plant located at Daggaiahpet, Andhra Pradesh with a total manufacturing capacity of -T.50 lakhs m3/annum. We also supply other construction materials such as jointing mortar and ready plaster. AAC blocks are marketed under the brand SmartBrix,

AAC blocks are lightweight and precast building materials made from natural raw materials such as cement, lime power, gypsum, water and a small amount of aluminum powder used as catalyst and waste material from power generation i.e., fly ash. AAC blocks are considered as green products that do not pollute the environment since they are made from natural materials and do not emit any harmful gases or chemicals during

Their manufacturing process. Additionally. AAC blocks have a lower carbon footprint compared to traditional clay bricks due to their lightweight nature, which means less fuel is required for transportation leading to cost savings They are also fire and moisture resistant, high dimensional accuracy which provide ease .of working, have good thermal insulation properties, which can reduce energy consumption for heating and cooiing in buildings, making them an eco-friendly choice for construction,

Ecobuild excels due to swift delivery, competitive prices & superior quality which fosters customer satisfaction and loyalty. Bondada Groups support & Ecobuilds expertise have delivered unmatched products to Shapoorji Pallonji, My Home Group, Preston, Aparna, etc.

Future Outlook:

At the end of the year, management has decided to transfer the business of uPVC products to Ecobuild from Bondada Abodes Private Limited (BAPL). Apart from the existing uPVC products under BAPL, we are planning to expand our products to uPVC profile extrusion, prioritizing precision and quality with an annual capacity of 3960 MT. The profiles are designed for tropical regions with high temperatures, and are lead free, nonfading, 8, UV resistant. Considering the expansion, good volumes of business is expected above the existing business.

Bondada Abodes Private Limited

uPVC Products

We supply Unplasticized Polyvinyl Chloride ("uPVC") doors and windows under the brand name "SmartWindoor, operating two manufacturing plants in Visakhapatnam and Hyderabad. Our annual production capacity is -2.88 lakhs sq. ft, and our products are known for their premium quality and superiority over traditional wooden or metal doors and windows. Our products offer several key benefits such as durability, energy efficiency and low maintenance, amongst others We offer customized products and installation services to meet specific needs of our clients.

Our raw materials are sourced entirely from China, Over the years, we have witnessed remarkable growth in our sales of uPVC products amounting to Rs. 2,504.35 lakhs for fiscal 2023-24.

We market our products under our key brand names such as "SmartWindoors" and have registered certain business names and logos as trademarks under various classes with the Registrar of Trademarks In India under the Trade Marks Act, 1999.

Bondada E&E Private Limited

During the year Croup has ventured in to industrial LED light segment under Bondada E&E Private Limited with 85% investment under the brand name " Bee-Lite". Bondada E&E Private Limited "Bee-Lite", is dedicated to designing, producing, and distributing a wide range of highly customized LED lights primarily for industrial and commercial use. The Company is recognized as one of the leading LED light factories in India.

The Company prides itself on customization, quality, competitive pricing, supply chain stability and Bondada Groups support. Comprehensive product range within the LED lighting segment with potential for expansion into new markets and opportunities The company excels in OEM with deep electronic expertise, advanced technology, and robust manufacturing capabilities. Bee-Lite earned Rs. 1,452.45 Lakhs in its first year, offering OEM services to local and international brands like Tisva, Dewton, Syska, Sturlite, and Airone. The LED industry is growing due to government initiatives, energy efficiency, and infrastructure development.

In 2023, the global LED market in India was valued at Rs. 675,000 Cr. The market is witnessing a growth of 11% p.a. to reach Rs, 1402,000 Cr. by 2030. Signify Holdings, Acuity Brands, OSRAM, Savat Systems. Hubbcll Lighting are some of the largest players. Asia Pacific region is expected to have the highest CAGR with an increasing number of construction activities in residential, commercial and industrial spaces.

In 2023, the organized LED market in India was valued at Rs. 35,000 Cr. The market is witnessing a growth of 8% p.a. to reach Rs. 151,000 Cr by 2030. The commercial segment dominated the market, with a share of around 58% in 2022, including government buildings, offices, restaurants, shopping centres, and enterprises that employ commercial LED lighting. With this industry outlook, there is large space to penetrate in to the market and is expected to create good volumes year on year.

Acquisition of Atpole Technologies Private Limited

Further, Group has acquired Atpole Technologies Private Limited "Atpole" with 60% stake. Atpole Technologies Private Limited is specialized in the design, development, & production of Brushless DC (BLDC), Permanent Magnet Synchronous Motors (PMSM), & Advanced Torque Controllers for EV 2, 3 & 4 Wheelers, Drones, Defence & other industrial products. Atpoles hub motors offer high torque, fast acceleration, efficient hill climbing, advanced power algorithms, and secure operation features. Atpole meets eco-friendly transport needs with innovative motors and controllers, precise sensing and control algorithms. The company earned significant revenue in its first year by catering to established players in the EV sector such as Varcas, AR4 Tech, Franklin EV, and Austhraa.

The electric motor industry is propelled by the rise in car production, energy efficiency requirements, expensive brushed motors and BLDC adoption. The manufacturing plant has capacity of 8000-10000 motors per month.

Industry Outlook:

The global brushless DC motor market size was valued at Rs. 165,000 Cr in 2023 & is expected to grow at a CAGR of 6.6%. The ability of BLDC motors to save energy & increase the operational efficiency is expected to drive the growth. The motor vehicle segment dominated the market with a share of 29% in 2023, It is also anticipated to emerge as the fastest-growing segment at a CAGR of 7.7%. Asia Pacific dominates the market with a 50% share due to its robust electronic components and devices manufacturing presence. Significant investments in electric vehicle components, especially battery systems, are observed in India, South Korea, and Japan. The regional markets of North America and Europe together captured over 37%.

India accounted for a revenue share of more than 14% in the Asia Pacific market. The India BLDC motor market size was valued at Rs. 12,000 Cr in 2023 and is expected to grow at a CAGR of 7% from 2024 to 2030. The burgeoning demand for brushless DC motors in India is propelled by factors like increased automation, widespread adoption of electric vehicles, and a growing need for energy-efficient solutions. Notably, the HVAC sector is witnessing rapid expansion, driven by smart technology integration, enabling centralized control through smartphone applications. The Indian governments push for electric mobility and renewable energy also contributes to the demand for brushless DC motors.