Choksi Imaging Ltd Management Discussions

1. Company Overview

Choksi Asia Limited ("the Company"), formerly known as Choksi Imaging Limited has historically engaged in the trading of medical X-ray films and associated consumables used primarily in diagnostic imaging. Operating across various geographies, the Company catered to hospitals, clinics and radiology centers, delivering value through competitive pricing, prompt distribution logistics and established supplier relationships.

However, the global trend toward digitalization in medical diagnostics, especially the adoption of Picture Archiving and Communication Systems (PACS), CR/DR modalities and cloud-based imaging systems has led to a sharp decline in demand for conventional X-ray films. In response to these structural changes, the Company undertook a strategic pivot.

Following the approval from Members and statutory authorities, the Company amalgamated with Choksi Asia Private Limited, a specialist in the Non-Destructive Testing (NDT) industry. This business realignment marks a significant diversification move from a sunset industry to a fast-growing, technologically advanced sector.

Non-Destructive Testing (NDT) is a crucial quality assurance function used in industrial applications to assess the integrity of materials, components and systems without causing damage. It plays an indispensable role in sectors such as aerospace, oil and gas, infrastructure, automotive, nuclear energy and manufacturing.

The global NDT market is projected to reach USD 23 billion by 2030, growing at a CAGR of 6.5% during the forecast period (2023-2030). In India, the NDT industry is witnessing rapid expansion, buoyed by significant investments in infrastructure development, safety compliance norms and manufacturing growth. The increasing complexity of engineering systems and the emphasis on predictive maintenance are further catalyzing the demand for advanced NDT services.

The amalgamation strategically places the Company in this emerging landscape, allowing it to leverage its legacy operational expertise while building a new foundation in a technology-intensive service domain.

During the fiscal year 2024-2025, the Company reported turnover of Rs.3,698.16 lakhs as compared to Rs.1809.02 lakhs (Considering appointed date of the Scheme of Amalgamation i.e. April 1, 2023) in the previous year, registering a 104% growth). This performance reflects the impact of amalgamation and distributorship from major player and the incremental revenue contribution from the newly integrated NDT segment.

Net Profit After Tax (NPAT) for the financial year 2024-2025 is Rs.309.90 lakhs as compared to Rs.138.72 lakhs for the year 2023-2024, impacted by depreciation, initial training costs and the integration of workforce and equipment from the amalgamated entity.

The amalgamation between Choksi Asia Private Limited (Transferor Company) and Choksi Asia Limited (Transferee Company) has unlocked substantial operational and strategic synergies. The integration has enabled a seamless transition from a trading-centric business model to a value-driven service and technology platform. On the human capital front, the merger enabled the acquisition of a skilled talent pool of certified NDT technicians, engineers and quality assurance professionals, significantly reducing hiring costs and onboarding timelines.

Additionally, the amalgamated entity contributed established relationships with clients in the oil and gas, infrastructure and manufacturing sectors, immediately expanding the Companys addressable market. The shared expertise and institutional knowledge enhanced internal training processes, streamlined certification requirements and fortified the Companys project execution capabilities.

On the infrastructure side, the merger resulted in access to calibrated NDT equipment and existing service facilities, mitigating the need for upfront capital expenditure.

The Company also benefited from improved economies of scale in procurement, logistics and administrative functions. Moreover, the consolidated balance sheet post-amalgamation strengthened the Companys financial profile, enhancing its ability to secure institutional funding for future expansion.

The synergy extends to brand equity as well, allowing the rebranded entity to present itself as a holistic inspection and quality assurance provider in both healthcare and industrial sectors. Overall, the amalgamation has not only accelerated the Companys entry into a promising new vertical but has also laid a strong operational foundation for sustainable long-term growth.

x Expanding industrial base in India is driving sustained demand for routine, preventive and reliability-based inspections across multiple sectors.

x Growing emphasis on safety and regulatory compliance is creating strong opportunities in high-risk industries such as oil & gas, power and infrastructure.

x High entry barriers in specialized NDT services provide a long-term competitive edge once domain expertise and credibility are established.

x Strategic partnerships in Middle East and Southeast Asia can open avenues to scale operations and capture demand in rapidly industrializing economies.

Threats x Dependence on highly skilled manpower poses an attrition risk in view of rising industry-wide demand for qualified professionals.

x Capital-intensive nature of advanced testing technologies may impact margins and increase investment risks.

x Frequent regulatory changes and evolving standards (ASME, ISO, BIS) require continuous adaptation and compliance, raising operational challenges.

x Intensifying competition from global and domestic players with larger scale and resources exerts pricing pressure and limits market share growth.

The Company has implemented a robust internal control framework in compliance with Section 134 of the Companies Act, 2013. Post-amalgamation, all internal controls have been realigned to cover:

x Risk-based internal audits were conducted across key business functions to proactively identify operational gaps, assess compliance adherence and mitigate potential risks thereby strengthening the overall governance framework of the Company. x Comprehensive asset verification of technical equipment was carried out to ensure proper utilization, maintenance and accountability of critical machinery, supporting operational reliability and long-term investment protection. x Revised Standard Operating Procedures (SOPs) for field inspections were implemented to standardize processes, improve efficiency, ensure safety compliance and enhance the accuracy and consistency of inspection outcomes across diverse locations. x Integration of ERP modules across legacy and new operations was successfully achieved, enabling seamless data flow, real-time reporting and unified management of processes, which improved operational efficiency and decision-making capabilities.

The Audit Committee periodically reviews these systems for adequacy and operational effectiveness.

The Companys human capital strategy post-amalgamation has focused on:

x Recruiting certified NDT professionals (ASNT Level II & III): The Company actively onboarded highly qualified NDT personnel to strengthen technical expertise. This strategic recruitment ensures capability to handle complex inspection projects with precision.

x Reskilling existing staff to support the service-driven model: Ongoing reskilling initiatives were undertaken to align staff with evolving service requirements. This enhances adaptability and prepares the workforce for advanced operational roles.

x Conducting quarterly training programs and safety certifications: Regular training sessions and safety certifications were conducted to continuously upgrade employee skills. These programs reinforce a culture of safety and professional excellence across operations. x Implementing a performance-linked variable pay structure to retain top talent: A performance-based incentive system was introduced to reward high-performing employees. This approach strengthens retention and motivates teams to achieve organizational goals.

The Employee count stood at 9 at the end of the fiscal year. Industrial relations remained stable and collaborative across all locations.

The Company remains optimistic about its future prospects following the successful integration of the NDT business. With an expanding base of clients, enhanced technical capabilities and a more resilient business model, the Company is well-positioned to tap into emerging opportunities across various sectors. Management continues to focus on operational efficiency, customer satisfaction and technological innovation to drive long-term sustainable growth. Supported by a stable financial foundation and a clear strategic vision, the Company is confident in its ability to capitalize on favourable market conditions and deliver consistent value to its stakeholders.

Certain statements in this MD&A may be forward-looking in nature. These include expectations, forecasts, or assumptions regarding future operations and financial performance. Actual results may differ materially due to economic conditions, regulatory developments, market risks, or other unforeseen events.

The Company assumes no obligation to publicly update or revise these forward-looking statements, whether due to new information, future events, or otherwise