Data Patterns (India) Ltd Management Discussions

Global Economy

becoming modestly more favorable since June

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overlapping negative shocks. Inflation appears to be moderating without a substantial slowdown in key economies, and monetary policy easing has now become widespread. In the next couple of years, deceleration in the two main engines of the global economy—the United

States and China is expected to be offset by firming growth elsewhere, including in many emerging market and developing economies (EMDEs). In all, the post-pandemic global economic expansion is forecast to remain on a steady path. However, the global economy appears to be settling at a relatively low level of growth with the possibility of further headwinds from heightened geo political situation, policy uncertainty, growing trade fragmentation, slower than-anticipated progress in reducing inflation, and weaker activity in major economies.

Global trade growth rebounded last year, despite weak manufacturing activity in some key advanced economies. The recovery was driven by goods trade though services trade growth continued to moderate. In 2025-26, trade growth is set to pick up and the growth will largely depend on the outcome of tariff announcements and its effect on bilateral trades between nations in addition to the already existing geo political situations.

Global financial conditions have eased slightly, in aggregate, since mid-2024, mainly owing to the onset of monetary easing in the United States and generally robust risk appetite. For much of last year, improving investor sentiment translated into capital inflows and improving financial conditions in the emerging economies.

Against this backdrop, global growth is estimated to have stabilized at 2.7 percent last year and is forecast to hold steady at that pace over 2025-26. However, the IMF has revised the global economic growth rate from 3.3% in Jan 2025 to 2.8% for the current year mainly due to the uncertainty over the tariffs and trade which is expected caste its shadow in the inflation also.

Despite continued downside growth to the global economy, India is expected to maintain its position as a fastest growing economy. IMF in its April 2025 release of World Economic Outlook has stated that India is poised to lead the global economy once again and to remain the fastest growing major economy over the next two years. Indias economy is expected to grow by 6.2 per cent in 2025 and 6.3 per cent in 2026, maintaining a solid lead over global and regional peers. This growth is possible given the Government push on infrastructure and other capital spent, moderate inflation and better liquidity leading to private spending. That said, the geo political situations and uncertainty over the tariff and trade policies casts a shadow on the expected growth. Despite this moderation, overall outlook for India remains strong signaling strong macroeconomic fundamentals and Indias resilience to the complex global environment.

Inflation also stayed moderated at around 4.6% in FY

2025, lowest since 2020 and lower than RBIs projection of

4.8%. Core inflation also stood below 4% mark in FY 2025.

On the monetary side, after staying unchanged since April 2023, RBI has started with its policy rate cuts in 2025 and has also been proactively taking efforts to ensure orderly liquidity.

With the Governments continuing aggressive push through Make in India initiatives, India is aiming to become a defence powerhouse. From being a major importer of its defence requirements, India is making all required initiative to transform itself to a leading defence manufacturer and exporter. This opens out substantial opportunities to the Companies engaged in Defence and Aerospace sector. In pursuit of its self reliance in Defence, the Government has also been increasing its budget allocation to the sector year on year at a CAGR of 8.5% in the last 10 years. For FY 2025-26 the amount allocated is INR 6.81 Lakhs Crores (~US$ 78.57 billion) which is 13.44% of the total budget. Budget for Capital outlay is around Rs. 1.9 Lakhs Crores, an increase of 4.65% over the last year. An increased allocation has also been made for indigenous R & D. Though the budget allocation to defence is increasing in terms of value, its share in GDP is on the decline, from around 2.5% in 2021 to 1.9% for FY 2026.

Initiatives such as Make in India, Athmanirbhar Bharath, curbs on imports, establishment of Defence corridors, allowing 74% FDI through automatic route, etc have opened out large opportunities to Indian Companies in the Private Sector as well. A recent study suggests that the Private Defence Companies are expected to grow at around 25 to 35% outpacing major DPSUs which are expected to grow less than 20%. Indias Defence exports is also expected to move sharply upwards. Europe and NATO countries are expected to substantially increase their defence spending and a decent portion of such opportunities are expected to Indian Companies.

Data Patterns (‘the Company) is one of the fastest growing companies in the Defense and Aerospace Electronics sector in India and has proven in-house design and development capabilities and experience of more than four decades in various electronic products used in the Aerospace and Defence requirements, like, avionics, Automatic Test Equipment (ATE), Radars, Communication Systems and Electronic Warfare solutions. The company offers a comprehensive suite of products tailored to the unique requirements of each industry, catering to the entire spectrum of Defense and Aerospace platforms – space, air, land, and sea.

Government initiatives such as ‘Make in India and ‘Atmanirbhar Bharat are directed towards encouraging indigenous products and Companies engaged in product development are expected to get good business opportunities. Indian requirements are also growing with some modernization approvals by the Ministry of Defence. Data Patterns has invested in product development cater to the such modernization programs to improve its addressable market size.

• Da ta Patterns possesses deep technical and expertise for end to end design of electronic systems, its manufacturing and testing, giving it a competitive edge in the industry.

Da ta Patterns invests significantly in full developments, allowing it to innovate and stay ahead in the market.

• Da ta Patterns has excellent quality processes it to build and deliver quality products earning strong reputation amongst its customers.

• The Company holds robust and unmatched end to end capability in Radars, Electronic Warfare, Communication systems, Avionics & ATEs.

• The Company has varied product range opening out larger market opportunities and scalable business.

• Da ta Patterns business heavily relies on contracts, making it vulnerable to fluctuations in government spending and regulatory changes.

• De spite favourable policy initiatives directed indigenization in Defence requirements, complex procurement processes make it difficult to predict the contract timelines.

• The nature of the defense industry often involves high upfront costs and long development cycles, which can result in longer working capital cycles and strain the companys financial resources also.

• Ra pid advancements in technology could render Data Patterns existing products and solutions obsolete if not continuously innovated upon.

• Continued government initiatives to modernize defense systems and infrastructure present opportunities for Data Patterns to secure additional contracts and expand its market share.

• Ther es potential for the company to presence in international markets by forming strategic alliances, joint ventures, or establishing subsidiaries in key regions.

• Changes in government regulations, export controls, or compliance requirements could impact the companys ability to operate and export its products.

• De pendence on international suppliers for electronic components exposes the company to risks associated with supply chain disruptions due to geopolitical situations, policy changes, or raw material shortages.

Revenues from operations increased from INR 520 Crore in FY 2023-24 to INR 708 Crore in FY 2024-25, a growth of 36% made possible by successful execution of the contracts planned for the year.

Other income, mainly comprise of interest on Bank Deposits and gains (realized and unrealized) on investments, for the year remained at the same level at Rs. 46 Crore in FY 2024-25 as in FY 2023-24.

Revenue from operations contributed to 94% of the total revenue (92% in FY 2023-24), reflecting the Companys dependence on its core business operations.

Companys export revenue increased from Rs. 32 Crore in FY 2023-24 (6% of revenue from operations) to Rs. 107 Crore in FY 2024-25 (15%). Apart from the regular export to its UK customer, the Company has developed and supplied new radars to NATO countries in FY 2024-25, contributing to the increase in export revenue. its

Total expenses increased by 42% from Rs. 324 Crores in FY 2023-24 to Rs. 459 Crore in FY 2024-25. Material cost increased by 67% as against 36% increase in the operating revenue, resulting in Gross Margin of 61% as against 68% in FY 2023-24. Data Patterns margin profile varies with the type and nature of products/projects.

Employee benefit expenses increased by 15% from

Rs. 99 Crore to Rs. 114 Crore and accounted for a 16% of the Companys revenue from operations (19% in FY 2023-24). Companys head count increased from 1345 in March 2024 to 1545 in March 2025.

Finance Cost increased by 30% from Rs. 9 Crore to Rs. 12 Crore mainly due to additional working capital limits, for Bank Guarantee, availed from Banks.

There was a 27% increase in the administrative and other expenses which is commensurate with the volume of business and increased infrastructure put in place in FY 2024-25.

The net worth of the Company increased by 14% from Rs. 1,324 Crores as on March 31, 2024 to Rs. 1,508 Crores as on March 31, 2025 due to increase in retained earnings.

Return on capital employed (ROCE), a measurement of returns derived from every rupee invested in the business increased from 20% in 2023-24 to 22% in 2024-25 due to increase in profit.

The Company continued to be a debt free as on March 31, 2025 as in the last couple of years.

During the financial year 2024-25, the Company added

Rs. 34.06 Crores to its gross block of Property, Plant and Equipment (PPE), comprising of Rs. 2.41 Crores of physical assets, Rs. 27.06 Crores of Plant and Machinery and Rs. 4.59 Crores of IT Assets (both tangible and intangible). Rs.

3.54 Crores of Right of Use assets is added in the financial year 2024-25. Total assets added in FY 2023-24 was Rs. 52.91 Crores.

The Company continued its efforts on developing new products under Radar, Electronic Warfare and

Communication Systems during the financial year 2024-25. Development of some of the products were completed during the financial year 2024-25 and the same was capitalized as per Companys policy on capitalization of assets under development and the amoritisation has also started as per the said policy. The Company has spent a total Rs. 107. 89 Crores till March 31, 2025 (Rs. 40.90 Crores till March 31, 2024) on such new product developments, out of which Rs. 71.61 Crores representing the carrying cost of completed projects, was capitalized during the year 2024-25.

Company has written off Rs. 13.92 Crores depreciation during the year as against Rs. 16.13 Crores written off in FY 2023-24 including accelerated depreciation of Rs. 3.13 Crores on assets that do not have any remaining economic life.

Current assets of the Company increased by 3.6% from Rs. 1,401 Crores as on March 31, 2024 to Rs. 1,451 Croreas on March 31, 2025.

The current ratio of the Company stood at 5.24 at the close of 2024-25 compared to 4.00 at the close of FY 2023-24 on account of the increase in the current assets and reduction in current liabilities mainly due to reduction in contract liabilities.

Inventories including raw materials, work-in-progress and finished goods among others increased by 19% from Rs. 267 Crores as on March 31, 2024 to Rs. 319 Crores as on March 31, 2025. The increase is mainly due to advance procurement for some of the projects that are executable in subsequent years and owing to a growing scale of business. However, the inventory turnover days reduced from 508 in FY 2023-24 to 387 days in FY 2024-25.

Receivables days as on March 31, 2025 is 256 days as against 274 days as at that date in 2024. Fourth quarter turnover accounted for 56% of the yearly turnover (35% in FY 2023-24) resulting in higher receivables as at end of FY2024-25. This has caused increase in the Receivables turnover ratio from 1.33 to 1.42.

Since, all the receivables are considered good and recoverable, no provision has been made.

Cash on hand, bank balances and Investment in Mutual Funds as on March 31, 2025 stands at Rs. 543 Crores as against Rs. 745 Crores as on March 31, 2024 mainly due to increased working capital requirement for the enhanced operational needs. However, Companys liquidity position continues to be strong. While IPO funds have been fully utilized, Rs. 86 Crores remains out of the QIP funds raised in March 2023.

The EBIDTA margin of the Company is 39% for FY 2024-25, as against 43% in FY 2023-24. Margin profile by the Company and it varies with individual contract.

Companys PAT increased by 22% from Rs. 182 Crores in FY 2023-24 to Rs. 222 Crores in FY 2024-25 and PAT Margin for FY 2024-25 was 31% as against 35% in FY 2023-24.

At Data Patterns India Limited, we prioritize the establishment of a robust internal control system to safeguard our assets, ensure compliance with regulations, and enhance operational efficiency. Our internal control framework encompasses a comprehensive set of policies, procedures, and practices designed to mitigate risks across all aspects of our operations. We implement segregation of duties to prevent fraud and error, regularly review and update our processes to adapt to changing business environments and regulatory requirements. Additionally, we conduct

internal audits to assess the effectiveness of our control measures and identify areas for improvement. Through a proactive approach to internal controls, we aim to promote transparency, accountability, and integrity throughout the organization, fostering trust among stakeholders and sustaining long-term success.

At Data Patterns India Limited, our Human Resources department is dedicated to fostering a dynamic and inclusive work environment where every employee can thrive and contribute their best. We believe that our people are our most valuable asset, and we are committed to attracting, developing, and retaining top talent. Our HR team works tirelessly to ensure that our hiring processes are fair and transparent, providing equal opportunities for all applicants. We prioritize employee growth and development through continuous learning initiatives, mentorship programs, and career advancement opportunities. Additionally, we understand the importance of work-life balance and offer comprehensive benefits packages to support the well-being of our employees. We strive to create a culture of excellence, collaboration, and innovation, where every individual feels valued and empowered to achieve their fullest potential.

Statement in the Management Discussion and Analysis describing the Companys objectives, projections, expectations and estimates regarding future performance may be "forward-looking statements" and are based on the currently available information. The management believes these to be true to the best of its knowledge at the time of preparation of this report. However, these statements are subject to certain future events and uncertainties, which could cause actual results to differ materially from those, which may be indicated in such statements.