DCX Systems Ltd Management Discussions

Forward-Looking Statement

This Management Discussion and Analysis of Financial Condition and Results of Operations contains statements that describe the Companys objectives, expectations, or predictions, which may be considered forward-looking within the context of applicable securities laws and regulations. These forward-looking statements are founded on certain assumptions and expectations regarding future events. The Company does not guarantee the accuracy or realisation of these assumptions and expectations. Furthermore, the Company undertakes no obligation to publicly update or revise any forward-looking statements based on subsequent developments, information, or events. Actual results may significantly differ from those expressed or implied in these statements. Key factors that could affect the Companys operations include changes in government regulations, tax laws, economic conditions within the country, and various global factors.

The financial statements are prepared in accordance with IND AS guidelines and comply with the Accounting Standards notified under Section 211(3C) of the Act, in conjunction with the Companies (Accounting Standards) Rules, 2015. The management of DCX Systems Limited has exercised prudent and reasonable judgment and estimation in preparing these financial statements to ensure they accurately and fairly represent the Companys financial condition and profit for the year.

This discussion of our financial condition and results of operations should be read in conjunction with our audited standalone financial statements and the accompanying notes included in the annual report. Unless otherwise specified or the context requires otherwise, references to "we," "us," "our," "the Company," and "DCX Systems" refer to DCX Systems Ltd.

About DCX Systems Limited

DCX Systems Limited is a prominent player in the defence and aerospace sectors, offering end-to-end solutions in cable and wire harnesses, electronic systems and sub-systems, high-end system integration, and PCB assembly. With a strategic focus on indigenisation, integration, and manufacturing, the company has positioned itself as the preferred Indian Partner for the Global OEMs especially for Israeli Defence Company, IAI, while also expanding into geographies such as the United States, Korea, and Israel for both IOP and non-IOP projects.

Company overview

In FY25, DCX Systems reported consolidated revenue of 1,083.67 crore compared to 1,423.58 crore in FY24, reflecting the impact of global headwinds and industry-wide challenges. Despite this, the company maintained strong momentum with a consolidated order book of 2,855 crore as of March 31, 2025, providing visibility for future growth. Its operations are supported by state-of-the-art manufacturing facility in Bengaluru and an additional EMS facility under its wholly owned subsidiary, Raneal Advanced Systems Pvt. Ltd., which is dedicated to Electronic Manufacturing Services for both captive consumption and external customers.

Historical milestones

The company was incorporated in 2011 and commenced its journey by fulfilling deemed export orders. By 2015, it had secured industrial licenses from the Government of India to manufacture microwave and electronic components, and in 2018 it obtained authorization to export munitions list items to IAI Elta Systems in Israel for use by the Indian Air Force and Navy. In 2020, DCX expanded its footprint by commissioning a state-of-the-art facility in the Aerospace SEZ, Bengaluru. The company went public in 2022, raising 400 crore through an IPO and simultaneously launched Raneal Advanced Systems for backward integration into EMS. It also incorporated NIART Systems Ltd. to provide obstacle detection solutions for the railway sector, enhancing safety and efficiency. The following year, DCX successfully raised 500 crore through a Qualified Institutional Placement, while also adding marquee global clients such as Lockheed Martin, Ametek, L&T, and Collins Aerospace to its portfolio. Most recently, in FY25, DCX signed a joint venture agreement with ELTA Systems to manufacture airborne maritime radar, fire control radar, and other radar systems for airborne and land applications under the Make in India initiative.

Business model and strengths

The business model of DCX Systems is anchored in its integrated approach that combines manufacturing, system integration, and allied services. Its cable and wire harness business continues to be a high-margin segment and is further strengthened by backward integration into Electronic Manufacturing Services through Raneal Advanced Systems, which provides cost efficiency and supply chain control. System integration has evolved as a strong growth driver, with DCX being a preferred Indian partner for leading global OEMs. Over the past few years, the company has steadily increased the share of non-offset projects from about 15 percent to nearly 40 percent, thereby reducing dependence on offset obligations and improving profitability. In addition, it has diversified into kitting and MRO services, which add incremental revenue streams without requiring significant capital expenditure. The companys strengths lie in its robust global procurement network, strong execution capabilities, asset-light operating model, and its ability to pursue technology tie-ups for new product development. Together, these elements position DCX Systems for sustainable growth in the evolving defence and aerospace landscape

Industry landscape

The defence and aerospace sectors are undergoing a phase of sustained expansion, shaped by persistent geopolitical tensions, the ongoing modernisation of armed forces, and the steady introduction of advanced technologies. Increasing focus on self-reliance in defence production and the integration of next-generation electronic and aerospace systems are further redefining the contours of the industry. Globally, the demand for defence electronics, system integration, and high-reliability manufacturing is rising, while in India, the sector is supported by strong government policies aimed at strengthening local capabilities and reducing dependence on imports.

The Positive Indigenisation List and the Defence Acquisition Policy are at the centre of these policy interventions, encouraging the development of domestic capacities, promoting Make in India, and opening opportunities for companies to participate in a broad spectrum of defence programmes. In parallel, the liberalisation of foreign direct investment norms and the corporatisation of the Ordnance Factory Board have created a more competitive and open ecosystem for private players. Together, these reforms are driving a structural shift that favours innovation, localisation, and advanced manufacturing in the country.

DCX Systems is well-positioned to take advantage of these tailwinds. Its integrated business model, spanning cable and wire harnesses, electronic systems, sub-systems, system integration, and PCB Assembly, aligns directly with the evolving needs of defence and aerospace customers. The companys partnerships with global OEMs, focus on indigenisation, and diversification into non-offset projects reflect a forward-looking strategy that matches the direction of the industry. By combining operational expertise with strong customer relationships and a commitment to advanced, technology-driven solutions, DCX is equipped to play a larger role in both domestic and international markets as the industry continues its transformation.

Financial Performance

DCX Systems has demonstrated consistent growth, with a healthy CAGR in both revenue and profit over the last few years. As of March 31, 2025, the company reported an order book of 2,855 crore, a sharp rise from the previous year. Financial highlights for FY25 include consolidated operational revenues of 1,083.67 crore, EBIT of 71.27 crore, and PAT of 38.88 crore. While YoY revenues declined due to market headwinds, the company maintained resilience, supported by efficient execution and long-term strategic initiatives.

Industrial Offset Partnership Opportunities

DCX Systems, a prominent player in the Indian defence market, continues to stand out as one of the largest IOPs (Indian Offset Partners) for the IAI Group from Israel. Specialising in "Build-to-Print" system integration and the manufacturing of cable and wire harness assemblies, DCX Systems excels in defence technology applications. Their capabilities cover electronic assemblies, automatic missile detection radars, unmanned aerial vehicle systems, Barak systems, medium-range maritime reconnaissance aircraft, and short-range surface-to-air missiles.

The company holds AS-9100:2016 certification for quality management system in Defence & Aerospace manufacturing, and a Defence Industrial License from the Ministry of Commerce and Industry, positioning it to support critical, secret and classified defence product manufacturing.

Order Book Position Details

As of March 31, 2025, DCX Systems Limited reported a robust order book of INR 2,855 crore, reflecting a substantial backlog and growing demand for its offerings in the defence and aerospace industries. Recent wins include:

• Two orders from Lockheed Martin Global, USA worth INR 839.97 crore for electronic assemblies.

• An order from ELTA Systems Ltd, Israel worth INR 483 crore for Close-In Weapon System (CIWS) module assemblies.

• Additional purchase orders of ~INR 57 crore from overseas and domestic customers for CIWS antenna and cable/wire harness assemblies.

Strategic Vision

Looking ahead, DCX Systems aims to further de-risk its business model by:

• Expanding into railway safety solutions through NIART Systems.

• Growing its share of non-offset projects, which has risen from ~15% to ~40%, improving margins.

• Backward integration through Raneal Advanced Systems for EMS and PCB assemblies, reducing costs and strengthening supply chain resilience.

• Leveraging technology transfer (ToT) from Israel and the US to enhance product offerings and reduce R&D spend.

The companys strategic goal is to transition into a technology-driven product company, expanding globally across defence and aerospace while continuing to align with the Governments Make in India initiative.

Leadership

DCX Systems is guided by a seasoned leadership team with deep expertise in defence and aerospace manufacturing. At the helm is Dr. H.S. Raghavendra Rao, Founder-Promoter, Chairman and Managing Director, with over three decades of experience in electronics manufacturing. Supporting him is Mr. Neal Jeremy Castleman, Non-Executive Director, with more than four decades in the electronic manufacturing sector.

The senior management team has a proven track record of anticipating market shifts, expanding operations, and strengthening customer relationships. Their strategic insights and operational focus have anchored the companys competitive edge.

Value Propositions

DCX Systems business model rests on three pillars:

1. Manufacturing – Cable & Wire Harness and EMS (PCBA), with backward integration through Raneal Advanced Systems.

2. System Integration – Both IOP and non-IOP projects, covering a diverse range of defence and aerospace systems.

3. Others – Kitting and MRO services, offering additional revenue streams without additional capex.

This diversified structure strengthens DCX Systems ability to serve global OEMs and deliver value across sectors.

Business Segments and Strategic Value

Manufacturing

DCX Systems continues to place strategic focus on its high-margin cable and wire harness business. This area is central to the companys profitability and financial health, with an emphasis on delivering high-quality, reliable products that are critical for diverse applications. By prioritising this segment, DCX has strengthened its reputation and customer trust in both domestic and international markets.

The EMS (PCB Assembly) segment remains a core competency of the company and has been further reinforced through backward integration by its wholly owned subsidiary, Raneal Advanced Systems. This move enhances efficiency, streamlines supply chain management, and supports operational excellence. The captive use of PCB assemblies reduces costs, improves overall efficiency, and enables DCX to offer competitive pricing while upholding superior product quality. By catering not only to defence and aerospace but also to other sectors, this segment ensures a diversified revenue stream, reducing risks associated with overdependence on a single market.

System Integration

DCXs role as the preferred Indian Offset Partner for the IAI Group reflects its credibility and reliability in delivering interoperable solutions. The segment is marked by strong yields and a solid order book, underscoring the companys ability to meet exacting global standards. At the same time, DCX has strategically concentrated on expanding its non-offset order book, thereby reducing reliance on the IOP model and achieving a balanced portfolio. This diversification has broadened the companys market reach and strengthened its customer base by offering customised system integration solutions tailored to different industry requirements.

A significant development within this segment is the companys joint venture with ELTA Systems. This collaboration is focused on airborne maritime radar systems, fire control radar systems, and other radar technologies for airborne and land applications under the Make in India programme. The JV strengthens DCXs position in advanced defence technologies and supports its transition towards becoming a product-oriented company through Transfer of Technology from global OEMs.

Others

In kitting, DCX supplies assembly-ready kits of electronic and electromechanical parts, simplifying procurement for customers and reducing their assembly time and effort. This service provides a distinct strategic advantage, allowing DCX to position itself as a partner offering integrated solutions that are ready for immediate deployment.

In the MRO segment, the company focuses on testing and maintenance projects, creating an additional revenue stream that does not require heavy capital expenditure. This enhances efficiency and reinforces DCXs expertise in ensuring the longevity and reliability of its products.

Strategic Positioning and Market Differentiation

DCXs strategic positioning is defined by its ability to offer a comprehensive suite of solutions across manufacturing, system integration, kitting, and MRO. By maintaining a strong focus on high-margin, high-quality products and services, the company has built a reputation for reliability and excellence in the market. Its approach to backward integration and operational efficiency ensures competitive pricing and innovation, while sector diversification across defence, aerospace, and civilian markets safeguards financial stability and future growth. The companys deep understanding of customer needs and ability to deliver customised solutions, from assembly-ready kits to complex maintenance and repair services, continues to drive customer satisfaction and loyalty. A major area of strategic expansion lies in DCXs collaboration with ELTA Systems through the establishment of NIART Systems Ltd. in Israel. NIART is dedicated to developing advanced obstacle detection solutions for the railway sector, aimed at enhancing operational safety and efficiency. By combining ELTAs technological expertise with DCXs manufacturing capabilities, NIART has introduced products with nearly double the track visibility compared to current standards, extending up to 1.4 kilometres. These solutions are targeted at both domestic and export markets, reinforcing DCXs global ambitions in this space. Importantly, NIART is also structured to generate steady business for DCX, as it will source system integration, cables, and PCB assemblies directly from the company. This arrangement not only creates a recurring revenue pipeline but also strengthens DCXs positioning as a technology-driven product company delivering solutions aligned with global benchmarks.

Key Advantages of DCX Systems

• Preferred Indian Offset Partner (IOP): Among the largest partners for the IAI Group, with deep relationships built over a decade in defence and aerospace.

• Integrated business model: End-to-end capabilities in cable & wire harness, PCB assembly through Raneal

Advanced Systems, and system integration, supported by kitting and MRO services.

• Strong order visibility: Consolidated order book of 2,855 crore as of March 31, 2025, backed by repeat global customers such as Lockheed Martin and ELTA Systems.

• Non-offset diversification: Share of non-offset projects has risen from ~15% to ~40%, improving margins and reducing dependence on offset contracts.

• Technology collaborations: Strategic JVs with ELTA Systems for radar systems and railway obstacle detection solutions (NIART Systems), ensuring Transfer of Technology (ToT) and faster product commercialization.

• Backward integration in EMS: Raneal Advanced Systems supports captive consumption, cost control, and stronger supply chain resilience.

• Sectoral reach and diversification: Presence across defence, aerospace, railways, and emerging civilian applications, ensuring multiple revenue streams.

• Leadership and execution strength: Experienced management team with proven ability to win and execute large-scale global projects, ensuring sustained customer trust and recognition.

Global Economic Environment

The world economy is currently in a delicate transition, characterised by modest recovery, persistent risks, and cautious optimism. According to the IMFs World Economic Outlook (January 2025), global GDP is expected to expand by 3.3% in both 2025 and 2026, below the long-term average of 3.7%. Inflationary pressures are easing, projected to fall from 4.2% in 2025 to 3.5% in 2026, as major central banks move away from aggressive tightening and supply-chain disruptions gradually ease.

Advanced economies such as the United States, Germany, and Japan are witnessing resilient consumer demand and smoother supply chains. In contrast, many emerging markets remain constrained by tighter financial conditions, elevated external debt, and currency depreciation. The IMF cautions that unresolved policy differences and rising protectionist tendencies—particularly U.S.-driven tariff escalations—could trim global growth to 2.8% in 2025.

Geopolitical volatility, notably in the Middle East, continues to exert pressure on energy markets and inflation dynamics. Offsetting these challenges, the rapid adoption of digitalisation and AI-driven productivity improvements provides a medium-term boost to global economic prospects. Yet, these gains are uneven, complicated by varying regulatory readiness and concerns around labour market disruptions.

Selective monetary easing in certain emerging economies, alongside more stable commodity prices, may help curb volatility. Nonetheless, the persistence of tight global financial conditions leaves low-income and fragile economies exposed to capital outflows, fiscal imbalances, and external shocks.

Indian Economic Overview

India continues to distinguish itself as the worlds fastest-growing major economy. GDP growth is estimated between 6.5% and 7.0% for FY 2024–25 and projected to stabilise at 6.5% in FY 2025–26. The growth trajectory is supported by strong household consumption, government-led infrastructure push, improved logistics networks, and structural reforms designed to raise manufacturing competitiveness.

In FY 2023–24, construction and manufacturing emerged as leading growth engines, expanding by 10.7% and 8.5%, respectively. Their contribution to Gross Value Added (GVA) underscores the resurgence of industrial activity. The Reserve Bank of India (RBI) reports a 14.1% YoY increase in credit to MSMEs, while credit flows to NBFCs and services grew by more than 20%, signalling broader access to formal finance and strengthening financial inclusion.

The RBI has kept the repo rate steady at 6.5%, striking a balance between inflation control and growth. Consumer inflation has moderated and is likely to remain within the 2–6% tolerance band, trending towards the 4% medium-term target.

Although Indias fundamentals are strong, risks persist from global commodity price swings, food inflation, supply-chain disruptions, and spillovers from emerging-market stress. Nevertheless, the countrys stable macroeconomic framework, prudent policymaking, and an expanding industrial base position it well to sustain momentum and reinforce its role as a key driver of global growth.

Review of Indian and Global Defence Sector

Global

The global aerospace and defence (A&D) industry delivered record performance in 2024 despite lingering supply chain bottlenecks and production constraints. According to PwCs 2025 report, industry revenues surged to $922 billion, a 9% year-on-year increase, while operating profit rose 11% to $84 billion, supported by resilient aftermarket activity and rising demand for service and replacement parts. Civil aviation suppliers such as TransDigm, GE Aerospace, and Collins Aerospace were central to this momentum, benefitting from extended aircraft lifecycles as OEM production struggled to match demand. While passenger traffic growth was robust—with Revenue Passenger Kilometres rising by 10.4% and global load factors hitting a record 83.5%—aircraft deliveries lagged, keeping the industry backlog at more than 14,000 units, equivalent to a decade of production at normal output levels. This imbalance between demand and capacity has created enduring tailwinds for aftermarket specialists and sustained earnings visibility across the sector.

The defence segment also reported historic highs, with global military expenditure crossing $2.178 trillion in 2024, surpassing Cold War peaks. Rising geopolitical tensions, particularly in Eastern Europe, the Middle East, and East

Asia, drove substantial increases in national defence budgets, leading to an 11% expansion in order backlogs for the worlds largest defence contractors. Yet, despite revenues climbing 7%, operating margins compressed to 6.9% due to cost overruns and program-related charges. Lockheed Martin, Northrop Grumman, and Raytheon all recorded significant backlog growth, but production challenges limited margin gains. At the same time, the industry faced heightened trade frictions, most notably tariff escalations between the US and China and restrictions on rare earth exports critical for advanced defence systems. Even so, long-cycle demand, rising government procurement, and emerging innovation in green aviation and next-generation systems continue to reinforce the industrys resilience, positioning aerospace and defence as a sector of strategic importance with a robust multi-year growth trajectory.

For DCX Systems, these dynamics present both opportunities and challenges. The global supply-demand imbalance in aerospace production and the surge in defence expenditure align strongly with DCXs expertise in system integration, cable and wire harnesses, and electronic assemblies. The companys position as one of Indias leading offset partners for global OEMs, combined with its diversification into non-offset and railway safety solutions, places it at the intersection of these growth drivers. Rising demand for aftermarket services and sustained defence procurement underscore the potential for DCX to secure long-term contracts, deepen its global partnerships, and accelerate its transition into a technology-driven product company. At the same time, geopolitical and trade-related uncertainties highlight the need for agility, cost efficiency, and continued investment in backward integration, ensuring DCX remains resilient and competitive in a rapidly evolving global A&D landscape.

Indian

India has emerged as one of the worlds most dynamic defence markets, supported by sustained government investment and a strategic focus on indigenisation. In the Union Budget 2024–25, defence expenditure was pegged at 6.21 lakh crore (approximately USD 74 billion), representing 1.89% of GDP and a 4.72% increase over the previous year. This allocation reflects the governments determination to strengthen national security in an environment marked by persistent border tensions with China, unresolved issues with Pakistan, and evolving maritime challenges. The modernisation of Indias armed forces remains a central priority, with increased spending on missile systems, drones, naval assets, electronic warfare, and space-based surveillance. Flagship programmes such as Agni, BrahMos, Astra, Akash, LRSAM, and MRSAM showcase both the scale and technological sophistication of Indias defence ambitions.

A defining element of this growth story is the Atmanirbhar Bharat (Self-Reliant India) initiative, which has significantly reoriented defence procurement policy toward domestic industry. Over 500 items have now been placed on the positive indigenisation list, ensuring greater opportunities for

Indian manufacturers. Structural reforms such as the Strategic Partnership model, redefined offset obligations, and increased private sector participation have further accelerated the sectors transformation. At the same time, Indias global footprint is expanding, with defence exports touching a record 23,622 crore (USD 2.76 billion) in FY 2024–25, up 12% year-on-year. Indian companies are now supplying missiles, radars, simulators, and ammunition to regions spanning Southeast Asia, the Middle East, and Eastern Europe, with the private sector contributing nearly 60% of these exports. Coupled with initiatives such as the Government-Owned Company-Operated (GOCO) model for defence production, India is not only building self-reliance but also positioning itself as a competitive global supplier in critical defence technologies. Complementing this, the aerospace sector is strengthening its international presence, with Hindustan Aeronautics Limited (HAL) at the centre of indigenous aircraft and helicopter programmes such as Tejas and Dhruv, alongside export opportunities in Malaysia, Argentina, and Africa. At the same time, India is increasingly being recognised as an emerging global hub for defence electronics, avionics, and system integration. With capabilities spanning cable and wire harnesses, PCB assemblies, radar systems, and advanced integration for aerospace and defence platforms, Indian companies are embedding themselves into global supply chains. This evolution reflects not only the success of policy reforms but also the ability of domestic players to match global standards, positioning India as a rising power in the high-technology defence and aerospace ecosystem.

Indian Defence Exports

Indias defence exports reached an all-time high of 23,622 crore in FY 2024–25, reflecting a 12% rise over the previous years 21,083 crore. The momentum came from both private and public sector contributions. While the private sector led with exports worth 15,233 crore, Defence Public Sector Undertakings significantly enhanced their role, registering a 43% jump to 8,389 crore. The growth was also visible in export authorisations, which increased by nearly 17% to 1,762 in FY 2024–25, and in the number of exporters, which rose by more than 17%, pointing to a widening base of players in the ecosystem.

This expansion underscores a decade-long transformation in Indias defence industry. From just 686 crore in FY 2013–14, exports have surged 34-fold, driven by reforms under the "Make in India" and Aatmanirbhar Bharat vision. The government has streamlined licensing processes, digitised approvals, and supported innovation through initiatives such as iDEX and Defence Industrial Corridors. Today, India exports defence equipment to over 100 countries, with major buyers including the USA, France, and Armenia. Backed by policy reforms and strong leadership, the nation is steadily moving toward its ambitious target of achieving 50,000 crore in defence exports by 2029.

SWOT Analysis of DCX Systems Limited

Strengths

Diverse product portfolio: DCX offers a wide range of products, including cable assemblies, wire harnesses, electronic subassemblies, PCB assemblies (PCBA), and system integration. This breadth enables the company to serve aerospace, defence, automotive, and telecommunications sectors, ensuring a balanced and diversified revenue base.

Strong customer relationships: The company partners with leading global players such as Lockheed Martin and IAI, providing stable revenue visibility and reinforcing DCXs credibility and market standing.

Advanced manufacturing capabilities: With state-of-the-art facilities including a 30,000 sq. ft. unit in Aerospace SEZ, Bengaluru, and a 40,000 sq. ft. EMS facility operated through its wholly owned subsidiary, Raneal Advanced Systems, DCX delivers products that meet stringent international standards. Backward integration: Through Raneal Advanced Systems, the company has integrated into EMS, enabling cost efficiencies, improved working capital utilization, and stronger supply chain control.

Global presence: Operations and customers in Israel, the US, Korea, and India provide geographic diversification, reducing dependence on any single market.

Weaknesses

High operational costs: Maintaining advanced facilities and adhering to rigorous quality benchmarks requires significant expenditure, impacting margins during demand volatility. Supply chain dependencies: While a global procurement network supports efficiency, it also exposes DCX to risks from geopolitical disruptions, raw material shortages, or logistical delays.

Inventory challenges: High-value and technically sophisticated components demand precise inventory management. Inefficiencies can increase costs and affect delivery schedules.

Competitive landscape: Cable assemblies and electronic subassemblies markets are highly competitive, with pricing pressure from multiple domestic and global players potentially impacting profitability.

Opportunities

Expansion in emerging markets: Rapidly growing Asian economies, particularly in aerospace and defence, offer room for DCX to strengthen its footprint.

Technology-led growth: Opportunities exist in joint ventures and transfer of technology to develop advanced solutions, such as railway obstacle detection systems and complex PCBAs.

Rising defence expenditure: Increasing defence budgets globally create demand for DCXs system integration and cable harness capabilities.

Strategic alliances: Collaborations with global leaders—such as the JV with ELTA Systems—can drive innovation, market reach, and product diversification.

Policy support: Initiatives like Make in India, the Positive Indigenisation List, and Defence Acquisition Policy 2020 promote domestic manufacturing and create a favourable ecosystem for DCX.

Opportunity Spectrum Cable & Wire Harness Industry Size

Year	Amount (USD mn)	CAGR
2022	541.2
2029	1,477.3	15.4%

EMS (Electronics Manufacturing Services) Industry Size

Year	Amount (USD mn)	CAGR
2019	400.0
2025	4,510.0	49.7%

MRO (Maintenance, Repair & Overhaul) Industry Size

Year	Amount (USD mn)	CAGR
2022	77.0
2031	165.0	8.8%

Threats

Macroeconomic uncertainty: Global slowdowns or fiscal tightening can affect defence budgets, thereby impacting demand.

Regulatory changes: Shifts in compliance requirements or industry standards demand constant alignment. Non-compliance risks fines and reputational damage.

Supply chain risks: Natural disasters, geopolitical tensions, or transport bottlenecks can disrupt timely deliveries and customer satisfaction.

Cybersecurity threats: Operating in defence and aerospace makes DCX a prime target for cyberattacks, necessitating continuous investment in robust security systems.

Technological obsolescence: The pace of innovation in aerospace and defence means existing technologies can quickly become outdated, pressuring DCX to continuously upgrade capabilities.

Key Drivers of the Business

Indigenous industry drivers

The Atma Nirbhar Bharat initiative is a key driver, with measures such as:

• Positive Indigenisation List: Encouraging domestic sourcing and reducing import dependency.

• Budget allocation: Increasing defence outlay to strengthen local industry.

• Corporatisation of OFBs: Driving efficiency and competitiveness.

• FDI liberalisation: Attracting foreign investments and collaborations.

• Offset policies: Promoting technology transfer and self-reliance.

Additionally, the application of EMS products in civilian industries like medical devices and opportunities from technology transfer support business growth beyond defence.

Expanding defence landscape

Both global and Indian defence markets are expanding due to geopolitical tensions, modernisation programmes, and rapid technology evolution. Defence spending is projected to grow steadily from CY22 through CY27, creating sustained opportunities for companies like DCX that combine advanced manufacturing, system integration, and global partnerships.

Review of Performance

Significant Purchase Orders Secured

DCX Systems entered into a JV agreement with ELTA Systems to conduct business in the areas of Airborne Maritime Radar System, Fire Control Radar System, and other Radar Systems for Airborne and Land applications under the Make in India program. The company also received a purchase order worth INR 483 crore from ELTA Systems Ltd. for manufacture and supply of Close-In Weapon System (CIWS) Module Assemblies. In addition, DCX received purchase orders worth INR 57 crore from overseas and domestic customers for supply of CIWS Antenna and Cable & Wire Harness Assemblies.

Expansion of Manufacturing Capacity

DCX established a new Domestic Tariff Area (DTA) unit along with its subsidiary Raneal Advanced Systems to support manufacturing activities. Commercial production at this facility is expected to commence shortly.

Strategic Focus on Non-Offset Orders

The share of non-offset projects in system integration continues to rise—from ~15% in earlier years to ~40%—helping to diversify away from the traditional offset model and improving margins.

JV with NIART Systems

DCXs subsidiary NIART Systems, formed in collaboration with ELTA Systems, is focused on radar & optics products for railways with significantly better track visibility (up to 1.4 km). This is positioned as a new revenue stream in domestic as well as export markets.

Review of Financial Performance

The company experienced a decline in revenue and profitability in FY25 compared with FY24, primarily due to lower execution volumes, higher costs, and strategic investments in capacity and new ventures. However, the year also saw improvements in balance sheet strength and order book visibility (Rs. 2,855 crore consolidated as of March 31, 2025).

Revenue from Operations

• FY25: Rs. 1112.06 crore

• FY24: Rs. 1423.40 crore

• Growth: -21.87%

Raw Material Expenses

• FY25: Rs. 1080.33 crore

• FY24: Rs. 1,328.92 crore

• Growth: -18.71

Employee Cost

• FY25: Rs. 14.70 crore

• FY24: Rs. 12.06 crore

• Growth 21.89%

Other Operating Expenses (Incl. FX Gain/Loss)

• FY25: Rs. 14.14 crore

• FY24: Rs. 12.34 crore

• Growth: 14.59%

Total Expenditure (Incl. FX Gain/Loss)

• FY25: Rs. 1124.86 crore

• FY24: Rs. 1384.20 crore

• Growth: -18.74%

Other Income

• FY25: Rs. 67.57 crore

• FY24: Rs. 46.21 crore

• Growth: 46.22%

Depreciation

• FY25: Rs. 5.72 crore

• FY24: Rs. 2.48 crore

• Growth: 130.65%

EBIT

• FY25: Rs. 64.73 crore

• FY24: Rs. 113.79 crore

• Growth: -43.11%

EBIT Margin

• FY25: 5.82%

• FY24: 7.99%

• Growth: -217 basis points

Interest

• FY25: Rs. 9.96 crore

• FY24: Rs. 28.39 crore

• Growth: -64.92%

Profit Before Tax

• FY25: Rs. 54.77 crore

• FY24: Rs. 85.40 crore

• Growth: -35.87%

Tax

• FY25: Rs. 19.10 crore

• FY24: Rs. 17.30 crore

• Growth: 10.40%

Profit After Tax

• FY25: Rs. 35.67 crore

• FY24: Rs. 68.10 crore

• Growth: -47.62%

PAT Margin

• FY25: 3.21%

• FY24: 4.78%

• Growth: -157 basis points

Basic EPS

• FY25: 3.20

• FY24: 6.83

• Growth: -53.15%

Significant Changes in Ratios

• Current Assets ratio o FY24: 2.57 o FY25: 2.98

• Debt Equity ratio o FY24: 0.24 o FY25: Nil Debt

Return on Networth

The Companys Return on Networth stood at 3.09% as on March 31, 2025 vis-?-vis 6.09% as on March 31, 2024

Human Resources for FY25

Our employees continue to remain pivotal to our business success, and we maintain a strong focus on attracting, nurturing, and retaining top talent. We seek individuals whose skill sets, interests, and backgrounds align with our evolving business needs.

Our workforce represents a balanced mix of seasoned professionals and young talent, enabling us to blend experience with innovation. This combination of skilled, semi-skilled, and unskilled resources, supported by a robust management team, has been instrumental in executing our strategic initiatives.

In FY25, we continued to strengthen our comprehensive training programs, which include behavioural, technical, leadership, and on-the-job training to enhance workforce capability.

Human Resources and Industrial Relations

At DCX Systems, our HR strategy remains centred on fostering a culture of continuous learning, inclusivity, and innovation. We view our employees as our greatest asset and are committed to providing opportunities for professional growth, career advancement, and holistic well-being.

During FY25, we enhanced employee engagement through structured initiatives such as leadership workshops, performance-linked development frameworks, and wellness programs addressing both physical and mental health. Our industrial relations remained stable throughout the year, underpinned by open communication and collaboration with employee representatives, ensuring a positive workplace environment.

Internal Control Systems

DCX Systems Ltd. has a well-established internal control system that ensures accuracy and reliability in financial reporting, compliance with applicable laws and regulations, and efficient conduct of business operations. The framework includes well-documented policies, regular audits, and monitoring by both internal and external auditors.

The Audit Committee continued to review internal audit findings during FY25 and ensured timely corrective actions were implemented. These systems collectively provide reasonable assurance regarding safeguarding of assets and maintaining the integrity of financial statements.

Risk & Risk Mitigation

Risk	Risk Definition	Risk Probability	Risk Impact	Risk Mitigation
Business Dynamics	Variance in the demand and supply of products in different geographies.	Medium	High	Predict demand based on experience and adjust supply accordingly.
Business Operations	Risks related to organisation and management including planning, monitoring, and reporting systems in day-to-day operations.	High	High	Defined organisational structure, clear information flow, backup positions, adequate raw material stock, cost management, captive power, and strong HR relations.
Liquidity Risks	Risks related to solvency, borrowing limits, and cash management.	Medium	Medium	Financial planning with budgets, variance analyses, cash flow monitoring, hedging support through LCs and bank guarantees.
Credit Risks	Settlement risks from clients, including provision for bad and doubtful debts.	Medium	Medium	Creditworthiness assessments, provisions, recovery systems, and follow-ups for dues, including government receivables.
Logistic Risks	Dependency on external transport services.	Medium	Medium	Partnering with committed service providers, in-house logistics, multiple transportation modes, and insurance coverage.
Market/Industry Risks	Fluctuations in demand, supply, pricing, lead time, and raw material rates.	High	High	Procurement from multiple sources, alternative vendor development, inventory control, and planning based on market experience.
Human Resource Risks	Employee turnover, replacement, training, skill gaps, and availability challenges.	Medium	Medium	Strong recruitment policies, appraisal systems, continuous training, and employee welfare initiatives.
Disaster Risks	Natural calamities like fire, floods, earthquakes.	Low	High	Insurance cover, fire safety systems, safety drills, risk assessments, first aid, and ESI/EPF coverage.
System Risks	IT system reliability, data integrity, and coordination risks.	Medium	High	Continuous monitoring, upgrades, password protection, licensed software, and access control.
Legal Risks	Risks linked to contracts, frauds, litigations, insurance, and IPR infringements.	Medium	High	Legal due diligence, compliance systems, quarterly reviews, and secretarial audits.