Droneacharya Aerial Innovations Ltd Management Discussions

DRONEACHARYA AERIAL INNOVATIONS LIMITED For the Financial Year Ended 31 March 2026

The Management Discussion and Analysis Report ("MD&A") forms part of the Annual Report of DroneAcharya Aerial Innovations Limited ("DroneAcharya", "DAIL" or "the Company") for the financial year ended 31 March 2026 ("FY 2025-26" or "FY26") and should be read together with the Audited Financial Statements, Notes to Accounts, Directors Report and other disclosures forming part of the Annual Report.

The discussion below reflects the managements assessment of the Companys business performance, operating environment, financial position, opportunities, risks and outlook based on information available to the management as on the date of this report.

1.BUSINESS OVERVIEW

DroneAcharya Aerial Innovations Limited is a listed Indian drone technology company operating across multiple segments of the unmanned aerial systems ("UAS")/drone ecosystem.

The Companys business activities broadly encompass drone manufacturing and technology, drone pilot training, aerial and geospatial services, defence and enterprise drone solutions, research and development, drone data processing and technology-enabled applications.

The Companys business model is designed to participate across multiple stages of the drone technology value chain, including:

• Drone manufacturing and assembly;

• Development of application-specific drone platforms;

• Defence and tactical drone solutions;

• Agriculture and precision-agriculture applications;

• Drone pilot and technical training through DGCA-approved Remote Pilot Training Organisations ("RPTOS");

• Aerial surveying, mapping, inspection and geospatial data services;

• Drone data processing and GIS solutions;

• Research and development in autonomous, surveillance and industrial drone applications;

• Technology integration and consultancy; and

• International collaborations and technology partnerships.

During FY26, the Company continued to strengthen its positioning as an integrated drone technology and solutions provider, with increasing emphasis on defence applications, indigenous product development, training, enterprise applications and technology partnerships.

The Company believes that its integrated capabilities across hardware, software, training, services and data provide a differentiated platform from which it can address the evolving requirements of defence, government, infrastructure, agriculture, enterprise and institutional customers.

2.INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian drone industry continues to evolve from an emerging technology market towards a broader technology and industrial ecosystem. Increasing adoption of drones across defence, agriculture, infrastructure, mining, energy, utilities, disaster management, surveying, surveillance and other applications is creating opportunities for manufacturers, technology developers, service providers and training organisations.

Technological developments in artificial intelligence, computer vision, autonomous navigation, advanced sensors, communication systems, edge computing, battery technology, geospatial technology and data analytics are expanding the potential applications of drones.

The industry is also moving towards integrated solutions where the value proposition extends beyond the drone hardware itself to include:

• Mission-specific drone platforms;

• Payload and sensor integration;

• Autonomous operations;

• Command-and-control systems;

• Data acquisition and processing;

• GIS and analytics;

• Artificial intelligence-enabled decision support;

• Training and skill development; and

• Drone-as-a-Service models.

Defence continues to represent a significant opportunity for the Indian drone ecosystem, particularly in areas such as surveillance, reconnaissance, tactical operations, logistics, FPV systems, counter-drone applications and other mission-specific requirements.

During FY26, DroneAcharya continued to increase its focus on defence and enterprise applications and executed and participated in multiple defence-related drone deployment and demonstration opportunities. The Company also continued to develop its capabilities in FPV, surveillance and tactical drone systems.

The Company believes that the increasing focus on indigenous technology, self-reliance and domestic defence capabilities provides a long-term opportunity for Indian drone technology companies with appropriate technical, manufacturing and execution capabilities.

3.FINANCIAL PERFORMANCE

The Companys financial performance for FY26 should be evaluated in the context of both the decline in revenue and the significant improvement in cost efficiency and profitability.

Consolidated Financial Performance

Particulars	FY 2025-26	FY 2024-25
Revenue from Operations	Rs. 14.67 Cr	Rs. 34.52 Cr
Other Income	Rs. 3.61 Cr	Rs. 2.18 Cr
Total Income	Rs. 18.28 Cr	Rs. 36.70 Cr
Profit/(Loss) Before Tax	Rs. 0.51 Cr	(Rs. 17.95 Cr)
Profit/(Loss) After Tax	Rs. 0.37 Cr	(Rs. 13.47 Cr)

The Company reported consolidated revenue from operations of approximately Rs. 14.67 crore during FY26 compared with Rs. 34.52 crore in FY25.

Despite the lower revenue, the Company reported a consolidated Profit Before Tax of approximately Rs. 0.51 crore and Profit After Tax of approximately Rs. 0.37 crore in FY26, compared with a loss before tax of approximately Rs. 17.95 crore and loss after tax of approximately Rs. 13.47 crore in FY25.

The improvement in profitability was supported by a substantial reduction in operating expenses and continued focus on cost optimisation and operational efficiency.

The Company also reported EBITDA of approximately Rs. 7.1 crore during FY26.

The managements focus going forward will remain on improving the quality of revenue, increasing utilisation of existing capabilities, improving gross margins, strengthening working-capital discipline and converting the Companys business pipeline into executable revenue.

Audit Report

The Statutory Auditor has issued an unmodified opinion on both standalone and consolidated financial statements for FY 2025-26. The financial statements have been prepared in accordance with Indian Accounting Standards (IND-AS) and other regulatory requirements, ensuring a true and fair view of the Companys performance.

4. REASONS FOR CHANGE IN REVENUE AND PROFITABILITY

The decline in FY26 revenue compared with FY25 was primarily attributable to delays and disruptions in the execution of certain business opportunities and the timing of procurement and customer deliveries.

The drone industry continues to be dependent on specialised electronic components, sensors, batteries, communication equipment and other components, many of which are sourced through international supply chains.

During the year, global geopolitical developments and supply-chain disruptions affected the availability, pricing and logistics of certain components and consequently affected the timing and economics of project execution.

The Company also adopted a more selective approach towards project execution and expenditure, with greater emphasis on opportunities with strategic relevance, stronger commercial potential and sustainable margins.

At the same time, significant improvement in cost management resulted in a substantial reduction in operating expenses and enabled the Company to return to profitability during FY26.

The management considers the improvement in profitability, despite lower operating revenue, to be an important indicator of the Companys progress towards establishing a more disciplined and sustainable operating structure.

5. RESEARCH AND DEVELOPMENT AND PRODUCT DEVELOPMENT

Research and development is an important component of the Companys long-term strategy.

The Company is focused on developing indigenous and application-specific drone technologies for defence, agriculture, enterprise and other industrial applications.

The Companys product development initiatives encompass areas such as:

• FPV drone platforms;

• Surveillance and tactical drone systems;

• Payload and sensor integration;

• Autonomous and semi-autonomous flight;

• Drone data acquisition and processing;

• AI-enabled applications; and

• Mission-specific drone solutions.

The Company intends to continue investing selectively in R&D and product development based on market demand, customer requirements and commercial viability.

6.INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal control systems commensurate with its size and nature of operations. These systems ensure accuracy in financial reporting, safeguard assets, and promote operational efficiency. During the year, the management further strengthened compliance processes and internal audits to support transparent governance.

^COMPETITIVE POSITIONING

DroneAcharya seeks to position itself as an integrated drone technology company rather than solely as a drone hardware manufacturer.

The Companys capabilities span multiple complementary areas:

Area	Company Capability
Drone Technology	Drone platforms, systems and allied equipment
Defence vwwwwwwvw	FPV, surveillance, tactical and mission-specific solutions
Manufacturing	Drone assembly, product development and integration
Training	DGCA-approved remote pilot training and technical programmes 1 A A jrnrrinrrrnrr r r -r,rnr n
Drone Services	Aerial surveys, mapping, inspection and data acquisition
GIS & Data	Geospatial data processing and analytics
Agriculture	Precision agriculture and spraying solutions
R&D	Product development and technology innovation
AI & Automation	Al-enabled and autonomous drone applications
Consultancy	Drone technology and application consulting
International	Technology collaborations and international opportunities

This diversified business model enables the Company to address multiple segments of the growing drone ecosystem and provides opportunities to develop cross-selling and integrated solution capabilities.

8.THREATS, RISKS AND CHALLENGES

• Rapid Technological Change

Drone technology is evolving rapidly. Advances in artificial intelligence, autonomous flight, sensors, battery technology, communication systems, navigation and data analytics can shorten product life cycles.

The Company will therefore need to maintain continuous focus on R&D, product improvement, technology partnerships and employee skill development.

• Regulatory and Compliance Risk

Drone operations are subject to aviation, safety, security, certification, airspace and other regulatory requirements.

Changes in applicable regulations, certification requirements, operating permissions, import restrictions or government policies may affect the Companys operations.

The Company remains committed to monitoring regulatory developments and maintaining appropriate compliance systems.

• Defence Procurement and Government Customer Risk

A significant part of the Companys growth opportunity is linked to government, defence and institutional customers.

Such projects may involve longer procurement cycles, technical evaluations, demonstrations, certifications, tender conditions and payment cycles.

Delays in procurement decisions or project execution can consequently affect revenue recognition and working-capital requirements.

• Competition

The Indian drone ecosystem is attracting manufacturers, technology companies, service providers, training organisations and established businesses.

The Company may face competition from domestic and international players across manufacturing, services, training, software and technology.

The Company intends to differentiate itself through integrated capabilities, execution experience, technology development, customer relationships and application-specific solutions.

• Imported Components and Supply-Chain Risk

Certain specialised components, sensors, electronics, semiconductors and other drone technologies may be sourced from international markets.

Supply-chain disruptions, geopolitical developments, foreign exchange movements, import restrictions, logistics disruptions and shortages can affect availability and cost.

The Company seeks to mitigate these risks through supplier diversification, inventory planning, localisation and development of alternative technologies wherever commercially feasible.

• Skilled Manpower Risk

The drone industry requires specialised personnel across aviation, electronics, embedded systems, software, AI, GIS, data analytics, manufacturing and operations.

Competition for skilled manpower may increase as the industry expands.

The Companys training capabilities provide an opportunity to develop internal talent and create a broader ecosystem of trained professionals.

• Cybersecurity and Data Privacy

Drone operations increasingly involve the collection, transmission, processing and storage of potentially sensitive information.

Cybersecurity incidents, unauthorised access, data breaches or misuse of drone-generated information may adversely affect customer confidence and operations.

The Company continues to recognise cybersecurity and data protection as important operational priorities.

• Working-Capital and Liquidity Risk

The Companys project-based business model can require working capital for procurement, manufacturing, deployment and execution before corresponding customer collections are received. Management continues to focus on collections, project-level cash-flow planning, cost control and prudent deployment of financial resources.

9.HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Human resources remain a critical component of the Companys ability to execute its technology, manufacturing, training and services businesses.

The Company requires personnel with specialised skills across drone operations, engineering, electronics, software, GIS, data processing, sales, project management, manufacturing and defence applications.

During FY26, the Company undertook measures to align its manpower and operating structure with business requirements and the prevailing scale of operations.

The Company continues to focus on employee capability development, technical training, productivity and efficient deployment of human resources.

Industrial relations during the year remained satisfactory.

10.OUTLOOK

The management remains positive about the medium- to long-term prospects of the Indian drone ecosystem.

The convergence of drones with artificial intelligence, computer vision, geospatial technology, automation, advanced sensors and data analytics is expected to create opportunities across defence, agriculture, infrastructure, mining, energy, utilities, logistics, surveillance and government applications. The Companys strategy is to focus on commercially viable and scalable opportunities across:

• Defence and tactical drones;

• Drone manufacturing and allied equipment;

• Drone-as-a-Service;

• DGCA-approved drone training;

• Infrastructure surveying and inspection;

• Agriculture and precision farming;

• Geospatial mapping;

• Surveillance and reconnaissance;

• AI-enabled drone solutions;

• Drone software and data analytics;

• • Government and institutional projects;

• R&D and product development; and

• International technology and business opportunities.

The Company intends to prioritise opportunities where it can leverage its existing technology, training, manufacturing and execution capabilities while maintaining disciplined financial and operational management.

The managements focus will be on improving revenue quality, strengthening margins, increasing order execution capability, improving working-capital efficiency and building sustainable long-term shareholder value.

11. GOVERNANCE, REGULATORY AND COMPLIANCE ENVIRONMENT

As a listed company operating in the technology and drone sector, DroneAcharya is subject to applicable corporate, securities, aviation, taxation, labour and other regulatory requirements.

The Company continues to monitor developments relating to the Securities and Exchange Board of India ("SEBI"), stock exchange requirements, Directorate General of Civil Aviation ("DGCA") regulations and other applicable authorities.

The Company remains committed to strengthening its governance, disclosure, compliance and internal- control processes as it scales its operations.

12. CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations, estimates, projections or predictions may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations.

These statements are based on certain assumptions and expectations concerning future events and are subject to risks and uncertainties.

Actual results may differ materially from those expressed or implied due to various factors including changes in economic conditions, industry conditions, demand, competition, raw-material and component prices, supply-chain conditions, regulatory developments, government procurement cycles, taxation, interest rates, foreign exchange movements, technological changes and other risks and uncertainties.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of future events or otherwise, except as required under applicable laws and regulations.

13.CONCLUSION

FY26 represented an important year of operational restructuring and strategic consolidation for DroneAcharya.

Although the Company experienced a significant decline in operating revenue during the year, it substantially reduced its cost base and returned to profitability. The Company reported consolidated Profit After Tax of approximately Rs. 0.37 crore compared with a loss of approximately Rs. 13.47 crore in FY25.

The management believes that the Companys expanding capabilities in defence, drone manufacturing, training, aerial and geospatial services, product development and technology integration provide a foundation for future growth.

Going forward, the Company will focus on:

• Strengthening its defence and enterprise business;

• Increasing execution of confirmed orders and business opportunities;

• Developing and commercialising indigenous drone products;

• Expanding manufacturing and technology capabilities;

• Strengthening the DGCA-approved training ecosystem;

• Improving revenue quality and operating margins;

• Enhancing working-capital and cash-flow management;

• Continuing selective investment in R&D and product development; and

• Building strategic domestic and international partnerships.

The management remains committed to strengthening the Companys fundamentals, improving operational efficiency, maintaining appropriate governance and compliance standards, managing liquidity and execution risks prudently, and creating sustainable long-term value for shareholders and other stakeholders.