ITI Ltd Management Discussions

I. Telecom and Electronic Industry Structure

The Telecom industry in India is the second largest in the world with a subscriber base of 1.207 Bn as of May 2025 (wireless + wireline subscribers). India has an overall tele-density of 85.36%, of which the tele-density of the rural market, which is largely untapped, stands at 59.33% while the tele-density of the urban market is 131.76 %. By the end of May 2025, the total number of internet subscribers increased to 974.87 Mn (Narrowband + Broadband subscribers), out of which 44.52% of the internet subscribers belonged to the rural areas. In India, the average monthly data consumption per user is 27.5 GB.

The industryRSs exponential growth over the last few years is primarily driven by affordable tariffs, wider availability, roll-out of Mobile Number Portability (MNP), expanding 4G and 5G coverage, evolving consumption patterns of subscribers, the GovernmentRSs initiatives towards bolstering IndiaRSs domestic telecom manufacturing capacity, and a conducive regulatory environment.

The DoT is targeting a combination of 100% broadband connectivity in the villages, 70% fiberisation of towers, average broadband speeds of 50 Mbps, and 50 Lakh km of optic fibre rollouts at a pan-India level by Dec 2024. Broadband connections rose to 924.07 Mn in Mar 2024 from 61 Mn in Mar 2014, growing by 1414%. As part of this, BharatNet Phase III focuses on enhancing rural broadband infrastructure through last- mile connectivity solutions and technological advancements, aiming to bridge the digital divide in India. This phase prioritizes high-speed internet access in rural areas, targeting over 600,000 villages with fiber- to-the-home (FTTH) and Wi-Fi hotspots, and aims to provide a minimum of 100 Mbps bandwidth. ITI is executing BharatNet Phase-3 Projects in Himachal Pradesh, West Bengal & Andaman & Nicobar Islands, and in the North East states comprising Arunachal Pradesh, Nagaland, and Manipur.

ITI is actively working in the manufacturing of 4G LTE RAN to be deployed for the BSNL network. ITI has dispatched more than 1000 Nos. of 4G eNodeB for BSNL West Zone. ITI is also manufacturing 4G RAN through technology transfer from CDOT. We are also exploring export opportunities for 4G LTE. Indian Railways aims to implement the Kavach (Train Collision Avoidance System) system across 44,000 km in 5 years. ITI is planning to be a part of this system with its in-house manufactured infrastructure systems, like 4G LTE and OFC, etc. Manufacturing of 4G LTE RAN for RDSO is in progress.

The Government has set a target of 280 GW of installed capacity of solar power generation by 2030. In a bid to push IndiaRSs energy transition toward renewable sources, the Union Cabinet has allocated RS19,500 crore under the production link incentive(PLI) programme for domestic manufacture of solar photovoltaic (PV) modules. ITI is planning for the expansion of Solar Module manufacturing units with a capacity from 18 MWP to 500 MWP ITI Naini unit is working with a focused approach to target the requirements of the new Solar Business and to expand market reach and build up the local supply-chain eco-system in India, thus generating more jobs and revenue.

The government has allocated Rs 21.58 billion for optical fibre cable- based network for defence services and Rs 7.16 billion for telecom projects in the northeastern states. Seeing the huge demand for OFC cable from Railways, BharatNet, and Defense projects, and for 5G projects, ITI is planning for the expansion of Optical Fiber Cable Manufacturing capacity to stay competitive in the OFC market.

In spite of best efforts, ITI faced difficulties in delivering some of the products and systems, as per timelines, due to non-receipt of components, modules, assemblies, etc, involving Semiconductor ICs both from Indian and foreign sources, as per the committed delivery timelines. Meetings at the government level are being planned with these chip manufacturers to shorten these logistical delays.

However, ITI is taking necessary actions like alternate sourcing/redesign coordination with Technology partners like C-DOT and proactive sourcing to shorten the procurement cycle time to manage the semiconductor shortage/delays.

ITI manufactured passive items like OFC, HDPE, Smart Racks, and Power Supply Systems. BharOS-powered Routers are also being considered for deployment in NER2. Capability to encapsulate the network hardware through Indigenous Operating System (BharOS) to ensure reliable & secure Networked IT for the nation, must be considered eligible for PLI, despite the hardware could be sourced from anywhere, considering the constraints in the manufacture of components in-house.

II. Opportunities and Threats Opportunities:

With the existing sectors like Telecommunications, Defence Electronics Industrial, Automobile, the advent of disruptive technologies like Electric Vehicles, 5G, Drones, Medical Technology, Agriculture Technology, IoT, Satellite Broadband, Defence, Space, and power electronics, among others, are the market segments for faster innovation. India is evolving as an innovation-driven R&D destination for global companies.

The AatmaNirbhar Bharat Abhiyan of the Government promotes local production and aims to implement a Phased Manufacturing Program for designated product segments in Digital Communication Technologies.

Govt. has allocated Rs 42.03 billion for incentives for Electronic assembly, test, and packaging plants. Specifically, Rs 15 billion is designated for semiconductor fab or electronic chip plants, which could be the potential area of opportunity for ITI. The growth in the EMS market presents an opportunity for Design-led manufacturing, which is given thrust by way of incentivization under schemes like PLI. Public Procurement policy and guidelines for Preference to Make in India will unfold many opportunity areas and boost local manufacturing in the telecom product and service sectors.

In the fields of 4G LTE communications, defence electronics, solar power plants, and medical electronics, there are several business opportunities. To produce diverse electronics and communications devices, ITI has collaborated with a number of start-ups, MSMEs, and reputed technical partners.

5G Global Market is growing and will be of the Order of 2.6 trillion USD by 2026. With the maturing of Solar Films and Battery Technologies, Solar Plants will take over Thermal power plants in the future. Small capacity Power Plants usage in Telecom, specifically for RAN, will keep on increasing. Homegrown Power Supplies and Inverter market are promising businesses for ITI. E and V Band Radio will be used in High- Capacity Backhauls, and will also be a substitute for Optical Fiber cable where it cannot be laid. The approach of executing proof of concept (POC) first and further to go ahead with TOT will result in successful product acquisition for ITI.

The enormous disparity between local demand and local supply in India, which is a result of the countryRSs excessive reliance on imports, is considered a potential to boost the manufacturing index in the electronics hardware and software divisions.

Current opportunities for ITI are the following.

1. GovernmentRSs emphasis on Make-In-India and Atmanirbhar Bharat for the manufacture of Telecom and Electronic equipment.

2. Execution of BharatNet phase-III project to extend high-speed Broadband services to every village across the country.

3. Growing Telecom, Defence, and security needs in the country.

4. Product manufacturing for BSNL 4G RAN and network implementation

5. ASCON Phase-IV project implementation

6. Govt policy towards promotion of alternate energy sources like Solar, Electric Vehicles.

7. Opening up of the Space electronics market for Indian industries.

8. Modernisation of BSNL Railways, Defence networks.

9. Growing market for areas such as Smart City, Energy Storage Products, Data Centre, Network & Cyber Security, Solar-based power plants, Defense market, etc.

10. Govt. PLI scheme and promotion of indigenization.

Threats:

Currently, the Indian electronics industry is characterised by a highly competitive industry wherein rapid technological change renders the huge investment made by OEMs and TSP out of date within a short time span.

The Company has identified the following threats in the changing business environment:

1. Pace of product innovation and competitiveness remains high.

2. Obsolescence of existing network elements and rapidly changing technology.

3. Stringent procedures and compliance, especially being a PSU, make it difficult to compete with smaller private players.

4. Policy interventions favoring the Private Sector

5. Difficulty in sourcing of few critical components and technologies.

6. Increase in competition from Private players and foreign OEMs, including their JVs in the Telecom Sector.

III. Strengths and Weaknesses Strengths:

1. I TI has a decade of experience in Electronic equipment manufacturing and providing telecom turnkey solutions for the creation of a national network.

2. State-of-the-art infrastructure for manufacturing for a complete range of telecom/ electronic products.

3. Strong in-house R&D with skilled workforce and strong domain knowledge.

4. Experience in deploying and maintaining strategic telecom network infrastructure for the Defence establishment on a turnkey basis.

5. Capacity for end-to-end execution of Mega projects like BharatNet, ASCON, and various state and central Govt projects.

6. Cybersecurity infrastructure (SOC) to provide various IT security services from ITI Tier-3 Data Centre.

7. Telecom testing labs for telecom equipment testing under the Department of TelecommunicationsRS Mandatory Testing and Certification of Telecom Equipment (MTCTE) rules.

8. Pan-India presence (6 Manufacturing Plants at Bengaluru, Palakkad, Rae Bareli, Mankapur, Naini, and Srinagar) as well strong marketing presence through countrywide 8 RO offices at Bengaluru, Chennai, Hyderabad, Delhi, Mumbai, Kolkata, Lucknow, Bhubaneswar, and many associated Area offices.

9. Capacity augmentation for indigenous manufacturing of 4G RAN.

10. In-house project execution capabilities to work in the most challenging terrains across India.

11. Wide product range with a strong Product Marketing Team

12. Loyal customer base / strong relationship

Weakness:

1. Lower project margins due to stiff competition in the market.

2. Low working capital for manufacturing and project execution.

3. Long cycle time of component procurement

4. Fewer Intellectual Property (IP) acts as a barrier to growth.

5. High working capital requirement due to a change in Business Model to DBOM (Design, Build, Operate and Maintain) / Deferred payment

IV. Future Outlook

Order book of ITI is about Rs. 16,180 Cr, including Advanced Purchase Order as on 31.03.2025. ITI is focusing on manufacturing in a big way and plans to take up turnkey projects as a System Integ rator (SI) to increase the value addition. ITI is executing a defence order for Phase IV of the Army Static Switched Communication network (ASCON) project. To be part of nation building, ITI has completed the Order from BSNL for Planning, Engineering, Supply, Installation, & Commissioning and AMC of 4G Mobile Network for 23,633 Sites in the West Zone of the BSNL Network. ITI has received an additional order of Rs 1142 Cr for RAN manufacturing from BSNL.

We will closely work with C-DOT, research, premier academic institutions, and progressive technology partners for developing new products and systems in emerging technologies.

The company is now manufacturing several new telecom products, including 4G RAN, G-PON, OFC, HDPE Duct, Laptops, Personal Computers, and Solar panel products. The company is working on the development of new products like Electronic Voting machine (EVM) & Voter Verifiable Paper Audit Trail (VVPAT), Digital Mobile Radio (DMR), Compact TESD (Terminal End Secrecy Device), and Software Defined Radios. ITI has won contracts of BharatNet projects like Himachal Pradesh, West Bengal & Andaman & Nicobar, Arunachal Pradesh, Nagaland, and Manipur. In addition, major focus has been given by the company to the manufacturing of encrypted telecommunication equipment required for the Defence sector. Products like Smart Energy Meters, Unlicensed band Radio(UBR), High Capacity Radio relay(HCRR) and Captive 4G/ 5G Network Systems, Solar Products like Solar Street Light, Solar Plants including Solar Inverters & Smart Poles, and Leak Tester are being considered for manufacturing this year.

The company is planning to enter into the manufacturing of new products like monocrystalline solar cells, SDWAN, EVM, and contract manufacturing will remain the focus areas.

ITI is continuously pursuing opportunities to expand business by capturing new customers in the existing and new geographies. We will pursue and focus on business models like OPEX, Service model, and Government-owned company-operated (GOCO) to increase our revenue margins. Currently, our presence in international geographies is less, but we will focus our strategy on creating marketing offices to increase business opportunities in South East Asia, the Middle East, and Africa by collaborating with other Indian companies and local partners.

While opportunities are many, we also anticipate challenges due to competition, geopolitical situations, changing policies and regulatory landscapes, emerging new technologies, and evolving customer expectations. We will remain focused on increasing our business and accepting new challenging assignments in the future.

V. Risk Management:

The Enterprise Risk Management (ERM) framework implemented as part of Governance, Risk Management and Compliance (GRC) in the Company is based on global best practices in Risk Management as covered by ISO 31000:2018 and IEC 31010:2019 and has enabled the Company to fully integrate the Risk Management into its normal business operations.

The CompanyRSs ERM policy framework is a structured process that involves:

?€? Identifying all external and internal risk-factors.

?€? Assessing the impact of these risks on the organizationRSs business and financial targets.

?€? Prioritizing the identified risk-factors.

?€? Exploring various alternatives for treating these risks.

?€? Implementing controls and monitoring mechanisms for managing the risks.

ERM is an ongoing and dynamic process that requires iteration and adaptation to changing circumstances. The CompanyRSs ERM Manual is a well-structured framework having four layers of governance teamRSs i.e.

?€? Level-1: URMC (Unit Level Risk Management Committee)

?€? Level-2: ERMSC (ERM Steering Committee)

?€? Level-3: ERMGC (Enterprise Risk Management Governing Committee) or RMC (Risk Management Committee)

?€? Level-4: Risk Management Committee at Board Level.

These Committees are responsible to monitor the policy implementation across all the Units by following approved ERM Process, ERM Governance Structure, Roles and Responsibilities of the relevant stakeholders, formation of Risk Registers, provide their continuous contribution to operation of ERM in all the Units of Company.

The establishment and maintenance of the ERM framework is facilitating effective decision making process at different levels of the Company. The Risk Register maintained by the Company includes standalone risks identified for the Corporate as well as any significant risks from the Units that merit attention of the Corporate, which will be regularly be presented and reviewed by the Task Force Committee.

All the Units submit and update ERM Risk Register to the ERM Steering Committee (ERMSC). As part of the policy operation ERMSC have conducted monthly risk management review meetings on 08 th April 2024, 14 th May 2024, 18 th June 2024, 16 th July 2024, 20 th August 2024, 24 th September 2024, 22 nd October 2024, 19 th November 2024, 24 th December 2024, 21 st January 2025, 25 th February 2025 and 19 th March 2025 with all the Units (URMSC). In the Risk Management Committee Meeting held on 9 th August 2024, the high-priority risks and mitigation plans proposed were reviewed.

As framed in the ERM Manual, Risk Management activities will be carried out on an ongoing basis as part of the routine business operations.

VI. Human Resources

As on 31 st March 2025, your Company had a total employee strength of 1368 as compared to 1676 at the end of the previous year. The detailed information on material developments in Human Resources/ Industrial front is given in DirectorsRS Report.

VII. Internal Control Measures

The CompanyRSs internal control systems are commensurate with the nature of its business, the size, and complexity of its operations. Internal Audit Department of the company at Corporate office and Units, reviews compliance with the CompanyRSs procedures & policies. The department coordinates with the Unit/Divisions of the Company for ensuring coverage of all major areas of operations and such internal financial controls with reference to Financial Statements are adequate.

VIII. Financial Performance

Your Company has achieved a sales turnover of Rs. 4323 crore for the year ended 31 st March 2025, as compared to Rs 1628 crore in the previous year. The detailed information on financial performance with respect to operational performance is given in DirectorsRS Report.

IX. Details of Significant changes in Key Financial Ratios

Sl. No	Particulars	FY 2024-25	FY 2023-24	Reasons for variation
1	Debtors Turnover	1.08	0.49	Due to faster collection from customers and better control over receivables
2	Inventory Turnover	16.26	6.50	Due to higher sales and efficient stock management
3	Interest coverage ratio	1.08	2.17	Due to increase in interest cost
4	Current Ratio	0.88	0.88	NA
5	Debt Equity ratio	0.94	1.03	Due to repay of borrowings and increase in operating profit
6	Operating Profit Margin (%)	-0.78%	-25.00%	Due to increase in contribution/margin
7	Net Profit Margin (%)	-6.45%	-45.03%	Due to increase in revenue and contribution/margin

Details of any change in Net Profit Margin as compared to the immediately previous financial year along with a detailed explanation thereof.

There is significant change in the Net Loss as compared to the immediately preceding financial year, the ratio for Net Profit Margin has significantly improved in the FY 2024-25.

X. Environmental Protection and Conservation:

The CompanyRSs Units are spread across the Country at different locations viz. Bengaluru, Mankapur, Rae Bareli, Naini, Palakkad and Srinagar. Environment Protection & Management of the Units is governed by various Acts & Rules like The Environment (Protection) Act, 1986, The Air (Prevention and Control of Pollution) Act, 1981, The Water (Prevention and Control of Pollution) Act, 1974, Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2016, The Solid Wastes Management Rules, 2016, etc. All the Units comply with the applicable Acts and Rules.

XI. Technological conservation, Renewable energy developments,

Foreign Exchange conservation:

Relevant information in this regard is disclosed in the DirectorsRS Report.

XII. Cautionary Statement

Statements made in the Management Discussion and Analysis about your CompanyRSs objectives, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the CompanyRSs performance include economic conditions affecting demand/supply and price conditions in the domestic market in which your Company operates, changes in Government regulations, tax laws, statutes and other incidental/related matters.

For and on behalf of Board

Place: Bengaluru	Rajesh Rai Chairman and Managing Director
Date : 13 th August 2025	DIN:10052045