Merritronix Ltd Management Discussions

You should read the following discussion and analysis of financial condition and results of operations together with our financial statements included in this Red Herring Prospectus. The following discussion relates to our Company and is based on our restated financial statements. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards and other applicable provisions of the Companies Act.

Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be "Forward looking statement" 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 our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factor.

BUSINESS OVERVIEW

We operate in the Electronic Systems Design and Manufacturing (ESDM) sector and are primarily engaged in electronic manufacturing services, including PCB assembly, system integration, testing, box-build solutions and delivery of finished electronic products. Our operations also include component sourcing and supply chain management for electronic and electromechanical components. While manufacturing and system integration constitute the core of our operations, we also support our clients in product design and development activities, including circuit and PCB layout support.

This integrated manufacturing and design support capability enables us to serve industries that require reliable and performance- oriented electronic systems. A key part of our manufacturing process is Surface-Mount Technology ("SMT"), which involves assembling electronic components directly onto the surface of printed circuit boards (PCBs) using automated placement systems and controlled reflow processes. Our SMT capabilities include the assembly of advanced packaging technologies such as Ball Grid Array (BGA) and micro-BGA components, commonly used in high-performance and miniaturized electronic systems. our manufacturing facility has an installed capacity of 7,65,000 boards per annum for SMT assembly, 6,00,000 boards per annum for Through-Hole Technology (THT) assembly, and 4,20,000 units per annum for product assembly/box build, aggregating to a total installed capacity of 17,85,000 production units per annum.

Our SMT capabilities support the use of advanced and miniaturized components required in defence, aerospace and industrial electronic systems. The largely automated nature of the SMT process — including solder paste printing, automated component placement and controlled reflow soldering — enables consistent quality and precision.

We have consistently grown in terms of our revenues over the past years our revenues from operation were t8,569.91 lakhs in F.Y.2023-24, t 11,356.38 lakhs in the FY 2024-25 and t 15,589.56 lakhs in FY 2025-26. Our Net Profit after tax for the above- mentioned periods are, t305.03 lakhs, t 865.95 lakhs and 1,610.30 lakhs respectively.

Justification for Increase in increase in Revenue from Operations, Profit After Tax (PAT), and EBITDA margins Revenue from Operations:

The Companys Revenue from Operations has increased significantly from t5,317.38 lakhs in Fiscal 2023 to t11,356.38 lakhs in Fiscal 2025. This growth is primarily driven by a shift in revenue mix towards the Aerospace & Defence segment, whose contribution increased from 52.94% in Fiscal 2023 to 88.50% in Fiscal 2025, which is a higher-margin segment with better realizations. The increase is further supported by a rise in turnkey projects and complex defence assemblies, which command higher value addition compared to standalone component supply. Additionally, the Company has benefited from a strong base of repeat customers, contributing approximately 80% to 94% of total customers across the period, ensuring revenue visibility and business stability. The execution of larger and higher-value orders has also contributed to the overall increase in revenue.

EBITDA and Profit After Tax (PAT):

The improvement in EBITDA margins from 3.35% in Fiscal 2023 to 13.31% in Fiscal 2025, along with the increase in PAT from t41.91 lakhs in Fiscal 2023 to t865.95 lakhs in Fiscal 2025, is primarily attributable to operating leverage and improved cos t efficiencies. The Companys fixed and semi-fixed cost base, including employee benefits, finance costs, depreciation and administrative overheads, has remained relatively stable in absolute terms across the period, as detailed in Annexures II.6, II.7 and II.8 of the Restated Financial Statements. As revenues scaled up, these costs were absorbed over a larger base, resulting in margin expansion. Further, material costs as a percentage of revenue declined due to improved procurement efficiencies and a shift towards higher value-added turnkey projects and job work services, particularly in defence assemblies, which carry structurally higher margins. These factors collectively led to a significant improvement in EBITDA margins and consequently higher profitability.

FINANCIAL KPIs OF THE COMPANY

(Amount in Lakhs, % and ratios)

Particulars	Merritronix LTD.
	Fiscal 2026	Fiscal 2025	Fiscal 2024
Revenue from Operations (Rs. in Lakhs) (1)	15,589.56	11,356.38	8,569.91
Growth in Revenue from Operations (%)	37.28%	32.51%	61.17%
Total income (2)	15,624.83	11,404.00	8,601.33
EBITDA (Rs. in Lakhs) (3)	2,721.68	1,518.11	672.64
EBITDA Margin (%) (4)	17.42%	13.31%	7.82%
Profit After Tax (Rs. in Lakhs) (5)	1,610.30	865.95	305.03
PAT Margin (%)(6)	10.33%	7.63%	3.56%
Net worth (7)	5,252.28	1,623.47	757.52
Return on Equity ("RoE") (%) (8)	46.03%	69.21%	44.22%
Return on Capital Employed ("RoCE") (%) (9)	45.26%	66.21%	43.13%
Net Asset Value Per Share (Post bonus and subdivision of shares) (Rs.) (10)	41.56	15.46	7.51
Debt- Equity Ratio (11)	0.81	1.10	1.93

Notes:

(1 Revenue from operations represents the revenue from sale of service & product & other operating revenue of our Company as recognized in the Restated financial information.

(2 Total income includes revenue from operations and other income.

(3 EBITDA means Earnings before interest, taxes, depreciation and amortization expense, which has been arrived at by obtaining the profit before tax/ (loss) for the year /period and adding back interest cost, depreciation, and amortization expense.

(4 EBITDA margin is calculated as EBITDA as a percentage of total income.

(5) Restated profit for the period /year margin is calculated as total income less total expenses.

(6) PAT Margin (%) is calculated as Profit for the year/period as a percentage of Revenue from Operations.

(7 Net worth means aggregate value of the paid-up equity share capital and reserves & surplus.

(8) RoE is calculated as Net profit after tax divided by Average Equity.

(9) Return on capital employed calculated as Earnings before interest and taxes divided by capital employed as at the end of respective period/year. (Capital employed calculated as the aggregate value of tangible net worth, total debt and deferred tax liabilities)

(10 NAV per share is computed as the Total Equity divided by the outstanding number of equity shares.

(II> Debt- equity ratio is calculated by dividing total debt by total equity. Total debt represents long-term and short-term borrowings. Total equity is the sum of share capital and reserves & surplus.

FACTORS AFFECTING OUR RESULT OF OPERATIONS

Except as otherwise stated in this Red Herring Prospectus and the Risk Factors given in the Red Herring Prospectus, the following important factors could cause actual results to differ materially from the expectations include, among others:

1. Our business model as a B2B EMS provider with limited brand recognition may restrict our pricing power, customer diversification and growth prospects.

2. We may not qualify for or win bids to further expand our business in future, which may have an adverse effect on our business, financial condition, results of operations and prospects

3. We typically do not obtain long-term commitments from our customers and they may cancel or change their production requirements. Such cancellations or changes may adversely affect our financial condition, cash flows and results of operations.

4. We are subject to strict quality requirements, customer inspections and audits, and any failure to comply with quality standards may lead to cancellation of existing and future orders and could negatively impact our reputation and our business and results of operations and future prospects.

5. Increases in the prices of raw materials required for our operations could adversely affect our business and results of operations

6. Our Order Book may not be representative of our future results and our actual income may be significantly less than the estimates reflected in our Order Book, which could adversely affect our results of operations.

7. We have significant working capital requirements. If we experience insufficient cash flows from our operations or are unable to borrow to meet our working capital requirements, it may materially and adversely affect our business, cash flows and results of operations.

8. An inability to comply with repayment and other covenants in the financing agreements or otherwise meet our debt servicing obligations could adversely affect our business, financial condition, cash flows and credit rating.

9. The majority of our product sales and services is concentrated in the region of Telangana. For the Fiscal 2026, 2025and 2024 our revenue from sale of products and services in Telangana accounted for 98.19%, 95.63% and 88.85% of our revenue from operations, respectively any adverse developments affecting our sales in these regions could have an adverse impact on our business, financial condition, results of operations and cash flows.

10. Our Company has not adequately complied with some of the provisions of Companies Act, 2013. Any penalty or action taken by any regulatory authorities in future, for noncompliance with provisions of corporate and other law could impact the reputation and financial position of the Company to that extent.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING AND PREPARATION OF RESTATED FINANCIAL STATEMENTS

The restated summary statement of assets and liabilities of the Company as year ended March 31, 2026, March 31, 2025 and March 31, 2024 and the related restated summary statement of profits and loss and cash flows for the year ended March 31, 2026, March 31, 2025 and March 31, 2024 (herein collectively referred to as ("Restated Summary Statements") have been compiled by the management from the audited Financial Statements of the Company for the year ended March 31, 2026, March 31, 2025 and March 31, 2024 approved by the Board of Directors of the Company. Restated Summary Statements have been prepared to comply in all material respects with the provisions of Part I of Chapter III of the Companies Act, 2013 (the "Act") read with Companies (Prospectus and Allotment of Securities) Rules, 2014, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("ICDR Regulations") issued by SEBI and Guidance note on Reports in Companies Prospectuses (Revised 2019) ("Guidance Note"). Restated Summary Statements have been prepared specifically for inclusion in the offer document to be filed by the Company with the BSE in connection with its proposed SME IPO. The Companys management has recast the Financial Statements in the form required by Schedule III of the Companies Act, 2013 for the purpose of restated Summary Statements.

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"), as applicable. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

Accounting policies not specifically referred to otherwise are consistent and in consonance with generally accepted accounting principles in India.

All assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has determined its operating cycle as twelve months for the purpose of current - non-current classification of assets and liabilities.

USE OF ESTIMATES

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.

CURRENT & NON-CURRENT CLASSIFICATION

All assets and liabilities are classified into current and non-current.

Assets:

An asset is classified as current when it satisfies any of the following criteria:

a) It is expected to be realised in, or is intended for sale or consumption in, the Companys normal operating cycle;

b) It is held primarily for the purpose of being traded;

c) It is expected to be realised within 12 months after the reporting date; or

d) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date

Current assets include the current portion of non-current financial assets. All other assets are classified as non-current."

Liabilities:

A liability is classified as current when it satisfies any of the following criteria:

a) It is expected to be settled in the Companys normal operating cycle;

b) It is held primarily for the purpose of being traded;

c) It is due to be settled within 12 months after the reporting date; or

d) The Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current."

OPERATING CYCLE

All assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out above which are in accordance with the Schedule III to the Act. Based on the nature of services and the time between the acquisition of assets for providing of services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current & non-current classification of assets and liabilities.

PROPERTY, PLANT & EQUIPMENT AND INTANGIBLE ASSETS

(i) Property, Plant & Equipment

All Property, Plant & Equipment are recorded at cost including taxes, duties, freight and other incidental expenses incurred in relation to their acquisition and bringing the asset to its intended use.

(ii) Intangible Assets

Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. DEPRECIATION / AMORTISATION

Depreciation on property, plant and equipment is calculated on a Straight-line method using the rates arrived at based on the useful lives estimated by the management, or those prescribed under the Schedule II to the Companies Act, 2013.

Intangible assets are amortized on straight line method basis over 5 years in pursuance of provisions of AS-26.

INVENTORIES

Inventories comprise of Raw Material, Work-in-Progress, Finished goods and stock-in-trade. Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in, first-out principle. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. For the purpose of Work-in-progress and Finished Goods, cost of inventory includes raw material cost (net of recoverable taxes), direct cost of conversion and proportionate allocation of indirect costs incurred in bringing the inventories to their present location and condition.

IMPAIRMENT OF ASSETS

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is the higher of an assets net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arms length transaction between knowledgeable, willing parties, less the costs of disposal. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable value.

GOVERNMENT GRANT AND SUBSIDIES

"Grants and subsidies from the government are recognized when there is reasonable assurance that:

i. The Company will comply with the conditions attached to them, and

ii. The grant / subsidy will be received."

The company is entitled to Capital Subsidy on the basis of Industrial Development Policy (IDP) 2010-2015, by the Government of Andhra Pradesh. Such Government grants is in the nature of promoters contribution, which are given with reference to the tot al investment in the undertaking or by way of contribution towards its total capital outlay and for which no repayment is ordinarily expected, are treated as capital receipts in accordance with Accounting Standard 12 on "Accounting for Government Grants". Su ch grants are credited to Capital Reserve under "Reserves and Surplus" in the Balance Sheet. These grants are neither recognized in the Statement of Profit and Loss nor deducted from the carrying amount of the related assets.

CHIT FUND DEPOSITS

The Company participates in chit fund schemes operated by registered chit fund companies. Subscriptions paid towards such schemes are recognized as Chit Fund Deposits under Loans and Advances. On successful bidding of the chit, the difference between the chit value and the amount received (discount foregone) is treated as finance cost and amortized over the remaining tenure of the chit scheme. Dividends or discounts distributed by the chit fund are recognized as income in the Statement of Profit and Loss on accrual basis. Future subscriptions payable after the chit is prized are recognized as liability towards chit fund subscriptions and

settled over the remaining tenure of the scheme. The carrying value of chit fund deposits is reviewed at each reporting date for impairment, if any.

FOREIGN CURRENCY TRANSLATIONS

Income and expense in foreign currencies are converted at exchange rates prevailing on the date of the transaction. Any income or expense on account of exchange difference either on settlement or on translation at the balance sheet date is recognized in Profit & Loss Account in the year in which it arises.

BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized in Statement of Profit and Loss in the period in which they are incurred.

PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provision involving substantial degree of estimation in measurement is recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements.

REVENUE RECOGNITION

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Sales are recognized on transfer of significant risk and ownership which generally coincide with the dispatch of the goods.

Revenue from services is recognized proportionately by reference to the performance of each act. Revenue is only recognized when it can be reasonably measurable and at the time of rendering of the services it would not be unreasonable to expect ultimate collection.

OTHER INCOME

Interest Income on fixed deposit is recognized on time proportion basis. Other Income is accounted for when right to receive such income is established.

TAXES ON INCOME

"Income taxes are accounted for in accordance with Accounting Standard (AS-22) - "Accounting for taxes on income", notified under Companies (Accounting Standard) Rules, 2021. Income tax comprises of both current and deferred tax.

Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961."

The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.

Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.

CASH AND BANK BALANCES

Cash and cash equivalents comprises Cash-in-hand, Current Accounts, Fixed Deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. Other Bank Balances are short-term balance (with original maturity is more than three months but less than twelve months).

EARNINGS PER SHARE

Basic earnings per share is computed by dividing the profit/ (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity share outstanding during the year. Diluted earnings per share is computed by dividing the profit/ (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other

charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

EMPLOYEE BENEFITS

Defined Contribution Plan:

Contributions payable to the recognized provident fund, which is a defined contribution scheme, are charged to the statement of profit and loss.

Defined Benefit Plan:

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service without any monetary limit. Vesting occurs upon completion of five years of service. Provision for gratuity has been made in the books as per actuarial valuation done as at the end of the year/ period.

SEGMENT REPORTING

The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment.

Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities.

RESULTS OF OUR OPERATIONS

Based on Financial Statements of Profit & Loss as Restated

(Amount Rs. in lakhs)

Particulars	For the year ended March 31, 2026	% of Total**	For the year ended March 31, 2025	% of Total**	For the year ended March 31, 2024	% of Total**
INCOME
Revenue from Operations	15,589.56	99.77%	11,356.38	99.58%	8,569.91	99.63%
Other Income	35.27	0.23%	47.62	0.42%	31.42	0.37%
Total Revenue (A)	15,624.83	100.00%	11,404.00	100.00%	8,601.33	100.00%
EXPENDITURE
Cost of Materials Consumed	13,178.21	84.34%	9,121.53	79.99%	8,659.26	100.67%
Purchase of Stock-in-Trade	101.38	0.65%	757.62	6.64%	582.94	6.78%
Changes in Inventories of Work-In-Progress & Finished Goods	(1,021.82)	(6.54%)	(610.86)	(5.36%)	(1,750.81)	(20.36%)
Employee Benefits Expenses	234.47	1.50%	170.51	1.50%	172.08	2.00%
Finance Costs	408.15	2.61%	282.63	2.48%	218.28	2.54%
Depreciation & Amortisation Expenses	47.18	0.30%	39.37	0.35%	40.67	0.47%
Other Expenses	375.27	2.40%	403.55	3.54%	249.69	2.90%
Total Expenses (B)	13,322.84	85.27%	10,164.35	89.13%	8,172.11	95.01%
Profit before tax (A-B)	2,301.99	14.73%	1,239.65	10.87%	429.22	4.99%
Tax Expense/ (benefit)
(a) Current Tax Expense	690.17	4.42%	379.06	3.32%	122.60	1.43%
(b) Deferred Tax	1.52	0.01%	(5.36)	(0.05%)	1.59	0.02%
Net tax expense / (benefit)	691.69	4.43%	373.70	3.28%	124.19	1.44%
Profit/(Loss) for the year/Period	1,610.30	10.31%	865.95	7.59%	305.03	3.55%

**Total refers to Total Revenue

Components of our Profit and Loss Account Income

Our total income comprises of revenue from operations and other income.

Revenue from Operation

The Revenue from operations as a percentage of our total income was 99.77%,99.58% and 99.63% for the Financial Years ended March 31, 2026, March 31, 2025 and March 31, 2024 respectively .

(Amount Rs. in Lakhs)

Particulars	Year ended
	31/03/2026	31/03/2025	31/03/2024
Sale of Goods		11,131.78	8,339.16
- Domestic Sales	15,336.09	11,004.76	8,229.58
- Export Sales	44.60	127.02	109.58
Sale of Services		224.60	230.75
- Domestic	196.13	224.60	230.75
- Export	12.74	-	-
Total	15,589.56	11,356.38	8,569.91

Other Income

Our other Income consists of Interest on Deposits, Gain on Foreign Exchange Fluctuation, Discount received, Interest income on advances, Dividend on Chit fund, Sundry Balances written back and Rental income.

(Amount Rs. in Lakhs)

Particulars	Year ended
	31/03/2026	31/03/2025	31/03/2024
Recurring in nature and not related to business:
Interest Income on fixed deposit	10.84	10.37	8.30
Interest income on advances	-	18.59	-
Non-recurring and not related to business:
Unpaid Bonus write back	-	2.23	-
Dividend on Chit funds	4.76	7.51	17.06
Miscellaneous Income	-	0.16	-
Non-recurring and related to business:
Gain on Foreign Exchange Fluctuation	17.75	7.79	6.04
Sundry Balances written back	1.42	0.94	-
Discount/Round off	0.50	0.03	0.02
Total	35.27	47.62	31.42

Expenditure

Our total expenditure primarily consists of Cost of material consumed, Purchase of stock in trade, Employee benefit expenses, finance costs, Depreciation and Other Expenses.

Cost of material consumed

Our cost of material consumed primarily comprises raw materials required for our operations. It includes the value of opening stock at the beginning of the period, net purchases made during the year, and is adjusted for the closing stock at the end of the period.

Employee Benefit Expenses

Our employee benefits expense comprises of Salaries and wages, Staff Welfare, Directors Remuneration, Gratuity, Employers Contribution towards Provident fund & ESIC.

Finance costs

Our Finance cost expenses comprise of Interest Expenses, bank and Loan processing charges, Interest on delayed payment of taxes, MSME interest and Discount on chit funs scheme.

Other Expenses

Our other expenses primarily comprise of Direct Manufacturing expenses, Auditors remuneration, Travelling & Conveyance, Professional and Consultancy Charges, Repairs & maintenance, Sales Commission and Rates & Taxes etc.

(Amount Rs. in Lakhs)

Particulars	Year ended
	31/03/2026	31/03/2025	31/03/2024
Direct Manufacturing Expenses
Testing & Inspection fees	1.32	4.08	3.26
Power & fuel	41.76	40.20	26.04
Labour Charges	81.96	68.65	59.63
Machinery repairs & maintenance	14.03	14.07	5.65
Job- Work	-	30.78	1.49
Freight & Cartage	13.82	6.53	8.36
Custom clearing charges	7.10	0.65	1.39
Total of Direct Manufacturing Expenses (a)	159.99	164.96	105.82
Administrative & Other Expenses
Auditors Remuneration:		-	-
- Statutory Audit	1.25	1.00	0.75
- Tax Audit	0.75	0.50	0.25
Sales Promotion & Advertisement Expenditure	-	12.40	12.91
Travelling and Conveyance	18.97	15.06	60.50
Donations	0.20	-	0.25
CSR Expenditure	12.03	-	-
Freight Charges-Outward	13.20	9.08	6.39
Loss on Foreign Exchange Fluctuation	16.83	0.65	1.60
Insurance charges	7.13	2.80	2.73
Professional and Consultancy Charges	22.32	39.83	1.86
Miscellaneous expenses	6.87	2.43	3.35
Postage, Telephone & Communication	3.40	5.47	3.99
Printing & stationery	8.07	5.42	9.91
Late Delivery Charges	12.64	-	4.82
Lease Rent	0.74	0.71	0.68
Rates & Taxes	27.93	16.85	5.76
Repairs & maintenance	45.44	11.64	18.12
Sales Commission	-	101.58	-
Subscription & membership	3.34	2.50	0.30
Security expenses	14.17	10.67	9.70
Total of Administrative & Other Expenses (b)	215.28	238.59	143.87
Total Other Expenses (a) + (b)	375.27	403.55	249.69

Provision for Tax

The provision for current taxation is computed in accordance with relevant tax regulation. Deferred tax is recognized on timing differences between the accounting and the taxable income for the year and quantified using the tax rates and laws enacted or subsequently enacted as on balance sheet date. Deferred tax assets are recognized and carried forward to the extent that there is a virtual certainly that sufficient future taxable income will be available against which such deferred tax assets can be realized in future.

Fiscal 2026 compared with fiscal 2025

Revenue from Operations

The Revenue from Operations of our company for fiscal year 2026 was Rs. 15,589.56 Lakhs against Rs. 11,356.38 Lakhs for Fiscal year 2025. An increase of 37.28% in revenue from operations. This increase was due to orders received from Top 2 customers pertaining to aerospace defence sector and additions of some new customers into the pipeline.

Other Income

The other income of our company for fiscal year 2026 was Rs. 35.27 Lakhs against Rs. 47.62 for Fiscal year 2025. The decrease of 25.93% in other income. This decrease was due to interest on advances received in fiscal year 2025 but in fiscal 2026 there was no such advances, hence there has been no interest income except for fixed deposit interest.

Total Income

The total income of the company for fiscal year 2026 was Rs. 15,624.83 Lakhs against Rs. 11,404.00 Lakhs of total income for Fiscal year 2025 with an increase of 37.01% in total income. This increase was due to orders received from Top 2 customers and additions of some new customers into the pipeline and interest on advances received in fiscal year 2025 but in fiscal 2026 there was no such advances, hence there has been no interest income except for fixed deposit interest.

Expenditure

Cost of material consumed

In Fiscal 2026, cost of material consumed were Rs. 13,178.21 Lakhs against Rs. 9,121.53 Lakhs of Cost of material consumed in fiscal 2025. An increase of 44.47%. This increase was due to increase in revenues for which purchases were made.

Purchase of Stock-In-Trade

In Fiscal 2026, Purchase of Stock-in-Trade of our company was Rs. 101.38 Lakhs against Rs. 757.62 Lakhs of Purchase Stock-in-Trade in fiscal 2025. The decrease of 86.62%. This decrease was due lower margins in trading activities and the Companys strategic shift from trading operations towards manufacturing activities during the year.

Employee Benefit Expenses

In Fiscal 2026, the Company incurred employee benefit expenses of Rs. 234.47 Lakhs against Rs. 170.51 Lakhs expenses in fiscal 2025. An increase of 37.51%. An increase was due to expansion of the workforce, annual salary increments, and additional manpower requirements arising from the growth in manufacturing and operational activities during the year.

Finance Costs

The finance costs for the Fiscal 2026 were Rs. 408.15 Lakhs while it was Rs. 282.63 Lakhs for Fiscal 2025. An increase of 44.41%. This increase was due to higher utilisation of working capital limits and additional term loans availed from financial institutions to support the Companys business expansion and operational requirements during the year.

Other Expenses

In fiscal 2026, our other expenses were Rs. 375.27 Lakhs and Rs. 403.55 Lakhs in fiscal 2025.The decrease of 7.01%. This decrease was due to non-incurrence of sales commission expenses during the current year as compared to the previous year.

Profit/ (Loss) before Tax

Our Company had reported a profit before tax for the Fiscal 2026 of Rs. 2,301.99 Lakhs against profit before tax of Rs. 1,239.65 Lakhs in Fiscal 2025. An increase of 85.70% was due to higher revenue from operations, improved operational efficiency, better product mix, and increased contribution from manufacturing activities during the year.

Profit/ (Loss) after Tax

Profit after tax for the Fiscal 2026 were at Rs. 1,610.30 Lakhs against profit after tax of Rs. 865.95 Lakhs in fiscal 2025, An Increase of 85.96%increase was due to higher revenue from operations, improved operational efficiency, better product mix, and increased contribution from manufacturing activities during the year.

Fiscal 2025 compared with fiscal 2024

Revenue from Operations

The Revenue from Operations of our company for fiscal year 2025 was Rs. 11,356.38 Lakhs against Rs. 8,569.91 Lakhs for Fiscal yea r 2024. An increase of 32.51% in revenue from operations. This increase was due to aggressive orders received from customer in aerospace and defence sector as compared to last year.

Other Income

The other income of our company for fiscal year 2025 was Rs. 47.62 Lakhs against Rs. 31.42 for Fiscal year 2024. The increase of 51.56% in other income. This increase was due to interest income received on advances given to directors.

Total Income

The total income of the company for fiscal year 2025 was Rs. 11,404.00 Lakhs against Rs. 8,601.33 Lakhs of total income for Fiscal year 2024 with an increase of 32.58% in total income. This increase was due to aggressive orders received from customer in aerospace and defence sector as compared to last year and interest income received on advances given to directors.

Expenditure

Cost of material consumed

In Fiscal 2025, cost of material consumed were Rs. 9,121.53 Lakhs against Rs. 8,659.26 Lakhs of Cost of material consumed in fisc al 2024. An increase of 5.34%. This increase was due to fulfillment of orders received from customer in aerospace and defence sector.

Purchase of Stock-In-Trade

In Fiscal 2025, Purchase of Stock-in-Trade of our company was Rs. 757.62 Lakhs against Rs. 582.94 Lakhs of Purchase Stock-in-Trade in fiscal 2024. An increase of 29.97%. This increase was due to increase in turnover and to fulfillment of orders received from customers.

Employee Benefit Expenses

In Fiscal 2025, the Company incurred employee benefit expenses of Rs. 170.51 Lakhs against Rs. 172.08 Lakhs expenses in fiscal 2024. A decrease of 0.91%. This decrease was due to decrease in gratuity provision.

Finance Costs

The finance costs for the Fiscal 2025 were Rs. 282.63 Lakhs while it was Rs. 218.28 Lakhs for Fiscal 2024. An increase of 29.48%. This increase was due to increase in working capital requirement and increase in working capital loan from CSB Bank from Rs.12Crore to Rs.18Crore.

Other Expenses

In fiscal 2025, our other expenses were Rs. 403.55 Lakhs and Rs. 249.69 Lakhs in fiscal 2024. An increase of 61.62%. This increas e was due to the company had incurred sales commission expenditure of Rs.101.58Lacs to get the orders from customers and also the company had incurred professional charges of Rs.39.83Lacs from IPO consultancy and advisory.

Profit/ (Loss) before Tax

Our Company had reported a profit before tax for the Fiscal 2025 of Rs. 1239.65 Lakhs against profit before tax of Rs. 429.22 Lak hs in Fiscal 2024. An increase of 188.81%. This increase was due to increase in turnover and gross profit margin as compared to last year.

Profit/ (Loss) after Tax

Profit after tax for the Fiscal 2025 were at Rs. 865.95 Lakhs against profit after tax of Rs. 305.03 Lakhs in fiscal 2024, An Inc rease of 183.89%. This increase was due to increase was due to increase in turnover and gross profit margin as compared to last year.

Cash Flows

(Amount Rs. in Lakhs)

Particulars	For the year ended March 31, 2026	For the year ended March 31, 2025	For the year ended March 31, 2024
Net Cash Flow from/ (used in) Operating Activities	(2,338.21)	(664.33)	453.24
Net Cash Flow from/ (used in) Investing Activities	(258.54)	447.94	(223.09)
Net Cash Flow from/ (used in) Financing Activities	4,114.73	74.15	27.48

Cash Flows from Operating Activities

1. For the year ended march 31, 2026, net cash flow used in operating activities used in Rs. 2,338.21 Lakhs. This comprised of the net profit before tax of Rs. 2,301.99 Lakhs, which was primarily adjusted for Depreciation expense of Rs. 47.18 Lakhs, Interest Cost of Rs. 356.73 Lakhs, Discount on Chit Fund of Rs. 15.78 Lakhs, Dividend Income of Rs. 4.76 Lakhs, Interest income of Rs. 10.84 Lakhs, Gratuity of Rs. 10.23 Lakhs, Unrealised Foreign Exchange gain of Rs. 6.27 Lakhs and Sundry balance written back of Rs. 1.42 Lakhs .The resultant operating profit before working capital changes was Rs. 2,708.62 Lakhs, which was primarily adjusted for an increase in Inventories of Rs. 3,162.14 Lakhs, increase in Trade Receivables of Rs. 1,612.47 Lakhs, increase in loans and advances of Rs. 736.02 Lakhs, increase in Other Assets of Rs. 778.68 Lakhs, increase in Trade Payable of Rs. 963.63 Lakhs, increase in Other Current Liabilities of Rs. 654.07 Lakhs and decrease in Provisions of Rs. 0.72 Lakhs.

Cash used in operations was Rs. 1,963.71 Lakhs, which was reduced by direct tax paid of Rs. 374.50 Lakhs, resulting into net cash flow from operating activities of Rs. 2,338.21 Lakhs.

2. For the year ended march 31, 2025, net cash flow used in operating activities used in Rs. 664.33 Lakhs. This comprised of the net profit before tax of Rs. 1,239.65 Lakhs, which was primarily adjusted for Depreciation expense of Rs. 39.37 Lakhs, Interest Cost of Rs. 211.42 Lakhs, Discount on Chit Fund of Rs. 27.67 Lakhs, Dividend Income of Rs. 7.51 Lakhs, Interest income of Rs. 28.96 Lakhs, Gratuity of Rs. 5.94 Lakhs, Unrealised Foreign Exchange gain of Rs. 0.04 Lakhs, Unpaid bonus write back of Rs. 2.23 Lakhs and Sundry balance written back of Rs. 0.94 Lakhs .The resultant operating profit before working capital changes was Rs. 1,484.37 Lakhs, which was primarily adjusted for an increase in Inventories of Rs. 618.85 Lakhs, increase in Trade Receivables of Rs. 917.14 Lakhs, decrease in loans and advances of Rs. 354.41 Lakhs, decrease in Other Assets of Rs. 4.87 Lakhs, decrease in Trade Payable of Rs. 2,463.33 Lakhs , increase in Other Current Liabilities of Rs. 1,605.88 Lakhs and decrease in Provisions of Rs. 2.22 Lakhs.

Cash used in operations was Rs. 552.01 Lakhs, which was reduced by direct tax paid of Rs. 112.32 Lakhs, resulting into net cash flow from operating activities of Rs. 664.33 Lakhs.

3. For the year ended March 31, 2024, net cash flow from operating activities was Rs. 453.24 Lakhs. This comprised of the net profit before tax of Rs. 429.22 Lakhs, which was primarily adjusted for Depreciation expense of Rs. 40.67 Lakhs, Interest Cost of Rs. 162.42 Lakhs, Discount on Chit Fund of Rs. 40.33 Lakhs, Dividend Income of Rs. 17.06 Lakhs, Interest income of Rs. 8.30 Lakhs, Gratuity of Rs. 12.29 Lakhs and Unrealised Foreign Exchange gain of Rs. 0.37 Lakhs. The resultant operating profit before working capital changes was Rs. 659.20 Lakhs, which was primarily adjusted for an increase in Inventories of Rs. 2,366.61 Lakhs, decrease in Trade Receivables of Rs. 1,190.64 Lakhs, increase in loans and advances of Rs. 884.14 Lakhs, decrease in Other Assets of Rs. 26.08 Lakhs, increase in Trade Payable of Rs. 1,861.88 Lakhs, increase in Other Current Liabilities of Rs. 5.52 Lakhs and decrease in Provisions of Rs. 3.76 Lakhs.

Cash generated from operations was Rs. 488.81 Lakhs, which was reduced by direct tax paid of Rs. 35.57 Lakhs, resulting into net cash flow from operating activities of Rs. 453.24 Lakhs.

Justification on negative cash flow from operating activities

a. Working Capital Requirements:

The Companys revenue grew at a CAGR of approximately 46% between FY23 and FY25. Sustaining this growth required proportionate expansion of the working capital base specifically, procurement of raw materials ahead of production and build-up of WIP for orders under execution. In a turnkey defence electronics business, where production cycles are long and revenue is recognised only upon delivery and customer acceptance, significant capital is deployed in inventory and WIP before any corresponding cash inflow is received.

In FY25, the operating profit before working capital changes stood at Rs.1,484.37 Lakhs. The negative Cash flow from operating activity arose entirely from working capital movements within that year, principally the inventory build-up and expansion in trade receivables commensurate with higher billing. This is not a profitability issue it is a timing and scaling issue inherent to the Companys business model.

b. Revenue Recognition and Cash Realization:

Revenue is recognized upon execution of projects or delivery of goods/services, while cash realization occurs subsequently based on agreed credit terms. This leads to Delayed cash inflows, particularly in case of milestone-based turnkey projects

c. Increase in Advances and Other Current Assets:

Higher advances to suppliers and other operational advances have also contributed to temporary cash outflows, as funds are deployed in advance for procurement and project execution.

d. Reduction in Trade Payable Days:

A specific and significant contributor to negative Cash flow from operating activity in FY25 was the active settlement of trade payables particularly MSME vendor dues during the year. As evidenced in Annexures I.8 and, Trade payables has declined in FY25, reflecting the Companys conscious effort to regularize its vendor payment cycle which resulted in higher cash outflows in the short term.

Cash Flows from Investment Activities

1. For the year ended March 31, 2026, net cash used in investing activities was t 258.54 Lakhs, which primarily comprised of cash used for purchase of property, plant & equipment of t 265.80 Lakhs, Interest income received of t 7.26 Lakhs.

2. For the year ended March 31, 2025, net cash generated in investing activities was t 447.94 Lakhs, which primarily comprised of cash used for purchase of property, plant & equipment of t 3.89 Lakhs, Interest income received of t 26.83 Lakhs and Refund of Capital Advances of t 425.00 Lakhs.

3. For the year ended March 31, 2024, net cash used in investing activities was t 223.09 Lakhs, which primarily comprised of cash used for purchase of property, plant & equipment of t 225.35 Lakhs and Interest income received of t 2.26 Lakhs.

Cash Flows from Financing Activities

1. For the year ended March 31, 2026, net cash flow from financing activities was t 4,114.73 Lakhs, which primarily comprised of Proceeds from Borrowing of t 3,236.90 Lakhs, Repayment of borrowing of t 791.97 Lakhs, Proceeds from share issued including Premium ( Net of issue expense) of t 2,018.51 Lakhs and Interest cost paid of t 348.71 Lakhs.

2. For the year ended March 31, 2025, net cash flow from financing activities was t 74.15 Lakhs, which primarily comprised of Proceeds from Borrowing of t 2,011.94 Lakhs, Repayment of borrowing of t 1,728.88 Lakhs and Interest cost paid of t 208.91 Lakhs.

3. For the year ended March 31, 2024, net cash flow used in financing activities was t 27.48 Lakhs, which primarily comprised of Proceeds from Borrowing of t 454.44 Lakhs, Repayment of borrowing of t 266.90 Lakhs and Interest cost paid of t 160.06 Lakhs.

OTHER MATTERS

1. Unusual or infrequent events or transactions

Except as described in this Red Herring Prospectus, there have been no other events or transactions to the best of our knowledge which may be described as "unusual" or "infrequent".

2. Significant economic changes that materially affected or are likely to affect income from continuing Operations

Other than as described in the Section titled "Financial Information " and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations, " beginning on Page 209 and respectively of this Red Herring Prospectus, to our knowledge there are no significant economic changes that materially affected or are likely to affect income from continuing Operations.

3. Known trends or uncertainties that have/had or are expected to have a material adverse impact on revenue or income from continuing operations

Apart from the risks as disclosed under Chapter titled "Risk Factors" beginning on page no. 22 in this Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known

Our Companys future costs and revenues will be determined by demand/supply situation, both of the end services as well as the government policies and other economic factors

5. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or increased sales prices.

Increases in revenues are by and large linked to increases in volume of business and also dependent on the price realization on our products/services.

6. Total turnover of each major industry segment in which the issuer company operated.

Relevant Industry data and, as available, has been included in the chapter titled "Industry Overview" beginning on page no. 121 of this Red Herring Prospectus.

7. Any significant dependence on a single or few customers

Our business is dependent on few clients. Our top 10 customers contributed 89.36%, 95.22%, and 92.28% of revenue from operations for F.Y. ending on 2026-25, 2025-24 and 2024- 23 respectively.