MTAR Technologies Ltd Management Discussions

Global Economic Overview

World economy is likely to grow at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise to 1.7 percent in 2024 and 1.8 percent in 2025 from 1.6 percent in 2023 —will be offset by a modest slowdown in emerging market and developing economies to 4.2 percent in both 2024 and 2025 from 4.3 percent in

2023. Global growth five years from now is expected to grow at 3.1 percent, lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies.

Core inflation is projected to decline more progressively. In spite of significant central bank interest rate hikes to restore price stability, the global economy has been surprisingly resilient.

Source: IMF

Regional Growth %	2024E	2023
World Output	3.1	3.4
Advanced economies	1.7	1.6
Emerging and Developing economies	4.2	4.3

Source: IMF

Indian Economic Review

In FY 2024, Indian economy surpassed all market estimates of GDP, with 8.15% year-over-year (YoY) growth. In spite of global uncertainties, Indias economy has exceeded growth expectations (averaging 8.3% annual growth over this period) for three consecutive years, driven by strong domestic demand and continuous government efforts toward reforms and capital expenditure. The fourth quarter of FY 24 witnessed a sharp growth of 7.8%, beating the governments second advanced estimate of 7.6% and Reserve Bank of Indias (RBI) estimate of 7.3%. Fourth- quarter economic activities pointed to three interesting trends:

1. improvement in private consumption,

2. exports, and

3. manufacturing

Government of India intends to position manufacturing as a cornerstone for Indias transformation into a developed nation. In view of that, the government has been providing unwavering support to Make in India to promote indigenisation and enhance Indias global competitiveness. As of 2023, the manufacturing sector accounted for 17% of the GDP and provided employment to more than 27.3 Mn individuals in India.

The government plans to increase manufacturings share to 25% of the economy by 2025.

The government has introduced targeted measures to accelerate the growth of specific sectors. Accordingly, Budget 2024 has laid a strong foundation for Indias manufacturing resurgence. By investing in infrastructure, rationalizing customs duties, and supporting key sectors, the government has demonstrated its resolve to transform India into a global manufacturing hub. Because of the push from government on manufacturing, global customers are keen to collaborate with Indian suppliers specifically in Clean Energy Defence sectors, manufacturers were able to pass on higher costs to customers, as demand increased, resulting in improved margin

As the country envisages to herald a manufacturing renaissance, sectors like Clean Energy- Civil Nuclear Power, Space Defence are set to witness a significant growth. Building a futuristic competency in these sectors will require focusing on R&D, investments in technology transfers, global tie-ups, and incentivizing private investments along with collaboration across academia, industry, and the government.

Propelled by growth in priority sectors and driven by favourable mega trends, Indias manufacturing sector is estimated reach $4.5 trillion, taking its GDP share to 22 percent by 2047 (against a base projection of $2.5 trillion with a 17 percent share in GDP), creating a sustained economic growth in the years to come

Source: Economic Times, IMF

Y-o-Y growth of the Indian economy

	FY18	FY 19	FY 20	FY 21	FY 22	FY 23	FY 24E
Real GDP growth (%)	7.2	6.1	4.2	6.6	8.7	7.2	8.2

Source: Economic Times, IMF

Growth of the Indian economy, FY 2023-24

	Q1 FY 24	Q2 FY 24	Q3 FY 24	Q4 FY 24
Real GDP growth (%)	8.2	8.1	8.6	7.8

Divisional Review

Clean Energy

The need for renewables has never been more important than now. Worldwide the shift to renewable energy is gaining traction. Reliable and affordable delivery of electricity is required for sustainable development of economies.

Simultaneously, the need to address climate change is driving a transformation of power systems globally. Renewables, including civil nuclear power, solar, wind, fuel cells, hydro, battery storage systems, waste to energy, tidal and others, are at the centre of the transition to a less carbon- intensive and more sustainable energy system. MTAR aims to increase its market share in various verticals of Clean Energy to contribute to the global transition to renewables to achieve carbon neutrality

Clean Energy - Civil Nuclear Power

India firmly believes that nuclear power is a clean and environment friendly source of electricity that is not only available 24X7, but also provide the country long-term energy security in a sustainable manner. Government of India has initiated steps to increase the share of nuclear power capacity. Addition of capacity in civil nuclear power sector is imperative to meet the twin goals of energy security and sustainable development.

To secure long-term energy independence, the country has a three stage nuclear power programme, with a mature first stage. Nine more reactors are under construction. Currently, 23 reactors with a combined capacity of 7.4 GWe are operational in the country, 8 reactors with combined capacity of 6.0 GWe are under construction. 19 operational reactors are Pressurised Heavy Water Reactors (PHWRs) and balance are Light Water Reactors (LWRs). Recently, Department of Atomic Energy has added two indigenously designed 700 MW Pressurized Heavy Water Reactors (PHWR), the Kakrapar Atomic Power Project - Unit 3 & 4. In a historic milestone marking entry into the vital second stage of our three stage nuclear power programme, the "Core Loading" took place recently at our first indigenous Fast Breeder Reactor (500 MWe).

Additionally, The government has accorded administrative approval for 14 reactors with a combined capacity of 9.8 GWe to be set up in fleet mode to strengthen the domestii nuclear supply chain in line with the governments Atmanirbhar Bharat initiative. The Centre has also given in-principle approval for the site at Jaitapu in Maharashtra for setting up six European Pressurised Reactors with a total capacity of 9.9 GWe in technical cooperation with France, which once built will be the largest nuclear power generating plant in the world.

Out of 14 fleet reactors, NPCIL has already floated majority of tenders for Gorakhpur 1&2. Recently, a private entity has secured the contract worth Rs. 125 Bn for Kaiga 5 & 6 reactors of 700 MWe each; tenders are yet to be floated for the balance 10 reactors Government of India is also considering steps for development of Small Modular Reactors (SMR) with 220 MWe, which is a testament to scientific and engineering capability in the country. It intends to increase the private sectors role in Indias nuclear capacity expansion through partnerships to set up small modular nuclear reactors and research on nuclear energy technologies. Nuclear energy experts have for long pitched the lower capital costs and modular construction of small reactors as key advantages over conventional large nuclear reactors

Source: NPCIL, World Nuclear Association,

CRISIL Research

Opportunity for MTAR

MTAR caters to 20-25% equipment portion of the overall order for a 700 MWe PHWR nuclear plant. The Company supplies 15 different products to the nuclear island and has the capability to cater to the entire core of the nuclear island.

MTAR has facilities to address orders from 4 reactors at a time. The Companys ability to manufacture and supply specialized products such as fuel machining head, bridge and column and coolant channel assemblies, among others, not just for the new pressurized heavy water nuclear reactors, but also for refurbishment of the existing reactors enables it to address the massive opportunity available in civil nuclear power sector. Nearly Rs. 5000 Mn of orders are expected from kaiga 5 & 6 reactors. From the balance 10 fleet reactors for which tenders are yet to be floated, there could be an order inflow Rs. 15- 20 Bn over the next 6-7 years. Since majority of operational reactors have hit the critical life-span, around Rs. 500 Mn- 600 Mn of reburbishment orders are anticipated every alternate year. In addition, there will requirement of Rs. 100-200 Mn of maintenance orders on an annual basis.

New-build market (Rs billion)	Overall capital cost (Rs. bn)	Equipment cost (Rs. bn)
Operational reactors*	110-120	22-28
Under-construction reactors**	680-720	130-170
Planned expansion (medium to long term)	1,760-1,800	350-435

 

Under-construction reactors	Construction start	State	Type	Gross capacity (Gwe)
PFBR	2004	Tamil Nadu	FBR	0.5
Rajasthan 7 & 8	2011	Rajasthan	PHWR	0.7*2
Kudankulam 3, 4, 5 6	2017	Tamil Nadu	PHWR	1*4
Gorakhpur 1 & 2	2018	Haryana	PHWR	0.7*2
Total				6.0

Source: NPCIL, World Nuclear Association, CRISIL Research

New reactors planned	State	Type	Gross capacity (Gwe)
Gorakhpur 3 & 4	Tamil Nadu	FBR	0.7 * 2
Chutka 1 & 2	Gujarat	PHWR	0.7 * 2
Mahi Banswara- 1, 2, 3 & 4	Rajasthan	PHWR	0.7 * 4
Kaiga 5&6	Tamil Nadu	PHWR	0.7 * 2
Kudankulam- 5 & 6	Haryana	PHWR	1.0 * 2
Total			9.1

Key MTAR- Projects , Executed FY 2023 - 24

• Fuelling Machine Head

• Coolant Channel Assemblies and other products

• Ball Screws

• Water Lubricated Bearings

Key MTAR projects in progress

• Fuelling Machine Head

• Fuel Transfer System

• Fuel Locator Assembly

• Fuelling Bridge & Column

Clean Energy - Fuel Cells

Fuel Cells Industry Potential

Fuel cells market is projected to witness a significant growth due to increasing demand for clean and efficient energy solutions. Global Fuel Cell market is estimated to attain a value of USD 25.10 Billion by 2031, with a CAGR of 27.1% during the forecast period (2024-2031). Fuel cells convert chemical energy from fuels like hydrogen, methanol, or natural gas into electrical energy. They are highly compatible and are specially designed for use in various applications across consumer electronics, military, medical devices & portable power generator, making them commercially sustainable. There is a rising demand for green energy solutions due to increasing environmental regulations and the global push towards reducing carbon footprints. Portable fuel cells, being eco-friendly, cater to this demand by offering a clean alternative to traditional batteries and internal combustion engines.

Fuel cells, being eco-friendly, cater to a rising demand for green energy solutions due to increasing environmental regulations and the global push towards reducing carbon footprints by offering a clean alternative to traditional batteries and internal combustion engines.

Technological Advancements in fuel cell technology paved way for improvements in efficiency, durability, and cost- effectiveness. Innovations in fuel cell technologies such as solid oxide fuel cells (SOFC) and proton exchange membrane fuel cells (PEMFC) have enhanced the

reduced the overall costs, making them more attractive for widespread use.

There is emergent interest in the use of fuel cells in remote and off-grid areas.

Fuel cells provide a reliable power source for locations without access to traditional power grids, supporting critical operations in disaster response, military deployments, and remote medical facilities.

Governments worldwide are investing in fuel cell research and development as part of their efforts to transition to sustainable energy systems, which is furthering the commercialization & adoption of fuel cells. Likewise, the growing awareness and adoption of green energy solutions among consumers and industries are fuelling market growth further. To meet corporate sustainability goals and comply with environmental regulations, businesses are increasingly seeking eco-friendly alternatives, boosting the demand for fuel cells.

In 2023, Asia Pacific is anticipated as second leading region in the global portable fuel cells market due to rapid industrialization, urbanization, and increasing adoption of clean energy solutions in countries like China, Japan, and South Korea. Government initiatives promoting sustainable energy development, coupled with investments in infrastructure and technology, are driving the demand for portable fuel cells across various sectors such as electronics, automotive, and telecommunications in the region

Efficiency of Solid Oxide Fuel Cells to Function at high Temperatures to Drive the Market Share

The Solid Oxide Fuel Cell segment is the fastest growing segment in the fuel cells market owing to its high efficiency to work in extreme temperatures. They can be used without costly catalysts like the ruthenium. A wide range of solid oxide fuel cells are increasingly used in the stationary uses.

Increasing Demand from Asia Pacific for additional electricity to Continue its Dominance

Asia Pacific that held considerable share of the market in the past few years is poised to lead in future as well owing to less dependency on fossil fuels, adoption of green energy, and high demand for additional electricity. These factors enabled the region to increase the market share in a splendid manner. Also, the market is expanding majorly in nations like South Korea, China, and Japan due to significant push from government, spending in fuel cell technology, and favourable regulations. Significant investments for the R&D to further improve the fuel cells technology have been undertaken by North America that is projected to be the fastest growing region. Canada and the United States are the leading countries for the development of fuel cells.

Fuel cell type	Operating temperature	Typical stack size	Electrical efficiency (%)	Major technology deployment players
Alkaline fuel cell	90-120?C	1-100 kW	60%	AFC Energy
Direct methanol fuel cell	30-130?C	25-5 kW	40%	SFC Energy
Phosphoric acid fuel cell	150-200?C	5-400 kW, 100 kW module (liquid PAFC) <10 kW (poly- mer membrane)	40%	Doosan Corporation
Molten carbonate fuel cell	600-700?C	300 kW -3 MW, 300 kW module	50%	Fuel Cell Energy
Solid acid fuel cell	220-280?C	10W- 10kW	-	SAFCell Inc

Increased Volumes to drive the cost reduction

As fuel cells find more commercial applications and higher reception in the market, the demand for fuel cells will help to bring economies of scale and aid in the reduction of prices. For instance, scaling fuel cell production from 10,000 to 50,000 units can reduce unit costs by as much as 7-10%, without technological breakthroughs. This cost reduction goes up to 40-45% with production volume of 200,000 units i.e., 20x times growth in fuel cell production. The major cost driver for fuel cells is manufacturing technology, which is reduced by increased volumes and improving operational efficiencies. By taking advantage of these increased production volumes, companies can achieve significant cost reductions for several reasons. Economies of scale will help reduce procurement costs and streamline production with lower requirement of supplies and additives.

Electrolysers Market Potential

Hydrogen production today is dependent on unabated fossil fuel technologies. To achieve, green hydrogen plays a key role in sectors that are hard to decarbonise, such as heavy industry and long-distance transport, with electrolysis powered by renewable electricity being the main route of production.

Electrolysers split water into hydrogen and oxygen, thereby generating green hydrogen using electricity from renewable sources Like fuel cells, electrolyzers consist of an anode and a cathode separated by an electrolyte. Electrolyzers function in dif- ferent ways based on technology, mainly due to the different type of electrolyte material involved and the ionic species it conducts.

Electrolysers today constitute 33-57% of green hydrogen production cost and the balance is divided between renewable and hydrogen storage units. Globally, industries want to reduce the cost of hydrogen production from USD 6 to USD 1 for which electrolysers to reduce from USD 500- 700 KW per KW today to about USD 200 per KW. Even the stack life and efficiency of electrolysers has to be improved. There are various technologies of electrolysers available today

Source: industry, Yahoo Finance, CRISIL Research

Solid Oxide electrolyzers

Solid oxide electrolyzers use a solid ceramic material as the electrolyte that selectively conducts negatively charged oxygen ions (O2-) at elevated temperatures as high as 800- 900 degree celsius. Steam at the cathode combines with electrons from the external circuit to form hydrogen gas and negatively charged oxygen ions.

The oxygen ions pass through the solid ceramic membrane and react at the anode to form oxygen gas and generate electrons for the external circuit. Solid oxide electrolyzers operate at temperatures high enough for the solid oxide membranes to function properly (about 700?-800?C, compared to PEM electrolyzers, which operate at 70?-90?C, and commercial alkaline electrolyzers, which typically operate at less than 100?C). Advanced lab-scale solid oxide electrolyzers based on proton- conducting ceramic electrolytes are showing promise for lowering the operating temperature to 500?- 600?C.

The solid oxide electrolyzers can effectively use heat available at these elevated temperatures (from various sources, including nuclear energy) to decrease the amount of electrical energy needed to produce hydrogen from water.

Proton exchange membrane (PEM) electrolysers

PEM electrolysers constitute one-fifth of the global eletrolyser capacity. PEM has a compact and simple design, and it has advantages in terms of operability with intermittent loads, i.e., fast response to varying renewable electricity. These electolysers operate at high pressure, due to the use of thin perfluorosulfonic acid (PFSA) membranes, which translates to an efficiency of 80- 90 per cent. However, the PFSA acidic environment makes it necessary to use gold and titanium plated electrodes and metals such as platinum, iridium, and ruthenium as catalysts, which increase its cost significantly.

Alkaline Electrolysers

Alkaline electrolysis is a mature and commercially available technology used primarily by the fertiliser and chlorine industries.

It presently accounts for almost two-thirds of the global electrolyser capacity.It operates at a pressure of 30 bar and uses thick membranes and nickel-based electrodes. While the technolgy is simple and relatively low- cost stack and system design makes it the cheapest electrolyser technology, its thick membranes reduce its efficiency to 70- 80 per cent

The global hydrogen electrolyzer market is anticipated to clock US$ 651.6 million in 2024, driven by international collaboration and trade. This is projected to reach a total valuation of approximately US$ 5,709.8 million by 2034 at a CAGR 24.2% between 2024 and 2034, creating new opportunities for the market.

Continuous innovation in electrolyzer design, materials, and manufacturing processes is expected to drive down the capital and operational costs associated with hydrogen production.

Source: industry, Yahoo Finance, CRISIL

Market Opportunity for Bloom Energy

In the clean energy segment, MTAR caters to Bloom Energy USA, a leading player in the manufacture of Solid Oxide Fuel Cells (SOFC) and Solid Oxide Electrolysers SOEC. Bloom Energy has witnessed a 11% YoY growth in revenues in CY 2023, reaching over $1.33B. Bloom Energys backlog now stands at over $12B, a 21% increase from the previous year. The revenue of Bloom Energy is forecast to grow 18% p.a. on average during the next 3 years starting from CY 2024, compared to a 8.0% growth forecast for the Electrical industry in the US. Bloom is witnessing a strong market interest and robust commercial activity across diverse end markets

Bloom has extended the market deal with SK group, South Korean based conglomerate, till 2027. The amended agreement includes a recommitment of 250 MW from the 2021 contract and an additional 250 MW under the current agreement. The deal will bring around USD 1.5 billion (EUR 1.35bn) in product revenues and USD 3 billion in service revenues over 20 years. Since their collaboration from 2018, the parties have deployed 400 MW. South Korean government released a Hydrogen Economy Roadmap in 2019 calling for 15,000 megawatts of stationary fuel cells by 2040, which shows an immense potential available for fuel cells.

Increasing public-private partnerships are also expected to result /in a faster adoption of hydrogen-based applications.

In addition, Bloom is forecasting major revenues from deployment of stationary fuel cells for AI powered data centres. Accordingly, it has entered into a power capacity agreement with Intel that will result in Silicon Valleys largest fuel cell-powered data center.

The total opportunity size from hydrogen fuel cells is estimated at USD 300 Bn; including other areas such as the US C&I market and international expansion, the total opportunity is estimated at more than USD 2 Trn. Bloom Energy is targeting 30- 35% CAGR over CY20-30E

Key advantages of Solid Oxide fuel cells supplied by Bloom Energy cells: The key advantages of Bloom Energys fuel cells over traditional grid power comprise the following: Competitively priced: Bloom Energys penetration is increasing, with an annual reduction of 18% CAGR in product costs. The Company expects to be competitive against traditional grid power in all 50 US states by 2025 (penetration in 12 states currently).

Uninterrupted power with high efficiency: Blooms fuel cells are designed to provide 24x7 power and enjoy a track record of no outages, compared with grid power, while generating the highest electrical efficiency of 65% among peers.

Lower emissions: Fuel cells generate 50% lower CO2 when compared with the US base load power generation with no particulates (SOx and NOx). A recent study indicates that fuel cells are able to reduce carbon reduction as effectively as renewables, given their high capacity factor (of 95%) against 10-30% for solar/ wind.

Lower production footprint and no transmission lines: A 1 MW Bloom box takes only 170m2 of space as against 22,257m2 by a solar PV (12,500% higher), while onsite generation eliminates T&D infra requirements

Key advantages of Solid Oxide

Electrolysers

Bloom Energys Solid Oxide (SO) electrolyzer are 20% more efficient than the PEM electrolyzer (45kWh/kg vs. 55 kWh/kg), however, the technology is yet to be commercialised . Higher efficiency is expected to enhance the market share of Bloom Energy

Opportunity for MTAR

MTAR is one of the key suppliers to Bloom Energy for power units, sheet metal assemblies and enclosures of Solid Oxide Fuel Cells. The Company is the sole supplier for electrolyser units.

The Company has more than 12 years of relationship with Bloom Energy. MTAR caters to 50%- 60% of its typical hotbox requirement and has a 100% compliance record with it. MTARs growth is estimat- ed to be in-line with Bloom Energy.

Over the past few years, the Company has been consistently increasing its wallet share with Bloom Energy by adding new products such as sheet metal, enclosures and ASP assemblies. In FY 24, we have delivered around Rs. 800 Mn of ASP assemblies, a new product developed in FY 23. The Company has executed around Rs. 3301 Mn orders for power units, sheet metal assemblies and enclosures.

In addition, MTAR has also increased the content with in the hot box by indigenising off the shelf items such as bellows, fins, fork lift bases , among others that enable the Company to save the costs and preserve the margins.

The growth of MTAR is expected to be in-line with the growth of Bloom Energy. Also, the Company is in discussion to supply products for a firm that is into manufacture of PEM electrolysers.

Source: industry, Yahoo Finance CRISIL Research

Key Products being supplied by MTAR

• SOFC Units

• electrolyser Units

• ASP assemblies

• Sheet meal assemblies & enclosures

Qualified * Products

• Cable Harnessing Assemblies

Clean Energy - Battery Storage Systems

Market Potential

Batteries are the most scalable type of grid-scale storage and the storage systems market has seen strong growth in recent year. Energy storage systems are quintessential to increase the share of power generated through renewable energy sources,

Carbon neutrality Scenario envisions both the massive deployment of variable renewables like solar PV and wind power and a large increase in overall electricity demand as more end uses are electrified.

As the electricity grid increasingly relies on variable load power generation, the ability to store this electricity becomes crucial to avoid supply disruptions and prevent the wastage of surplus energy through curtailment. Hence, to achieve a high level of RE share requires development of energy storage systems (ESS) to manage the intermittency associated with wind and solar power.

The ESS is currently mainly driven by the battery energy storage systems (BESS) and pumped hydro storage projects (PSP). The amplified the demand for longer duration energy storage technologies. Additionally, the utilization of both battery and non battery storage in various applications offers promising growth opportunities for players in this sector. The need for efficient energy storage solutions is continuing to gain momentum, marking a transformative shift in the power industry. amplified the demand for longer duration energy storage technologies. Additionally, the utilization of both battery and non- battery storage in various applications offers promising growth opportunities for players in this sector. The need for efficient energy storage solutions is continuing to gain momentum, marking a transformative shift in the power industry.

The tariff under the BESS tenders more than halved from Rs 10.84 lakh/MW/month in the first Solar Energy Corporation of India (SECI) tender in August 2022 to Rs 4.49 lakh/MW/month in the latest tender by Gujarat in March 2024, reflecting the decline in battery prices and improving competitiveness of such projects

Opportunity for MTAR

MTAR aims to cater to storage solutions considering the exponential growth the storage solutions sector is set to witness

The Company has concluded discussions with Fluence Energy that is into battery storage systems for supplying enclosures to their batteries. Fluence Energy is yet to win an order for Battery Storage systems in India. Also, it is trying to develop batteries with some major firms in India as the custom duties levied on the import of bat- teries are higher, taking away cost competitiveness for export of battery storage systems from Indian. Hence, till the development of batteries, Fluence intends to work with Indian manufacturer to address Indian market for which Fluence has to win a contract for the supply of battery storage systems

It has potential to generate significant revenues, once the deal is materialized. We have also initiated discussions with Enervenue that is into Hydrogen Storage Systems. MTAR startegises to grow the storage systems vertical in a significant way over the next five years.

Source: industry, Economic Times

Clean Energy - Hydel, Wind Energy & Others

Market Potential - Hydro Power

Hydropower currently generates more electricity than all other renewable technologies combined and is expected to remain the worlds largest source of renewable electricity generation into the 2030s. Henceforth, it will continue to play a critical role in decarbonising the power system.

India sees hydro power, one of the renewable sources of energy as key in its transition away from coal to help manage the fluctuations caused by intermittent solar and wind supplies. With nearly 15 GW currently under construction at aggregate level, the country is poised to witness a substantial increase in its hydroelectric power potential, targeting a rise from the present 42 GW to an impressive 67 GW by 2031-32, marking an increase of over 50 percent.

The progress of hydroelectric power projects is set to substantially augment the countrys renewable energy capacity, thereby enabling a significant transformation in the adoption of renewables.

Opportunity for MTAR

MTAR is catering to customers such as Andritz, Voith, GE Power, among other by supplying complex fabricated products including draft tubes, spiral casings etc. The customer in Hydro Power sector are projecting strong demand for the next decade and are keen to release more orders for MTAR post the execution of current orders.

Clean Energy - WInd Energy

Market Potential - Wind Energy

Wind is estimated to be one of the predominant sources of power generation in the Net Zero Emissions by 2050. India may add about 25 GB wind energy capacity by 2028 but will need about Rs 2 lakh crore, according to Crisil. The sector just added 9 GW between 2021 and 2024

The growth in wind power capacity is driven by the increasing need for renewable energy to provide grid balancing and continuous power supply, contrasting with solar power which is limited to daylight hours

Opportunity for MTAR

MTAR has started catering to rotar and stator assemblies for Regen Power that is into Wind Energy. The Company also startegises to expand its presence with other players in Wind Energy

Source: industry, Economic Times

Space

Indian Space Industry Market Potential

The Indian Space Research Organisation (ISRO) has carved a unique niche in the global spacefaring community, renowned for its cost-effective and innovative missions for launching lunar probes, building satellites, ferrying foreign satellites up. ISRO has even succeeded in reaching Mars and stands out as one of the most cost-effective in the world.

Established in 1969, ISRO has steadily climbed the ladder of space exploration with a robust launch vehicle portfolio, including the reliable Polar Satellite Launch Vehicle (PSLV) and the heavy-lift Geosynchronous Satellite Launch Vehicle (GSLV). Self-reliance in launch vehicles significantly reduced mission costs compared to relying on foreign launch services.

Currently, Indian Space economy which is valued at USD 8.4 bn with a 2% share in the global space economy is expected to grow to USD 44 bn by by 2033. Experts opine that the global space economy could well be $1 trillion in the next few years

So far, ISRO has carried out 125 spacecraft missions, 92 launch missions. Currently, it is planning several missions including the Gaganyaan (crewed/robotic) and Interplanetary mission such as Lunar Polar Exploration Mission, Chandrayaan-4, Shukrayaan and Mangalyaan-2 (MOM 2)

2023 marked a monumental year for ISRO as it has successfully achieved first-ever soft landing of Chandrayaan-3 on the Moons uncharted South Polar region. Chandrayaan 3, lauded for its technical complexity and budgetary efficiency, placed India at the forefront of lunar exploration.

Aditya-L1 spacecraft , an Indian solar observatory at Lagrangian point L1, launched on September 2, 2023 and inserted in its targeted halo orbit on January 6, 2024, has completed its first halo orbit around the Sun-Earth L1 point. Aditya-L1 spacecraft in the Halo orbit takes 178 days to complete a revolution around the L1 point

The ambitions of ISRO extend beyond lunar exploration. The Gaganyaan mission, currently under development, aims to send the first Indian astronauts to space by 2024.

Additionally, ISRO actively contributes to global space endeavors, collaborating with various international agencies on projects like the Aditya-L1 mission, studying the Suns corona

As apart of future endeavors, ISRO plans interplanetary missions to Venus and Mars, further solidifying their place as a key player in the global space race. Additionally, they focus on developing reusable launch vehicles and human spaceflight capabilities, pushing the boundaries of space exploration.

The growth of Indian Space industry and successful space exploration missions is a testimony to the power of innovation and cost-effectiveness.

Privatisation of Space

The Indian space industry is offering a tremendous opportunity for the private sector in the country as a new area of growth and development.

To promote competence within Space sector, enhance the diffusion of space technology and boost space economy within the country, DOS desires to encourage the participation of private companies in space activities. ISRO shall complement DOS in its objective of opening up the space sector to private industries.

Indian space equipment market (Rs billion) by type, for FY17-FY25P

Segment	CAGR (FY17-FY21)	CAGR (FY21-FY25P)
Satellite	-7.5%	6.0 - 7.0%
Launch systems	-26.5%	10.0 - 11.0%

Source: ISRO, CRISIL Research

Government policies are aimed at allowing Indian private players to become independent actors in the space sector instead of being solely vendors or suppliers to the government programs. Accordingly, Government has outsourced the contract for construction of 5 PSLVs to consortium of HAL-L&T. Similarly government has invited industry to submit bids for GSLV and SSLV.

To facilitate private sector participation, the government has created the Indian National Space Promotion and Authorization Centre (IN-SPACe), as a single window, independent, nodal agency under Department of Space. The main mandate of IN-SPACe is to promote and enhance the role of Non- Government Entities (NGEs) in the space sector through hand holding, support, and by providing them with a level playing field. It will also authorize the use of ISRO facilities by private companies, development of Indian satellite systems, and launch of rockets/ vehicles developed by the private sector.

Currently, the following Support is being rendered from IN-SPACe to all the private entities

1. Building Launch Vehicles and Satellites

2. Sharing of ISRO facilities

3. Establishment of facilities in Department of Space premises

4. Mentorship, Evaluation & consultancy

5. Launch campaign & launch

6. Customization & Delivering of sub-systems packages to NGEs

7. Space based services

The policy framework by IN-SPACe has encouraged private players to involve in manufacturing of launch vehicles, satellites and provide launch services. These developments might take medium to long term in order to fully materialise. Going forward, ISRO shall solely focus on development of new technologies, its ambitious exploration and human spaceflight missions.

Competitive landscape of space industry

Indian Space industry is marked with high entry barriers as working with Space technologies entails advanced technological capabilities, skilled talent pool,manufacturing prowess, quality assurance, reliability and state of the art production facilities. As a result, the supplier ecosystem of ISRO has very few major players, with each operating in a niche monopolistic segment of precision equipment manufacturing. However, recently many start ups have emerged in Launch Vehicle space because of the opportunities due to commercialization of Space

Opportunity for MTAR

MTAR has been associated with ISRO from 1983. The Company has been a trusted partner to ISRO for the past four decades. It has proven capabilities in manufacturing high-tech products for PSLV, and GSLV like liquid propulsion rocket engines (Vikas Engine for PSLV), cryogenic engine sub systems, electro-pneumatic modules etc.; these products are used in the LVM 3 and PSLV for prestigious missions such as Chandrayaan 3 and Aditya L1 missions. The Company is also manufacturing critical structure like grid fin for Gagaganyaan mission.

Increase in launches from ISRO due to success of commercial launches over the coming years is expected to provide increased inflow of orders to MTAR. Furthermore, the Company intends to increase its wallet share and address opportunities including motor casings, light alloy structures and thrust chambers through our new sheet metal facility.

Source: industry, Economic Times,

Key Products being supplied by MTAR

• Vikas Engines

• Cyrogenic Upper Engine assemblies including Turbo Pump, Booster Pump and Gas Generator

• Satellite Valves

• Structures for Gaganyaan

Key Products under development

• Semi Cryo Engine

• Initiated discussions for development of electro-mechanical actuators

• Valves for Launch Vehicles

MNC Aerospace

MNC Aerospace industry analysis

Due to push from Government on Self reliance, Global MNC Aerospace firms are looking at Indian firms to be a manufacturing and supply chain partner

With over seven decades of presence in India, companies like Boeing, Airbus continue to support the development of indigenous aerospace and defense capabilities in the country strengthening the Aerospace eco-system in India. The growth of the Indian aviation industry will create further opportunities for local sourcing, skilling, and service support.

MNC Aerospace customers are viewing India as an Asian alternative to Chinese manufacturing. Reputed MNC customers have been trying to establish their supplier bases in India since the launch of "Make in India" campaign to raise the profile of India as a global manufacturing hub.

Companies like Thales, a French military, avionics & cyber security software group, are bullish on India not only as a market due to increasing orders from its defence sector and airline operators but also as an R&D hub with its massive engineering talent.

India also has got a huge pool of talent as the country generates 1.5 million engineers per year, which is massive compared to European countries and even compared to the UK or the US. This further strengthens the case for MNC Aerospace firms to establish their base in India to invest and develop the futuristic technologies in addition to push from government for self-reliance.

Domestic Aerospace industry is set to witness an exponential growth as MNC customers are viewing India as a top MRO destination and Manufacturing destination

Market Potential for MTAR

MTAR has established MNC Aerospace division in the year 2018 and started catering to Rafael and ELBIT. Over the year the Company has added several prestigious gobal MNCs such as GKN Aerospace, Thales, Thales Aliena Space, Israeli Aerospace Industries, Collins Aerospace, among others. The Company is projecting a growth of around 45%-50% from MNC Aerospace vertical over the next five years as we have completed the execution of first articals and will cater to the volume production

Source: Economic Times, CRISIL Research

Key Products being supplied by MTAR

• Aerostructures

• Ammunition Boxes

• Engine Parts

• Drone components

• Housings

Defence

Ministry of Defence aims to bolster Indias defence sector with increased self-reliance and domestic manufacturing, the roadmap government has set for achieving its defence production and export goals is both bold and transformative. Government of India aims to nearly triple annual defence production to Rs 3 lakh crore by 2028-29 and more than double exports to Rs 50,000 crore, which provides Indian Defence industry an opportunity for significant growth.

Indias defence production value for FY24 stands at Rs 74,739 crore, down from Rs 1.09 lakh crore in FY23. This decrease follows FY23s historic production surpassing Rs 1 lakh crore. The private sectors contribution rose to Rs 16,411 crore, or 22% of total defence production in FY24, up from 19% in FY23 but still below the previous years levels.

The interim Union Budget allocated Rs 6.21 lakh crore to the Ministry of Defence (MoD) for FY24-25, marking a 4.72% increase from FY 23 but a slight decrease from revised allocations. While Defence spending as a percentage of government expenditure stood at 13%, as a percentage of GDP, it remained below 2%

The transformative shift towards indigenization will aid in reducing dependence on foreign armaments and enable self-reliance in cases of geopolitical tensions

By liberalizing procurement processes for startups, and easing payment terms, Indian government is supporting start ups in Defence sector and promoting innovation. The MoD targets a turnover of Rs 1.75 lakh crore in aerospace and defence manufacturing by 2025. In addition, private sector that has been taking on the majority share of Defence production is expected to over 50% of Indias defence production over the next decade

The strategic shift towards self-reliance involves reducing dependency on foreign suppliers by boosting domestic manufacturing. The government intends to allocate 75% of the capital acquisition budget for procurement from local sources. To realise the same, government has taken up Initiatives like the Defence Industrial Corridors and positive indigenization lists are part of this strategy To achieve its ambitious export targets, India might need to enhance private sector contributions through supportive policies and incentives. To attract global client through our exports we need to enter into strategic partnerships with foreign OEMs shall expedite technology, crucial for modernisation. This shall propel the growth of domestic defence manufacturers. The Positive indigenization list and initiatives like the DcPP Programme of DRDO are expected to contribute to the further growth of domestic defence industry

MTARs Contribution to Defence

MTAR caters to niche areas of Defence by supplying products such as Magnesium Gear Boxes, Air frames, structural components for helicopters etc. We have supplied 5 ton and 10 ton actuators to LCA Tejas program. The Company is awaiting the roller screws that are currently being imported from Rollviz Sweden. The Company has executed some part of electro-mechanical actuators in this fiscal year and is anticipating more orders over the coming quarters.

Key Products

• Magnesium Gear Boxes for Helicopters

• Actuation Systems

• Aerostructures

• Valves

Opportunities and threats

Clean Energy Civil nuclear: While Government has announced for construction of reactors on a fleet mode, NPCIL has already floated tenders for Gorakhpur 1&2 and orders for kaiga 5& 6 reactors shall be given to pre-qualified vendors of NPCIL. In addition, the tenders for the balance reactors shall be floated over the next 6-7 years. The capacity addition from these new reactors will provide unprecedented growth of the domestic industry. This sector is marked with stringent qualification criteria that could provide incumbents an edge over others. MTAR has approximately 20- 25% equipment share in each nuclear reactor; the Company is expected to capitalise on robust order inflow from construction of new

Clean Energy Fuel cells, Hydel, Wind and Others: Global governments are emphasizing renewable energy sources to achieve carbon neutrality by 2050. Fuel cells are efficient energy sources; exponential growth is expected in this segment, boosting Companys revenues. In addition, the market for electrolysers is expected to grow significantly over the coming years that shall further strengthen our revenues. The Company is one stop solution provider for mechanical systems for SOFC fuel cells of Bloom Energy

The Company intends to expand its presence in Clean Energy sector, accordingly, it has started fabricating critical structures for Hydel, Wind Energy and Waste to Energy sector. The Company is also in discussion with other customers in Clean Energy.

Space: The launches by ISRO are expected to increase as the market share of India in the Global Space economy valued at USD 400 Bn is projected to increase from 2% to Increased launches from ISRO could 10% by 2030. Vikas Engines supplied by MTAR are used in all the launch vehicles where as cryogenic upper stage systems are used in GSLV. Increased Company. Our sheet metal facility enables us to address new opportunities such as motor casings, thrust chambers and light alloy structures, including others. The Company is also working on the development of valves for Space on a built to specification basis.

Defence: Government of India so far released five positive lists of indigenisation and the sector is expected to witness an exponential growth . The Company is awaiting the certification from customer for roller screws, once approved it is expected to provide substantial opportunity in this area. Additionally, Company is working on the development of valves on a built to specification basis.

Company overview

MTAR Technologies is a leading manufacturer in Indias niche precision manufacturing industry. The Company is engaged in the manufacture of mission critical precision engineered systems for Clean Energy- Civil Nuclear Power, Fuel Cells,Hydro Wind, Space and Defence sectors . The Company emerged as a market leader due to its contribution to the Indian civilian nuclear power programme, Indian space programme, Indian defence, global defence as well as global clean energy sectors. The Company is respected for having invested in state-of-the-art facilities comprising machining, assembly, specialised fabrication, painting and special process facilities. The Companys clients comprise

ISRO, DRDO, Bloom Energy, Andritz, GE Power, Voith, Hitachi Zosen, Rafael, Elbit, GKN Aerospace, Collins Aerospace, Thales among others. Owing to a complex product portfolio for strategic sectors, MTAR is one of the top three suppliers that provide precision engineering requirements to the Indian Civil Nuclear Power, Space and Defence sectors.

Segment wise or product wise performance

The Company does not operate in the manner of different business segments. However, we do measure revenues based on various customer segments. Revenue from exports stands at 71% of total revenue from operations in FY 2023- 24 as against 79% of total revenue from operations in FY 2022-23. Revenue from domestic stands at 29% of total revenue from operations in FY 2023-24 as against 21.0% of total revenue from operations in FY 2022-23. Products and others has witnessed an exponential growth due to ramp up of ASP assemblies.

Sector	Revenue generated from customers in FY 2023 - 24 (Rs. Mn)	Revenue generated from customers in FY 2022 - 23 (Rs. Mn)
Clean Energy- Civil Nuclear Power	619	438
Clean Energy- Fuel Cells & Others	3,511	4,417
Space	390	494
Defence	197	151
Products and Others	1,083	233
Total	5,800	5,733

Financial overview

Analysis of the profit and loss statement

Revenues:

Revenues from operations reported at Rs. 5,800.33 Mn in FY 2023-24 compared to Rs. 5,733.47 Mn in FY 2022-23. Increase in revenue from operation is 1.17% compared with FY 2022-23.

Expenses:

Total expenses increased by 13.49% from Rs. 4,521.48 Mn in FY 2022- 23 to Rs. 5,131.78 Mn. Cost of materials consumed, accounting for 54.72% share of the Companys revenues, increased by 0.84% from Rs. 3,147.23.05 Mn in 2022-23 to Rs. 3,173.66 Mn in FY 2023-24 owing to an increase in the material cost related to domestic revenues. Employees expenses, accounting for a 16.40 % share of the Companys revenues, increased by 3.02% from Rs. 923.63 Mn in 2022-23 to Rs. 951.52 Mn in FY 2023-24. Finance costs of the Company increased by 52.88% from Rs. 145.02 Mn in 2022-23 to Rs. 221.71 Mn in FY 2023-24. Increase in finance costs was due to increase in term loans and working capital loans. Other expenses of the Company increased by 24.55% from Rs.579.83 Mn in FY 2022-23 to Rs. 722.19 Mn. In[crease in others expenses is due to Increase in sub-contracting costs.

Analysis of the Balance Sheet Sources of funds

The Equity capital employed by the Company increased by 9.08% from Rs. 6,208.12 Mn as on March 31, 2023 to Rs. 6,771.65 Mn as on March 31, 2024. Net Increase in Long term borrowing (Including Current maturity of long-term borrowings) is 35..58% from Rs.1,050.82 Mn as on March 31, 2023 to Rs. 1,424.70 Mn as on March 31, 2024. due to Investment in New Capex.

Applications of funds

Fixed assets (gross) of the Company primarily increased by 19.14% from Rs. 3,670.37 Mn as on March 31, 2023 to Rs. 4,372.72 Mn as on March 31, 2024 owing to an increase in Capex for our EOU Unit to Increase the capacity and specialised fabrication facilities at Adibatla.

Depreciation on tangible assets increased by 25.24% from Rs. 176.47 Mn in 2022-23 to Rs. 221.01 Mn in FY 2023-24 owing to an increase in fixed assets during the year under review.

Working capital management

Current liabilities of the Company decreased by 39.69% from Rs. 3,407.75 Mn as on March 31, 2023 to Rs. 2,055.27 Mn as on March 31, 2024, due to decrease in trade payables and advance received from customers. The Current Ratio of the Company stood at 2.75 at the close of FY 2023-24 compared to 2.04 at the close of 2022-23. Inventories including raw materials, work-in-progress and finished goods, among others, decreased by 10.14% from Rs. 3,859.67 Mn as on March 31, 2023 to Rs. 3,468.39 Mn as on March 31, 2024. owing to decreased in stock of raw materials and work in progress. The inventory cycle decreased to 218 days of turnover equivalent in 2023-24 to 246 days of turnover equivalent in FY 2022-23. Company received the trade receivable within due date which resulted in decrease of 30% in trade receivables from Rs. 2,081.16 Mn as on March 31, 2023 to Rs. 1,462.72 Mn as on March 31, 2024. All receivables were secured and considered good and 90% of receivables are not overdue. The Company contained its debtors turnover cycle within 92 days of turnover equivalent in FY 2023-24 compared to 132 days in 2022-23. Cash and bank balances of the Company increased from Rs. 309.81 Mn as on March 31, 2023 to Rs. 506.64 Mn as on March 31, 2024.

Other Current Assets decreased by 70.14% from Rs. 382.35 Mn as on March 31, 2023 to Rs. 114.16 Mn on account of reduction of balances recoverable from government authorities. During the year 2023-24 Company received 320 Mn refunds from GST Authorities.

Margins

The EBITDA margin of the Company reduced from 26.85% in 2022-23 to 19.25% in 2023-24. while net profit margin of the Company reduced from 18.2% in 2022-23 to 9.7% in 2023-24.

Key Ratios

Particulars	2023-24	2022-23	Remarks
Debtors turnover ratio	3.27	3.27	Our debtors turnover ratio is stable due to Company continuous effort in collecting receivable before due date.
Inventory turnover ratio	0.82	1.13	The decrease in ratio is due to increase in average inventory during the year.
Interest coverage ratio	4.30	10.72	The decrease in Interest service coverage ratio is due to decrease in net profit.
Current ratio	2.75	2.04	The current ratio of Company Increase is due to decrease in trade payables during the year.
Debt-equity ratio	0.28	0.23	Increase in ratio is due to new term loans obtained for procurement of property, plant and equipment.
Operating profit margin (%)	16.45%	27.10%	Our operating margin has seen reduced in FY 2023-24 compared with last year due to Increase in Employee benefit expenses and Operational cost.
Net profit margin (%)	9.7%	18.49%	Our net profit margin decreased compared with last year due to Increase in finance cost, Depreciation and Other expenses
Return on Net worth	8.67%	18.25%	Our RoNW decreased by 52% compared with last year due to decrease in Net profit

Risks and concerns

Identifying and assessing risks is crucial to examine the relationship between different types of risks and the cascading impact they could have on an organisations strategic goals.

The product transition in Clean Energy and inspection delays in Space vertical have impacted our revenues and margins in FY 24. Such events could pose a threat for our revenues in future as well. Similarly, the Company imports majority of raw materials for Clean Energy vertical and any supply chain disruption could impact our revenues adversely

However, with our diligent procurement and production planning Global geo-political occurrences might pose supply chain disruptions that could cause a delay in the procurement of raw materials, labour shortages and customer clearances, which could affect revenues. However, the Company follows a defined and comprehensive risk management process, which is integrated with its operations.

The Company has a three tier risk management structure. It has constituted a board risk management committee, apex risk management committee and functional risk management committee to manage risks at various levels. This enables it to identify, categorize and prioritize operational, financial and strategic business risks. To address the identified risks, the Company continues to spend significant time, effort and human resources to manage and mitigate such risks

Internal control systems and their adequacy

The Companys internal audit system has been continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The audit committee reviews reports presented by the internal auditors on a quarterly basis. The committee makes note of the audit observations and takes corrective actions, if necessary. It maintains constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively

Information Technology

The Company has continued implementation of various IT solutions and undertook upgradation of technology in relation to customer order management and dispatches, production planning and reporting, manufacturing processes, financial accounting and scheduling raw material purchase.

We have carried out necessary upgrades in ERP addressing the requirements from different functions including production, finance, sales, manufacturing processes, storage and warehousing, inventory and human resource management to have a greater control over the business.

Our facilities at Unit 2, EOU and Adbatla have been certified for ISO 27001:2013 Information Security Management Sys- tem. The Company is working on getting the ISO 27001:2013 for its new unit at Pasamailaram

The Company has also increased its investment further in automated shop floor management solutions to reduce the cycle time and enhance productivity by addressing product life cycle bottlenecks. MTAR shall continue to focus on investments in IT systems and processes, including backup systems, to improve operational efficiency, customer service, decision-making and reduce manual intervention and risks of system failures and negative impacts these failures may have on the business, improving reliability of operations.

Human Resources

The Company has sufficient manpower to cater to future growth. The Company aligns as per the industry standards . As on March 31, 2024, the Company has 671 staff and 1077 workmen (including on and off rolls) and 724 third party contractors. Historically, the Company has a modest attrition rate due to conducive personnel policies. The attrition rate for FY 24 stands at 5.6% .

The Company has always maintained amicable industry relations . The Company has two recognised labour unions, with registration numbers. There is no labour unrest in seven years.

Our personnel policies are aimed at recruiting talent, facilitating their integration into the Company, encouraging the development of skillsets, paving way for career growth and creating a mutually beneficial relationship to build a world class organisation.

Particulars	FY 2023 - 24	FY 2022-23
Staff, including on and off the rolls	671	603
Workmen including on and off the rolls	1077	952
Third party contractors	724	1010
Total	2472	2565

Disclosure of Accounting Treatment

During the preparation of the financial statement of FY 2023-24 the treatment, as prescribed in an Accounting Standard, has been followed by the Company.

There is no discrepancy in Accounting Treatment as followed by the Company in the last financial year as compared to the previous financial year.

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectation and estimations which may be forward-looking statements within the meaning of applicable securities laws and regulations