NELCO Ltd Management Discussions

MACRO-ECONOMIC SITUATION

The global economic environment entering FY2026-27 is expected to remain complex, shaped by geopolitical realignments, regional trade policy shifts, and evolving monetary conditions. While inflationary pressures are projected to moderate across several economies, global growth is likely to remain uneven, driven more by domestic resilience than by synchronized expansion.

Globally, this fiscal year is defined not by recovery but by structural fragmentation. Persistent tensions in Middle East and ongoing conflicts in Eastern Europe is likely to move beyond energy markets to disrupt high-technology supply chains, satellite manufacturing timelines, and launch schedules. The current landscape reflects a structural shift from traditional globalization towards a security-first economic model, characterized by strategic autonomy and resilience. Global GDP growth has stabilized at approximately 3.3% (as per IMF estimates); however, the macroeconomic narrative is increasingly dominated by geopolitical developments. This volatile backdrop has catalysed a sustained increase in global Defense spending and a sharpened focus on sovereign digital infrastructure, as nations prioritize resilient communication systems capable of withstanding cyber, physical, and geopolitical disruptions. In this context, satellite communication is fast evolving from a niche alternative into a foundational layer of global digital architecture, providing essential redundancy and continuity amid an investment super cycle driven by artificial intelligence and data centre expansion.

According to IMF, India remains the worlds fastest-growing large economy at ~6.5% GDP growth, driven by domestic demand and policy continuity. The Union Budget 2026-27 marks a transition from connectivity expansion to service depth - enabling applications like telemedicine, e-governance, and real-time agri-analytics across remotest regions with satellite networks as the connectivity backbone. Increasingly state governments have started defining their own space policies, decentralizing demand and creating localized infrastructure pipelines. These state-level developments complement national reforms by converting policy into funded, region-specific projects, supporting sustained long-term demand across enterprise and government connectivity, ground infrastructure, gateway services, and managed satellite networks. The key demand drivers for Satcom driven by Indian Governments 2026-27 budget include:

Telecom & Space Outlay: The 38% increase in Telecom outlay to 73,990 crore, along with Space Mission 2.0 and the RISE (R&D in Space Excellence) framework, signals a maturing ecosystem. Rising private participation in satellite launches reduces entry barriers while increasing demand for ground infrastructure and managed services.

AI & Data Centres: Tax incentives for AI-driven data centres are catalysing investment in distributed digital infrastructure, particularly in tier-2 and tier-3 cities. These centres require low-latency, high-availability connectivity to edge networks?€”a gap that hybrid satellite-terrestrial links can effectively fill.

Defence modernisation: A record 7.85 lakh crore budget, including a 22 percent increase in capital expenditure, with strong emphasis on intelligence, surveillance, reconnaissance, secure communications, and maritime domain awareness, all requiring Satcom solutions.

Maritime & Energy Security: Allocations of 10,000 crore for container manufacturing, 20 new National Waterways, and 20,000 crore for carbon capture, utilization, and storage (CCUS) collectively mandate real-time, high-reliability monitoring of offshore assets, vessel tracking, and environmental compliance?€”all requiring satellite connectivity as the only viable medium beyond coastal cellular range. 

Education and Healthcare: The establishment of the Indian Institute of Creative Technologies and plans to set up content creator laboratories across 15,000 secondary schools reinforce the role of satellite based broadband as a critical enabler of digital education. In remote and geographically dispersed regions where terrestrial fibre build out remains limited, satellite connectivity continues to serve as the primary medium for ensuring equitable access to high quality digital learning and healthcare.

Strategic Conclusion for Satcom

The macroeconomic and policy environment for FY 2026-27 is not merely favourable but structurally reinforcing for satellite communication. Geopolitical fragmentation drives demand for sovereign, resilient networks. Indias sustained growth and budget priorities explicitly fund digital infrastructure depth as well, not just breadth as well. State-level policies convert national reforms into localized, funded projects. For Satcom operators, this environment validates their view that in the long-term run satellite connectivity will move beyond being a last resort.

The Companys strategic positioning aligns precisely with these macro drivers. The Companys focus on an always-on communication backbone - resilient to both domestic infrastructure gaps and global geopolitical volatility - directly addresses the security-first paradigm. Its hybrid multi-modal solutions position the Company as a systemic enabler of Indias digital and strategic sovereignty.

COMPANY STRATEGY AND DIRECTIONS:

BUSINESS STRATEGY:

Our Purpose is to create a ubiquitously connected world, empowering businesses and communities, and enabling nationbuilding endeavors. Nelco is a globally trusted and most preferred multi-modal communication solutions partner in India - weaving innovative and cutting-edge Satcom technologies. The Company is committed to sustaining this leadership position through our core values of IMPACT : Integrity & Commitment, Mentoring & Nurturing People, Passion for Technology, Agility, Collaboration, and Teamwork.

Through IMPACT, Nelco creates lasting impact - transforming connectivity into empowerment, businesses into enablers, and Indias Satcom vision into reality.

The Company is enhancing its role to becoming an integrated solution provider, from being only a Satcom connectivity provider. Against this backdrop, the Companys strategy remains anchored in long-term value creation through dependable connectivity solutions, with emphasis on:

Reliability, security, and sector-specific application mapping - tailoring Satcom technologies to the unique demands of Enterprise, Government, Defense, Maritime, and Aero segments.

Disciplined capital allocation - investing in infrastructure, partnerships, and capabilities that offer sustainable returns and strategic relevance.

Partnerships aligned with strategic priorities - including multi-constellation access (GEO/LEO), and global technology alliances for emerging areas.

Nelco creates value for customers by adopting the Satcom technologies best suited for their applications and developing customized products and services through multi-technology partnerships. This approach, combined with a relentless focus on operational excellence and customer-centric innovation, positions Nelco to lead Indias Satcom transformation while remaining true to its purpose of connecting a nation.

INDUSTRY STRUCTURE AND EMERGING TRENDS

A paradigm shift is reshaping Indias satellite communication landscape, driven by progressive policy reforms, growing private sector participation, rapid technological advances, and new global entrants eyeing the domestic market. Worldwide, innovation is pushing the industry towards more agile and efficient architectures-software-defined satellites that reconfigure bandwidth and coverage in orbit are gaining ground, while hybrid multi-orbit networks blending GEO, MEO, and LEO are enabling seamless, high-reliability connectivity. The real path forward lies in integrating these technologies to address Indias unique connectivity challenges across its diverse terrains, from the Himalayas to remote island territories.

The policy environment has been equally transformative. This has set the stage for accelerated evolution, characterized by several key themes:

Multi-orbit architecture adoption will be accelerating, with established GEO services being complemented by emerging LEO constellations.

Hybrid network models that seamlessly fuse satellite and terrestrial infrastructure will increasingly become the new standard for enterprise, government, and all backhaul applications.

A definitive shift toward managed services is underway, moving the industry beyond standalone bandwidth sales to integrated offerings.

Increased participation from global satellite operators in GEO as well as LEO satellites, is expected, enabled by regulatory clarity and Indias large unserved market.

Rising emphasis on security, redundancy, and low latency use cases is driving demand in Defense, disaster management, and real-time enterprise applications.

Indias regulatory framework, having laid foundational reforms, is now expected to mature further through operational guidelines, spectrum allocation decisions, transparent licensing mechanisms, and service-level clarity. For incumbent players like Nelco, long-standing partnerships, and a strong customer base provide a distinct competitive moat as the industry structure evolves to a dynamic, multi-player, multi-orbit ecosystem.

MARKET OPPORTUNITIES:

In the global satellite communication industry, India is fast emerging as an important growth market. Satellite networks are no longer optional but essential for Indias digital economy, enabling truly inclusive connectivity. Despite terrestrial coverage surges, vast stretches of Indian geography remain under-connected or entirely dark, presenting a long-term, substantial opportunity for the Satcom industry. This is over and above the fact that Satellites also helps in much needed media level redundancy and enables many critical applications.

Driven by technological advancements, evolving customer demands, and global trends, several high-impact opportunity clusters are taking shape:

Bridging the Digital Divide: Satellite communication, through GEO and emerging LEO constellations, offers a scalable solution to connect unserved and underserved regions. Mobile network operators are increasingly leveraging satellite backhaul to extend 4G and 5G coverage into remote areas.

Mobility Applications: Satcom enables seamless in-flight connectivity and powers vessel tracking, route optimization, and crew welfare for maritime operations. On land, it supports connected trains, trucks, and commercial fleets with real-time tracking, remote diagnostics, and operational continuity beyond terrestrial networks.

Defense & Strategic Autonomy: Satcom offers secure, resilient, mission-critical communication for encrypted military communications, border surveillance in high-altitude regions, maritime domain awareness in the Indian Ocean Region, and real-time coordination during counterinsurgency operations. With the opening of Indias space sector, private satellite operators are gaining opportunities to deliver dedicated, indigenous Satcom services tailored for Defense under the AtmanirbharBharat framework.

Satellite IoT & Remote Monitoring: The growing adoption of IoT across agriculture, logistics, manufacturing, and healthcare is creating a new wave of demand for ubiquitous, always-on connectivity. Satellite communication is essential for IoT data transmission where terrestrial networks are unreliable or unavailable. Some of the key applications include precision agriculture , logistics, energy, and healthcare. With satellite-IoT integration, even the most remote assets and environments can be digitally managed, boosting operational efficiency and safety. 

Disaster Preparedness & Response: Natural disasters frequently disrupt terrestrial communication networks. Satcom is a critical enabler of disaster recovery, ensuring uninterrupted connectivity during emergencies. Use-cases include deploying VSAT terminals in disaster-hit areas for first responder coordination, real-time monitoring through satellite imaging, and maintaining communication for relief and rescue teams. Satcoms inherent resilience and rapid deployability make it the preferred technology for national disaster preparedness and response strategies.

Smart Cities & Utilities: As India rolls out smart city missions and modernizes power grids, satellite connectivity will enable reliable backhaul for smart metering, surveillance, and environmental monitoring, particularly in areas where fibre rollout is delayed and also as an alternate media.

Telemedicine & Remote Education: Post-pandemic, the demand for satellite-enabled healthcare and learning in remote regions have intensified. Satcom can bridge the last mile for virtual consultations, e-learning platforms, and administrative connectivity for rural schools and health centres.

KEY STRATEGIC PRIORITIES:

The Company is focused on driving long-term, sustainable, profitable growth and building leadership across key sectors through innovation, customer-centricity, and disciplined value creation.

A key strategic cornerstone for the Company is the accelerated roll-out of Low Earth Orbit (LEO) satellite services, once these are commercially available. LEO services - with their inherent low latency, high throughput, and global coverage - are transforming the Satcom landscape. The Company is well-positioned to offer resilient, multi-orbit GEO-LEO services as a clear market differentiator. LEO will not only open up newer segments that were not addressable so far but will also drive significantly higher bandwidth offtake across existing verticals. LEO will also enable newer applications - including real-time remote operations, low-latency edge computing, and dynamic mobility solutions - that cannot be served by Satcom solutions using GEO satellites currently.

The Companys strategic agenda rests on four pillars: market expansion, infrastructure leadership, strategic partnerships, and innovation leadership .

To translate this into action, Nelco has identified the following key strategic priorities for FY2026-27 and beyond :

Solution-led Growth: Expand application-specific offerings across sectors, offering managed services & solutions along with multi-orbit GEO-LEO hybrid connectivity services.

Infrastructure Resilience: Strengthen gateway, teleport, and network redundancy capabilities to support multiorbit (GSO & NGSO) operations and ensure extremely high uptime required for mission-critical customers.

Partnership Enablement: Deepen collaborations with global satellite operators (existing and new LEO entrants), technology providers, and domestic ecosystem partners.

Operational Excellence: Enhance service delivery through automated network monitoring, Al-driven fault prediction, and customer portal upgrades, and enhancing overall operational efficiency.

Future Readiness: Prepare networks and systems for multi-orbit and next-generation service models.

Policy Advocacy: Proactively engage with regulators and the Govt bodies to shape spectrum allocation, licensing frameworks, and security norms that enhances the Satcom industry.

Talent & Culture: Invest in upskilling teams on next gen Satcom technologies, data analytics, and customer solutioning, while embedding the IMPACT values across all operations.

These priorities reflect the Companys unwavering focus on sustainable growth, service integrity, long-term relevance, and its commitment to being the trusted architect of Indias Satcom-enabled future. The Company is aligning infrastructure investments, partnership strategies, and solution development with Indias unique needs, to ensure sustainable profitable growth in the future.

PERFORMANCE

The Company operates in a single reportable segment, namely Network Systems, comprising Satellite Communication (Satcom) Services, which also includes relevant equipment sales, maintenance, and other allied services. The Company also has a wholly owned subsidiary, Nelco Network Products Limited (NNPL).

The current period under review is from April 1,2025, to March 31,2026

During the year, Nelco demonstrated resilience amidst a competitive landscape.

Consolidated Revenue: Reported at 307 Crores (as against 305 Crores in FY25)

Standalone Revenue: Reported at 198 Crores (as against 205 Crores in FY25)

Business Performance & Market Position:

The Companys revenue trajectory reflects a portfolio in transition, where accelerated growth in emerging segments is progressively offsetting structural declines in some of the traditional verticals. The commercial ramp-up of LEO services - currently pending regulatory approvals in India - remains a pivotal catalyst, and this delay is directly impacting growth across multiple segments. Few select segments are also experiencing natural lifecycle contractions, further dampening near-term revenue growth. Additionally, input costs are rising due to the prevailing geopolitical situation, exerting further pressure on margins.

The Company maintained a dominant ~40%+ revenue share in the Indian Satcom market. The Company registered strong traction across Maritime and Aero in-flight connectivity verticals, with these segments delivering robust incremental growth. Nelco also deepened its footprint in Government sectors, securing an expanded share of new business during the year. Progress continued steadily on building innovative solutions and extending service offerings into emerging use-cases. Concurrently, operational processes were refined to improve agility, drive efficiency gains, and enable faster, more reliable customer service delivery.

Newer value-added services and customized solutions are being increasingly deployed to sharpen customer responsiveness, address niche sector requirements, and shape next-generation Satcom offerings. These initiatives are poised to strengthen Nelcos ability to meet dynamic customer needs while advancing Indias broader digital connectivity vision.

With momentum poised to build up as new segments scale and regulatory clearances are granted by the government, the Company remains well-positioned to return to a sustained growth trajectory in the coming years. The Company has invested in building new segments, which will start generating accelerated revenue in the coming years.

Key Financial Ratios (Consolidated)

Ratio	FY 2025-26	FY 2024-25	Remarks
Debt-Equity Ratio	0.46	0.30	Debt : Equity ratio increased on a/c of borrowing.
Interest Coverage	3.17	8.78	Interest coverage ratio reduced due to lower profitability as compared to previous year.
ROCE	7%	15%	ROCE reduced due to lower profitability in current year
Net Profit Margin	1 %	3%	Net profit margin reduced from 3% to 1 %.
Inventory Turnover Ratio	1.10	0.96	Due to higher inventory as compared to previous year, inventory ratio increased.

Key Financial Ratios (Standalone)

Ratio	FY 2025-26	FY 2024-25	Remarks
Debt-Equity Ratio	NIL	-	-
Interest Coverage	40.28	24.53	Interest coverage ratio improved due to lower finance cost.
ROCE	9%	18%	ROCE reduced due to lower profitability in current year.
Net Profit Margin	3%	5%	Net profit margin reduced from 5 % to 3 %.
Inventory Turnover Ratio	-	-	-

FUTURE OUTLOOK & EMERGING OPPORTUNITIES

A confluence of factors - progressive policy reforms, rapid tech innovation, next-generation satellite systems including NGSO, and rising demand across Enterprise, Government, and Defense - is propelling Indias Satcom industry into a high- growth trajectory. The next 3 - 5 years represent a potential Golden Age for Indian Satcom. Nelco is uniquely positioned to lead in several transformative areas in the coming years .

Over the next year, the industry is poised for transformation with the anticipated commercial rollout of LEO satellite services. These will enable low-latency, high-throughput applications that complement existing GEO offerings. Hybrid terrestrial- satellite networks will emerge as a mainstream solution across sectors. Looking ahead, the industry will shift from selling pure satellite bandwidth services to delivering application-driven, integrated platforms.

Some of the new opportunities that are likely to emerge in the near-term of 3 to 5 years include the following:

Direct-to-Device (D2D): A multi-billion-dollar opportunity to eliminate Indias "dark zones" by connecting standard smartphones directly to satellites, enabling messaging, emergency alerts, and eventually voice services without specialized hardware through global partnerships.

Satellite IoT at Scale: Bridging Indias digital divide by enabling applications like precision agriculture (soil moisture monitoring), smart logistics (container tracking across rail/road), and utility monitoring (pipeline/power grid surveillance) in regions where terrestrial fibre is unviable, powered by low-power satellite networks.

Defense & Strategic Autonomy: Indigenous, encrypted communication links under the Atmanirbhar Bharat framework, with long-term, capital-efficient contracts for secure military communications, border surveillance, and disaster response.

Connected Vehicles & Mobility: Satellite-enabled telematics for commercial fleets, railways, and vehicles in remote corridors, complementing terrestrial networks for seamless nationwide tracking.

Disaster Management & Climate Resilience: Real-time early warning systems, post-cyclone connectivity restoration, and remote sensing integration for government agencies, offering mission-critical, high-impact solutions.

Telemedicine & Remote Education: Enabling healthcare and learning in the Himalayas, Northeast, islands, and other unserved regions, thereby moving beyond connectivity to deliver managed application platforms.

With hybrid multi-modal solutions, value-added services, sector-specific offerings, infrastructure readiness, and strategic global alliances, Nelco stands fully equipped to leverage the full spectrum of opportunities in Indias unfolding Satcom growth story.

RISK MANAGEMENT

To achieve sustainable and profitable business growth while continuously strengthening governance practices, the Company has adopted a multi-layered Risk Management Policy. Under this policy, risks are not merely identified and assessed; they are managed through an integrated approach using Resilience frameworks to recover from high-impact disruptions, using robust controls, redundancies, and contingency planning. Simultaneously, a Risk Interactivity framework maps how different risk categories intersect and amplify each other, enabling a proactive and dynamic response.

The Company-level Risk Management Committee, comprising the Managing Director & CEO, Chief Financial Officer, Chief Risk Officer, and key business and functional leaders, ensures that all existing and emerging risk exposures are reviewed regularly. This Committee also oversees the development and implementation of targeted mitigation strategies. The enterprise risk management framework embeds risk ownership across core functions, facilitating informed decisionmaking at every level of the organization. The Board-level Risk Management Committee, meeting three times annually, provides oversight for critical exposures and their mitigation.

In the current dynamic environment of Indias Satcom industry, the Company has intensified its focus on several key risk areas:

Structural Risks

Regulatory and Policy Landscape: Indias Satcom sector is undergoing rapid policy evolution, with ongoing discussions regarding spectrum assignment, usage charges, and new authorizations. The Company maintains continuous engagement with regulatory bodies and industry associations to proactively manage these changes and ensure market access.

Infrastructure: The Companys operations depend on critical physical and satellite infrastructure, susceptible to natural disasters, power outages, cyber incidents, or human error. Unforeseen satellite failure could affect service continuity until alternative transponder capacity is available. The Company builds resilience through access to multiple satellites, teleport redundancy, and hybrid networks.

Volatility & Macro-economic Risks

Supply Chain and Geopolitical Risks: The ongoing conflict in the Middle East, has introduced fresh volatility into global logistics and component sourcing. While semiconductor shortages have eased, geopolitical tensions threaten the stability of critical electronics and specialized Satcom hardware. The Company is actively managing its supply chain through strategic partnerships, diversified sourcing, inventory planning and maintaining strategic buffer stocks. This is particularly critical given the sectors reliance on imported satcom equipment.

Volatility of Demand: Demand for satellite services is influenced by macroeconomic trends, availability of alternate technologies, government spending, and sectoral shifts. Fluctuations in key verticals could affect short-term revenue and profitability. The Company is developing new segments to reduce dependency on a few markets.

Foreign Currency and Financial Risks: Foreign currency exposures are closely monitored through appropriate advisory inputs and board-approved hedging strategies. All net forex positions, including derivatives, are periodically reviewed and kept within defined risk thresholds.

Operating Risks

Competition and Market Dynamics: The entry of global players into the Indian market, alongside established domestic entities, is intensifying competition. The Company continuously explores new use cases, markets, and strategic partnerships to mitigate industry-specific volatility and maintain its competitive edge. This approach ensures the Company can navigate uncertainties and respond effectively to external changes.

Technology and Security: Rapid evolution in Satcom technologies creates challenges of adoption and obsolescence. The Company mitigates this through investment in scalable, interoperable systems and long-term OEM partnerships. Migration to newer systems involves cost and transitional complexity, which may temporarily impact margins. With heightened cybersecurity threats, the Company is proactively securing its infrastructure. The Company has reinforced its resilience framework with advanced encryption and redundant network paths to ensure 99.9% uptime.

Operational Resilience: Security frameworks are regularly reinforced across all sites. The Company continues to invest in cybersecurity, physical infrastructure safety, and compliance with data protection protocols.

INTERNAL CONTROL ON FINANCIAL RECORDS:

The Company maintains robust internal controls that have been further strengthened in the past few years to align with its expanding digital footprint and the scale of its Satcom operations. These controls are designed to ensure uncompromising integrity of financial reporting, rigorous safeguarding of assets, and full compliance with the evolving statutory and regulatory frameworks governing Indias Satcom industry.

The internal control architecture is grounded in documented policies across critical functions - including Revenue Assurance, Network Operations, Project Execution, Finance, Procurement, Human Resources, and Legal Compliance. These frameworks are continuously reviewed and updated for integration of new services and business models, in alignment with changes in operational and regulatory environments.

To ensure independent oversight, the Company engages an independent Chartered Accountant firm to execute a risk-based internal audit plan, which is reviewed quarterly by the Audit Committee. In FY2025-26, the scope of these audits has been expanded to include specialized assessments of cyber-financial risks. Audit findings, along with proactive improvement actions, are presented to the Audit Committee of the Board, which regularly monitors the adequacy of internal control measures to ensure continued maturity.

Key Strategic Focus Areas:

Regulatory & Statutory Compliance: Ensuring 100% adherence to the Telecommunications Act 2023 and updated IN-SPACe guidelines.

Asset Safeguarding: Protecting both tangible ground infrastructure and critical intangible digital assets and licenses.

Financial Precision: Guaranteeing timely and accurate reporting through the use of data analytics and automated reconciliation tools.

Ethical Governance: Strict alignment with the Tata Code of Conduct , fostering a culture of transparency and accountability across all levels of the organization.

Continuous Improvement: Utilizing process audits and third-party quality reviews to identify and bridge operational gaps in real-time.

The Statutory Auditors, S.R. Batliboi & Associates LLP, have evaluated and confirmed the adequacy of the Companys internal financial controls. With robust internal reviews, process audits and external specialized assessments, the Company ensures that its financial controls and operational maturity remains resilient, scalable, and benchmarked against global best practices.

KEY DEVELOPMENTS IN HUMAN RESOURCES:

People are the architects of our connected future. As of March 31, 2026, our workforce stands at 106 professionals. The Company continued to foster a performance-oriented and inclusive culture, anchored in values of IMPACT (Integrity & Commitment, Mentoring & Nurturing People, Passion for Technology, Agility, Collaboration, Teamwork), ensuring our team is equipped to manage the transition to hybrid multi orbit satellite technologies and services. With respect to industrial relations, the Company maintained cordial relations with its employees and employee feedback and engagement mechanisms were strengthened to enhance workplace experience.

CAUTIONARY STATEMENT:

This Management Discussion and Analysis contains forward-looking statements describing Companys objectives, projections, expectations, or predictions based on managements current views and assumptions. Actual outcomes may vary materially from those expressed or implied due to changes in macroeconomic conditions, government policies, regulatory developments, or other external factors beyond the Companys control.