NELCO Ltd Management Discussions

MACRO-ECONOMIC SITUATION

The global economic landscape in FY2025–26 reflects a period of transition and cautious optimism following a year of uneven recovery across regions. The International Monetary Fund (IMF) projects global GDP growth to be around 3.2% in 2025, from 3.4% in 2024, as tighter monetary policies and trade realignments weigh on demand. This reflects the ongoing recalibration of fiscal and trade strategies by major economies amid heightened protectionism and tighter financial conditions. The United States, for instance, has reintroduced tariff barriers impacting trade flows with key partners such as China, Japan, and the European Union. These measures have rekindled supply chain uncertainties and added inflationary pressure across commodity markets. For India, while these global headwinds may dampen external demand, they are likely to be offset by robust domestic drivers, including consumption, infrastructure investment, and policy continuity-allowing the economy to maintain its growth momentum.

India continues to be positioned among the fastest-growing major economies, with GDP growth expected to be in the range of 6.2% for FY2025–26, as per IMF and Reserve Bank of India (RBI) projections. The countrys economic performance is projected to be supported by strong private demand, public capital expenditure, and a stable macroeconomic environment. The RBI has maintained a cautiously accommodative stance, recently easing policy rates slightly to support investment and manage downside risks from global volatility.

The Union Budget 2025–26 reinforces this momentum, with a sizeable capital expenditure plan amounting to approximately 3.4% of GDP, focusing on long-term infrastructure development and rural inclusion and aiming to bring in private investment. Key focus areas include transport networks, digital infrastructure, renewable energy, agriculture, MSMEs, and tourism. The continued push towards rural digital connectivity aims to bring high-speed internet to over 600,000 villages, and also bolster access to digital banking, healthcare, and online education.

Indias space-tech ecosystem is gaining traction as a strategic growth sector, with more than 200 startups and several hundred MSMEs contributing across launch, ground infrastructure, and satellite services. Indias space economy saw $300+ million in private funding in 2024, driven by IN-SPACes eased satellite licensing and ISROs shared launch infrastructure. This ecosystem is aligned with national ambitions to build resilient digital infrastructure and enhance Indias global space capabilities.

Additionally, budgetary focus on sectors like agriculture and MSMEs includes schemes such as the Prime Minister Dhan- Dhaanya Krishi Yojana to modernize agri-infrastructure and productivity. MSMEs are supported through enhanced credit guarantee mechanisms and entrepreneurship development initiatives. Meanwhile, the tourism sector has been earmarked for high-potential destination development to boost domestic employment and regional growth. Digital inclusivity through robust connectivity will be imperative for these initiatives across the country.

With Indias long-term ambition of achieving "Viksit Bharat 2047," the nation is laying the foundation for a more resilient, inclusive, and self-reliant economy. Cross-ministerial initiatives like the PM-SURAJ portal (single-window for rural entrepreneurs) and RISE (R&D in Space Excellence) are expected to play a pivotal role in unlocking growth, ensuring policy coherence, and sustaining macroeconomic transformation in the years ahead.

The Govt. has taken up many initiatives which require effective communication to the remotest parts of the country. The ubiquitous reach of Satellite Communication (Satcom) and its uninterrupted connectivity will be a key enabler for all such initiatives to be successful in India.

The Company aims to be a globally trusted and most preferred communication solutions partner, using innovative and cutting-edge Satcom technologies. The Company creates value for customers by adopting the Satcom technologies best suited for their applications and creating customized products and services through partnerships in multiple technologies. The Company endeavors in helping in creating a ubiquitously connected world, enabling nation-building endeavors, and empowering businesses and communities.

The Indian satellite communication (Satcom) industry is undergoing a paradigm shift, driven by progressive policy reforms, increasing private sector participation, rapid technological advancements and newer players entering the India market. Technological innovation is reshaping the satellite communications industry globally. The industry is moving towards much more flexible and efficient solutions. Software-Defined Satellites are gaining prominence for their ability to dynamically reconfigure bandwidth allocation and coverage patterns while in orbit. Hybrid multi-orbit networks, combining GEO, MEO and LEO satellites, are being deployed to deliver seamless and highly reliable connectivity services. These advancements will soon be available in India and help fulfilling Indias unique connectivity needs across its diverse geography. The policy environment has been equally transformative. The Indian Space Policy 2023 and Telecommunications Act 2023 have fundamentally restructured the regulatory framework.

The global satellite communication industry stands at an inflection point, with India positioned to become one of its important growth markets. As India races toward its trillion-dollar digital economy vision, satellite networks are becoming a critical backbone for inclusive connectivity. Even with rapidly increasing terrestrial coverage, a significant part of the countrys geography remains unconnected, presenting an opportunity for the Satcom industry. The Satcom services market in India is witnessing several emerging opportunities driven by technological advancements, evolving consumer demands, and global trends.

Satellite communication, through GEO and emerging LEO constellations, offers a scalable solution to bridge the digital divide. The convergence of satellites with terrestrial networks in hybrid architecture plays a key role in remote and rural regions where fiber or terrestrial networks are economically unviable or unreliable. Mobile network operators are increasingly using satellite backhaul to extend 4G and 5G coverage. Satcom is best suited to offer uninterrupted connectivity for aircraft and marine vessels. For aviation, Satcom delivers seamless in-flight connectivity (IFC) for passengers while enabling real- time aircraft health monitoring - ensuring both passenger comfort and operational efficiency. In maritime operations, it powers vessel tracking, route optimization, and weather updates, while providing crew welfare communication. Satcom enables seamless connectivity for ATMs and bank branches in remote areas, ensuring uninterrupted real-time data access. It enhances financial inclusion by providing reliable communication links for secure banking operations, even in regions with poor terrestrial infrastructure. Satcom offers secure, resilient, and mission-critical communication capabilities and supports a wide range of use-cases such as encrypted military communications, border surveillance in high-altitude regions, maritime domain awareness in the Indian Ocean Region, and real-time coordination during counter- insurgency operations. With opening up of the space sector, private satellite operators are likely to gain opportunities to offer dedicated Satcom services tailored for defense. The growing adoption of IoT solutions across industries - from agriculture and logistics to manufacturing and healthcare, is creating a new wave of demand for ubiquitous, always-on connectivity. Satellite communication is essential for ensuring IoT data transmission in locations where terrestrial networks are unreliable or unavailable. Applications include precision agriculture with remote sensing and automated irrigation, GPS tracking of fleets and cargo in logistics, predictive maintenance in oil and gas pipelines, and remote patient monitoring in rural healthcare. With satellite-IoT integration, even the most remote assets and environments can be digitally managed, boosting operational efficiency and safety. Natural disasters often disrupt terrestrial communication networks. Satellite communication is a critical enabler of disaster recovery, ensuring uninterrupted connectivity during emergency situations. Use-cases include deploying VSAT terminals in disaster-hit areas for coordination among first responders, facilitating real- time monitoring through satellite imaging, and maintaining communication for relief and rescue teams. Satcoms inherent resilience and rapid deployability make it a preferred technology for national disaster preparedness and response strategies.

The Company focuses on driving long-term sustainable profitable growth, and building leadership in key growth sectors through innovation, and value creation. The company focuses on market expansion in multiple segments; strengthening policy advocacy; and aligning infrastructure investments with long-term trends.

• Market Expansion – continuously innovating its portfolio with industry-tailored solutions and exploring new verticals through indigenous, customized offerings;

• Infrastructure Leadership – deploying cutting-edge technologies for satellite gateways;

• Strategic Partnerships – collaborating with global technology providers, satellite operators, and stakeholders to amplify market reach and competitive differentiation; and

• Innovation Leadership – pioneering multi-modal next-gen Satcom solutions adapted to Indias unique needs, backed by all requisite licenses and a commitment to secure, scalable connectivity.

These initiatives have enabled Nelco to not only expand its addressable market but also establish itself as an innovation enabler across the Satcom value chain, offering hybrid, multi-modal and value-added solutions customized as per the requirements of each sector.

The Company operates in a single reportable segment, namely Network Systems, comprising Satellite Communication (Satcom) Services, which include 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, 2024 to March 31, 2025

During the year, the revenue of the Company on a consolidated basis stood at Rs 305 Crores, as compared to Rs 320 Crores in the previous financial year. On a standalone basis, the Company recorded a revenue of Rs 205 Crores, as against Rs 223 crore in FY2023–24.

The Company continues to maintain a strong market position, with an estimated 40% share of the Satcom industrys revenue. It further strengthened its presence in key verticals, including the Enterprise and In-Flight & Maritime Connectivity (IFMC) segments, by securing a larger share of incremental business during the year. During the year, the Company made sustained progress in building new solutions and expanding services across emerging sectors and use-cases. The Company offers multi-modal hybrid solutions for multiple sectors. The Company also further optimized its operational processes to enhance agility, drive efficiency, and ensure more responsive service delivery across its customer base.

The Company is increasingly leveraging digital tools, data analytics, and automation to improve customer responsiveness, further streamline operations, and develop next-generation Satcom solutions. These efforts are expected to enhance the Companys ability to meet evolving customer needs while supporting Indias broader digital and connectivity goals. Significant changes in key financial ratios as compared to the previous financial year are as under:

The Indian satellite communication (Satcom) industry is entering a high-growth phase, driven by progressive policy reforms, technological advancements, availability of NGSO satellites and surging demand across enterprise and government sectors. In the near term (2025-2026), the industry is poised for transformation with the anticipated rollout of LEO satellite services, which will enable low-latency applications and complement existing GEO offerings. The convergence of satellite networks with terrestrial 5G is creating hybrid connectivity solutions. Key segments like Maritime, Aviation (in-flight connectivity), Enterprises, Govt. and Defense are expected to drive growth, supported by evolving technologies. Looking ahead to 2027-2030, emerging opportunities such as direct-to-device (D2D) communications and Satellite IoT will reshape the market landscape. Defense and strategic sectors present a significant opportunity, with Indias push for indigenous secure communication systems under the Atmanirbhar Bharat initiative. Additionally, the rise of application- driven solutions such as precision agriculture, smart logistics, and disaster management, will move the industry beyond traditional bandwidth services toward value-added, integrated platforms.

Nelco focuses on offering hybrid multi-modal solutions along with value-added services for its key sectors. More sector specific customized solutions, infrastructure readiness, and strategic global alliances make the Company well-positioned to capitalize on Indias Satcom growth story.

• Infrastructure: Nelcos operations rely heavily on critical physical and satellite infrastructure. These are susceptible to natural disasters such as earthquakes, _oods, and extreme weather, as well as power outages, cyber incidents, or human errors. Additionally, any unforeseen satellite failure could affect service continuity until alternative transponder capacity is available. The Company continues to build resilience through access to multiple satellites, teleport redundancy and hybrid networks.

• Regulatory Environment: The Satcom sector in India is governed by multiple regulatory bodies including the Department of Telecommunications (DoT), IN-SPACe, Department of Space and NSIL. Although reforms such as the Indian Space Policy 2023 and administrative spectrum allocation have improved the regulatory climate, any major unfavorable changes in the regulations could impact multiple areas like addressable market, profitability, etc. The Company proactively engages with industry bodies and regulatory authorities to minimize any potential adverse impact.

• Exchange rate fluctuations: A significant portion of Satcom infrastructure, particularly bandwidth leasing and equipment procurement, has exposure to foreign exchange risks. While contracts are negotiated in rupee terms wherever possible, volatility in USD/INR impacts the Companys cost structure. The Company monitors currency movements and uses appropriate hedging mechanisms to manage exposure.

• Volatility of demand: Demand for satellite services is influenced by macroeconomic trends, government spending, and sectoral shifts. Fluctuation in demand from one or more key verticals could affect revenue and profitability in the short term. The Company is developing multiple new segments to minimize dependency on a few market segments.

• Supply chain volatility: While semiconductor availability related disruptions have subsided, lead times may be volatile due to global geopolitical situation. The Company continues to diversify its supplier base, wherever possible, and maintains bu_er inventories of critical hardware components.

• Technology Risk: Rapid technological evolution in Satcom technologies presents a dual challenge of adoption and obsolescence. Nelco mitigates this by investing in scalable and interoperable systems and forging long-term OEM partnerships. Migration to newer systems involves cost and transitional complexity, which could temporarily impact margins.

• Competition Risks: Competition in the India Satcom market is likely to intensify with new Indian and Foreign players entering the market. The Company continues to strength its competitive differentiators, product innovation and service quality while leveraging its global partnerships.

With the main objective of ensuring sustainable and profitable business growth and strengthening governance practices, the Company has established a comprehensive Risk Management Policy under which risks are identified, assessed, and mitigated proactively across business operations. The Company has also implemented a Resilience framework which enables a differentiated approach for various risks - mitigation is by robust controls and redundancies and mitigation by innovation and newer approaches, as required.

The Risk Management Committee at the Company level comprises the Managing Director & CEO, Chief Financial Officer, Chief Risk Officer, and key business and functional leaders. This Committee ensures that existing and emerging risk exposures are reviewed regularly and that appropriate mitigation strategies are developed and implemented. The Companys enterprise risk management framework enables informed decision-making at all organizational levels by embedding risk ownership into core functions. The Company has actively integrated risk awareness into operational planning to manage uncertainties and respond effectively to changes in the external environment. The Board-level Risk Management Committee reviews the Companys risk landscape three times annually and provides oversight into critical exposures and mitigation actions. The Company continues to deploy targeted risk mitigation approaches across its key focus areas, as detailed below:

• The Company is continuously evaluating opportunities to improve profitability across established and emerging business segments, while exploring new use cases and markets to insulate operations from industry-specific volatility. This includes close monitoring of global Satcom trends, the adoption of advanced technologies, and expanding strategic partnerships.

• The Company regularly engages with regulatory bodies - both independently and through industry associations - to stay ahead of policy developments and proactively respond to changes that may affect its market access or service offerings.

• Foreign currency exposures are closely monitored, and the Company takes appropriate advisory input and uses board-approved hedging strategies to manage exposure. All net forex positions, including derivatives, are reviewed periodically and kept within defined risk thresholds.

• The Company has strengthened its supply chain through strategic partnerships, inventory planning, and multi- source procurement to enhance resilience against global supply disruptions.

• Security frameworks are regularly reviewed and reinforced across all sites. The Company continues to invest in cybersecurity, physical infrastructure safety, and compliance with data protection protocols to mitigate operational and reputational risks.

The Company has instituted a robust and well-documented internal control system commensurate with the scale and nature of its operations. These controls are designed to ensure the integrity of financial reporting, safeguarding of assets, enhancing operational efficiency, and promoting compliance with applicable statutory and regulatory frameworks.

Internal controls are supported through documented policies and process manuals covering key functions such as Revenue Assurance, Network Operations, Project Execution, Finance, Procurement, Human Resources, and Legal Compliance. These frameworks are reviewed and updated periodically in alignment with changes in operational and regulatory environments. The Company engages an independent Chartered Accountant firm to conduct risk-based internal audits as per an annual audit plan approved by the Audit Committee. The scope includes detailed assessment of key business and financial processes, adherence to controls, and evaluation of risk exposure. Audit findings and improvement actions are presented to the Audit Committee of the Board, which regularly monitors the adequacy and implementation of internal control measures.

• Ensuring compliance with defined policies and statutory regulations

• Safeguarding of tangible and intangible assets

• Timely and accurate financial reporting

• Alignment with Tata Code of Conduct and ethical governance practices

• Identification of improvement areas

The Statutory Auditors, S.R. Batliboi & Associates LLP, have also confirmed the adequacy of internal financial controls with reference to financial reporting. The Company supplements its internal reviews through external assessments, including process audits and quality improvement reviews by third-party agencies, to strengthen control effectiveness and operational maturity.

The Company continued to foster a performance-oriented and inclusive culture, anchored in values of excellence, agility, and accountability. Talent development remained a strategic priority, with focused efforts on strengthening capabilities aligned to future business needs.

As of 31^st March 2025, the Company maintained a headcount of 104 employees. With respect to industrial relations, the Company maintained cordial relations with its employees and employee feedback mechanisms were strengthened to enhance workplace experience.

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, expectations, or predictions may be considered forward-looking within the meaning of applicable laws and regulations. Actual results 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.