Rossell Techsys Ltd Management Discussions

Global Economic Environment

The global economy is navigating a complex transitional phase marked by moderate recovery, evolving risks, and cautious optimism. As per the International Monetary Fund (IMF) World Economic Outlook released in January 2025, global GDP is projected to grow at 3.3% in both 2025 and 2026, remaining below the historical trend of 3.7%. Inflation is expected to decline from 4.2% in 2025 to 3.5% in 2026, as major central banks step away from aggressive monetary tightening and supply-side pressures subside.

Advanced economies such as the United States, Germany, and Japan are benefiting from resilient consumer spending and improving supply chains. However, emerging markets face tighter financial conditions, high external debt, and currency pressures. The IMF has highlighted that unresolved policy frictions and increasing trade protectionism—particularly U.S.-led tariff escalations—could downgrade global growth to 2.8% in 2025.

Geopolitical uncertainties, especially in the Middle East, continue to impact energy markets and inflation expectations. On the positive side, digital transformation and AI-led productivity gains offer medium-term support to economic momentum. However, the benefits are unevenly distributed and tempered by concerns around regulatory readiness and employment shifts.

Monetary easing in select emerging markets, coupled with more stable commodity prices, is expected to reduce volatility. Nonetheless, tight global financial conditions mean that low-income and vulnerable economies remain susceptible to capital outflows and fiscal stress.

The A&D Context.

The global macroeconomic landscape has both opportunities and challenges for aerospace and defence engineering companies like Rossell Techsys Ltd., which are embedded in international supply chains. Slower global GDP growth may moderate procurement cycles, especially in the civil aerospace segment. Still, defence spending by major nations is expected to remain steady or increase, driven by geopolitical imperatives.

Rossells export-oriented business model depends on the stability of global demand for systems integration, electrical wiring harnesses, avionics panels, and interconnect solutions. As defence OEMs continue to invest in legacy upgrades, mid-life enhancements, and mission-critical system modernisation, reliable Tier-1 suppliers like Rossell are well positioned to meet quality and cost requirements.

Global disinflation and easing input cost pressures offer relief on raw materials and imported components, improving margin stability. Currency fluctuations and trade protectionism, however, can introduce procurement risks and cost unpredictability—necessitating strategic hedging and supply chain agility.

Furthermore, the global shift toward digital engineering, aerospace electrification, and AI-integrated production methods is aligned with Rossells investment in technology-driven manufacturing and precision quality systems. Global macroeconomic stability will therefore play a crucial role in shaping Rossells business continuity, contract pipeline, and export competitiveness.

Indian Economic Overview

India remains a standout performer in the global economic arena. With GDP growth projected between 6.5% and 7.0% in FY 2024–25 and stabilising at 6.5% in FY 2025–26, the country continues to be the fastest-growing major economy. This growth is underpinned by strong private consumption, government-led infrastructure investments, improved logistics, and sectoral reforms aimed at boosting manufacturing productivity.

During FY 2023–24, construction and manufacturing emerged as growth leaders, expanding by 10.7% and 8.5%, respectively. These sectors contributed significantly to Gross Value Added (GVA), reflecting the resurgence in industrial activity. According to the Reserve Bank of India (RBI), credit flows to MSMEs rose by 14.1% YoY, while lending to NBFCs and services grew over 20%, indicating deepening financial penetration and broader access to formal credit.

The RBI has maintained the repo rate at 6.5%, balancing inflation control with growth support. Retail inflation has moderated and is expected to remain within the 2–6% tolerance band, converging towards the 4% target in the medium term.

Despite a strong economic foundation, India remains exposed to global risks such as commodity price volatility, food inflation, trade disruptions, and emerging market contagion. However, with stable macroeconomic indicators, robust policy frameworks, and a growing industrial base, India is well-positioned to sustain its growth momentum.

The A&D Context.

Indias economic trajectory directly supports the growth ambitions of indigenous aerospace and defence companies. The consistent expansion in manufacturing and construction contributes to capacity creation, infrastructure readiness, and demand for precision components—laying a strong foundation for companies like Rossell Techsys Ltd., which deliver value-added engineering services and subassemblies to global and domestic defence OEMs.

The growth in MSME and NBFC credit access also strengthens Rossells ecosystem of material suppliers and logistics partners. A financially stronger supply chain ensures timely deliveries, adherence to quality benchmarks, and scalability—factors that are vital for executing complex aerospace contracts.

Indias defence modernisation budget and localisation efforts, including defence corridors and offset obligations, have created increased opportunities for qualified domestic suppliers. Rossell, with its proven record in wire harnesses, cockpit panels, and electromechanical assemblies, is strategically positioned to serve both the Indian armed forces and MNC partners fulfilling localisation mandates.

The stable interest rate regime and manageable inflation environment support better working capital management, particularly important in long-cycle projects. The governments emphasis on high-value exports, strategic autonomy, and public-private defence collaboration further strengthens the outlook for firms like Rossell that have invested in technical capability, certifications, and global integration.

Industry Overview -Aerospace & Defence

Record revenue and profit despite production bottlenecks

According to a report by PWC (2025), the global aerospace and defence (A&D) sector achieved historic highs in 2024, with total industry revenue reaching $922 billion, a 9% increase over 2023. This performance was especially notable considering that aircraft production volumes remained subdued. The profit trajectory followed a similar pattern, with operating profit hitting $84 billion, an 11% rise from the previous year. Civil aviation suppliers, in particular, were instrumental in driving these gains, as they capitalised on robust aftermarket parts and service revenues that offset reduced output from OEMs.

Key Financial Metrics	2024	2023	Change
Revenue	$922 billion	$843 billion	+9%
Operating Profit	$84 billion	$75 billion	+11%
Operating Margin	9.1%	8.9%	+20 bps

Growth was led by aftermarket specialists like TransDigm, GE Aerospace, and Collins Aerospace, who benefited from ageing aircraft fleets and a slowdown in new aircraft deliveries, which prolonged the lifecycle of existing platforms. This, in turn, ensured consistent demand for service and replacement parts.

Commercial aviation: Recovery with challenges

RPK recovery and OEM struggle In 2024, global Revenue Passenger Kilometres (RPKs) increased by 10.4%, surpassing pre-pandemic levels by nearly 4%. The recovery in passenger travel marked a significant milestone, signalling the sectors resurgence. Airlines globally operated at a record load factor of 83.5%, indicating not only growing demand but also efficient fleet utilisation.

However, OEM production could not keep pace. Airbus delivered 766 aircraft, which, while a 4% increase from the previous year, was still 11% short of its 2019 peak. Boeing delivered 348 aircraft, down 34% YoY due to a 53-day labor strike and regulatory production curbs. Despite these challenges, total industry backlog stood firm at over 14,000 units, representing approximately a decades worth of production at normal output rates.

Metric	2024	2023	Change
RPK Growth	+10.4%	-6%*	Recovery
Aircraft Delivered	1,114 units	—	Moderate
Passenger Load Factor	83.5%	82.3%	Record
Aircraft Backlog (value)	$994 billion	$973B	+2%

*2023 RPK compared to 2019

The industrys inability to meet demand has extended the lifespan of older aircraft, creating strong tailwinds for companies focused on the aftermarket. Moreover, this dynamic has opened the door for sustained double-digit growth in both revenues and profits within the aftermarket segment.

Defence segment: Demand surge and production lag

Elevated spending, margin compression

Global defence spending reached $2.178 trillion in 2024, a new record that eclipsed Cold War-era peaks. Countries like Israel and Russia reported significant increases in military expenditures, with Israel up 65% and Russia at least 38%. NATO nations and East Asian countries also elevated their defence budgets, reflecting mounting geopolitical tensions. This surge led to an 11% increase in backlog across top defence contractors, but production has lagged, revealing constraints in scaling output fast enough to meet rising demand.

	2024	2023
Company	Backlog (US$ B)	Backlog (US$ B)	YoY Change
Lockheed Martin	176	161	+9%
Northrop Grumman	92	84	+9.5%
Raytheon (RTX)	93	78	+19.2%
Total (Top 11 companies)	831	747	+11%

Although revenue for the top defense firms grew 7% YoY, margins declined. The average operating margin for the top 11 defense companies fell to 6.9%, weighed down by charges on troubled programs like Boeings KC-46A and Lockheed Martins classified project. While US firms saw profit pressures, Rolls-Royce Defence in Europe posted a robust 14.2% margin, reinforcing the divergence in operational resilience across regions.

Trade and tariff headwinds

Rising geopolitical complexity and cost burden

The A&D industry has increasingly become entangled in trade policy shifts. In May 2025, the US and UK reached an agreement eliminating tariffs on British aerospace products, while the UK committed to purchasing $10 billion worth of Boeing aircraft. On the flip side, the US–China trade standoff escalated into steep mutual tariffs—initially reaching 145% on US imports from China, and 125% on Chinese imports from the US. Though later relaxed temporarily, these actions disrupted access to critical components like semiconductors and metals.

Particularly concerning is Chinas decision to restrict exports of heavy rare earths and magnets vital to A&D systems such as drones, missiles, and radar equipment. These resources—of which China controls nearly 90% of global production—are indispensable to modern aerospace engineering. US efforts to reestablish a domestic rare-earth supply chain remain in infancy, with significant operational delays.

Risks to air travel demand further compound the sectors exposure to these shifting trade policies. For instance, Canadian air travel to the US saw severe drops amid political tension and visa complications, while major US carriers like American Airlines have suspended their 2025 forecasts, citing aircraft cost inflation and tariff uncertainty.

Green aviation and sustainability initiatives eVTOLs, SAF, and electric aviation

Efforts toward decarbonising aviation are gradually taking shape. North America, with its congested urban hubs and weak airport ground infrastructure, continues to lead the development of electric vertical take-off and landing (eVTOL) and short take-off and landing (eSTOL) platforms. JetZero, backed by Delta and RTX, made significant strides with its blended-wing aircraft program aimed at reducing fuel usage by 50%.

Other major developments include United and Archer Aviations rollout of eVTOL air taxi services in New York, Electras demonstration of ultra-STOL capabilities for defence purposes, and JetBlues launch of SAF supply in New York. Additionally, South Korea implemented a mandate for a 1% SAF blend on all international flights by 2027, positioning itself as a potential regional leader in sustainable aviation.

Industry Overview -Space sector

Record launches and lunar milestones

The space sector set new records in 2024, with 261 orbital launches, a 17% increase over the previous year. The United States led with 156 launches, and SpaceX accounted for 134, reinforcing its dominance. Notable milestones included NASA and Boeings crewed Starliner launch, Fireflys Blue Ghost lunar landing, and the Odysseus mission under NASAs Artemis program.

SpaceX also succeeded with Starships fourth test flight, advancing its Mars ambitions, while Blue Origins New Glenn and ULAs Vulcan Centaur completed maiden launches. The first commercial spacewalk occurred, and commercial players like ispace and ArianeGroup made meaningful progress in global lunar initiatives.

Outlook for A&D and Space

Mixed profitability, strong demand trajectory

Looking ahead to 2025 and beyond, the aerospace and defence industry is poised for continued revenue expansion, albeit with challenges. Commercial aviation is forecasted to grow at 4% CAGR, outpacing global GDP by 60%. The backlog of 14,000+ aircraft reflects this demand surge. However, OEMs must navigate production inefficiencies, regulatory scrutiny, and skilled labour shortages.

In defence, backlog fulfilment will be the primary driver of performance. While supply chains and labour stability are improving, high input costs and potential new program charges remain risks. A proposed US defence budget of $1 trillion for FY26 could redefine procurement patterns, while Europes push for self-reliant defence manufacturing will reshape transatlantic dynamics.

The space industry, meanwhile, is entering a golden era, with commercial launches, tourism, and lunar exploration likely to push annual valuations towards $1.5 trillion in the next decade.

Despite inherent uncertainties, the fundamental outlook for A&D remains robust, supported by long-cycle demand trends, strategic importance, and rising investment in sustainability and innovation.

About The Company

Rossell Techsys, formerly the Aerospace and Defence (A&D) division of Rossell India Limited, was demerged into a separate entity through a Scheme of Arrangement sanctioned by the Honble NCLT, Kolkata Bench. Since its inception in 2011, the Company has built a strong reputation for delivering engineering and manufacturing services to global aerospace and defence OEMs with meticulous adherence to timelines, quality, and cost commitments. Anchored in a culture of operational hygiene, Rossell Techsys offers an integrated value proposition that combines world-class infrastructure, qualified talent, robust systems, and best-in-class processes. Headquartered in Bengaluru, India, the Companys flagship facility at the Aerospace Park spans 225,000 sq. ft. and is designed in line with LEED-Gold standards under IGBC. It is envisioned to scale up to 450,000 sq. ft. in future phases with an aim to attain LEED Platinum certification. Rossell Techsys operates under a Centers of Excellence (CoE) model, delivering Build-to-Print (BTP) and Build-to-Specification (BTS) solutions through its state-of-the-art engineering and manufacturing capabilities.

Opportunities, Strengths and Risks

Opportunities

The global defence, aerospace, and space industries are undergoing a significant transformation. Rising geopolitical instability and heightened national security concerns have led to increased defence budgets across NATO and Indo-Pacific regions. These trends offer substantial opportunities for Indian companies with export-oriented models and partnerships with global OEMs.

The company is well-placed to capitalise on these developments. Its participation spans across fighter jets, commercial aircraft, and space platforms, supplying wire harnesses, interconnect solutions, electronic systems, and test equipment to leading OEMs. The expansion of defence offset obligations in India and the governments push for self-reliance through Make in India and Atmanirbhar Bharat have further opened avenues for deeper participation in global and domestic programmes.

Emerging sectors such as unmanned aerial systems, electric aircraft, and digital battlefield technologies are creating new spaces for innovation and diversification. The company is actively exploring higher-value engagements such as design-to-spec and build-to-spec models, enabling a transition from a manufacturing partner to an engineering collaborator. The civil aviation industry is also recovering, with sustained demand for modernisation and new-generation aircraft. This, coupled with increasing global investment in space exploration, enhances the long-term growth potential across segments where the company is already actively engaged.

Key Strategies

a. Ongoing Market expansion strategy The Americas

The company is deepening relationships with top OEMs. These strategic pursuits are expected to increase revenue contribution from the region significantly.

Europe

Europe remains a relatively untapped region. Aggressive sales efforts are underway to convert these into long-term relationships.

Middle East

Targeting strategic collaborations the company is leveraging local partnerships to build traction. Having already gained momentum, this region is seen as a key area for future expansion.

India and the Rest of the World

While the Indian market is cost-sensitive and slow-moving, the company remains focused on key strategic customers The company is also cautiously entering Australasia, Japan, Korea, Australia, Singapore.

b. Strategic direction and plans

With over a decade of proven performance, the company is now poised for both organic and inorganic growth. Its strategic roadmap includes diversifying into engineering services, electromechanical systems, sensors, actuators, and small mechanical components such as electro-optics. These expansions are driven by strong interest from existing customers and favourable market conditions.

To capture upcoming opportunities, the company is investing in talent, technology, process capabilities, and infrastructure. It is also open to acquisitions, joint ventures, and technology partnerships to fast-track its expansion across new domains and geographies.

c. Leveraging offset and MSME multipliers

The company plays a strategic role in helping global OEMs meet Indias Defence Offset obligations under the FMS route, which mandates 30–50% localisation. As a registered MSME, the company offers 1.5x offset multipliers, significantly enhancing the value proposition for OEMs seeking Indian partners. This regulatory advantage positions the company as a preferred offset partner in the global aerospace and defence supply chain.

Strengths

The company operates from a position of strategic strength, anchored in long-standing relationships with globally respected OEMs.These partnerships underscore its credibility, delivery excellence, and engineering capability.

Certified to global aerospace standards such as AS9100D and NADCAP, the companys advanced infrastructure supports complex and mission-critical manufacturing. Its skilled workforce, combined with a culture of zero-defect delivery and on-time performance, has enabled the company to build a strong reputation for reliability.

With a diversified portfolio spanning combat aircraft, civilian aviation, and space applications, the company is able to mitigate sectoral risks while staying aligned with key global trends in aerospace digitisation, defence modernisation, and space systems development.

Its consistent export performance and increasing design capabilities enhance competitiveness in a global supply chain that values agility, quality, and engineering depth.

The company specialises in custom engineering and manufacturing across four primary competencies:

1. Electrical Wiring and Interconnect Systems (EWIS) and Electrical Panel Assemblies (EPA) Covers design to certification of complex harnesses, fibre optics, connectors, PCB components, and related tooling.

2. Electronic Systems and System Integration (ESSI) Involves systems design using ICs, FPGAs, ADCs, DACs, and integration of third-party or off-the-shelf components.

3. Automatic Test Equipment (ATE) Provides automated and manual test solutions, integrating EWIS, ESSI, and EPA modules with instrumentation and HMIs.

4. Electrical MRO Encompasses re-engineering, reverse engineering, and repair capabilities for a wide range of systems and sub-systems.

The company operates on both BTP and BTS models, with higher value addition derived from BTS engagements. To maximise customer value, the company is expanding engineering offerings across all service areas.

The company serves a broad spectrum of customers and directly partners with government entities, including the Indian Air Force and DRDO.

Sectoral and domain expansion

The company currently operates predominantly in aerospace and defence, with strategic expansion initiatives underway in space, land systems, transportation, and urban air mobility. It is also exploring maritime and other airborne applications to further diversify its offerings.

Local market presence in the US through RTI

To meet the growing needs of US-based OEMs and address export compliance complexities, the company established its wholly owned subsidiary, Rossell Techsys Inc. (RTI), in Tempe, Arizona. RTI is registered with the US Department of Defence Trade Controls (DDTC) and provides near-shore support for repairs, reworks, licensing, and customer-specific contingencies. Over time, RTIs role has expanded to include business development, customer relationship management, supplier coordination, on-site quality, logistics, and institutional collaborations, including with the Rossell School of Learning. RTI is AS9100 Rev D certified and governed by a board-nominated Director. It has the flexibility to evolve into a full-lifecycle support hub, subject to the emergence of appropriate business opportunities.

Infrastructure and facilities

The Bengaluru facility, situated on a 4.25-acre campus, supports all core functions including engineering, project management, SCM, QA, and sales. The US facility in Tempe supports customer interface, logistics, supplier quality, and repair work within a 4,000 sq. ft. leased space.

Certifications and global compliance

The companys certifications include:

• AS9100 Rev D

• ISO9001, ISO27001, ISO14001, ISO45001, ISO37001

• ISO17025 (Metrology)

• NADCAP AC7121

• CEMILAC-approved

• ISO31000 (Risk management)

• NIST SP 800-171 (cybersecurity) and readiness for CMMC v2.0 The companys US subsidiary, RTI, is also DDTC-registered for ITAR compliance and holds AS9100 certification. The company maintains strong IP protection policies and safeguards customer and national interests across NATO countries.

OEM compliance

While the company qualifies as an MSME, it adheres to governance and operational frameworks that align with large OEM expectations. The company has in place comprehensive policies for sustainability, DEI, POSH, rare earth and metal traceability, ethical employment, and anti-bribery. These practices ensure audit-readiness and reinforce the companys position as a credible global supplier.

Weaknesses

Despite its strong positioning, the company faces certain structural limitations. A significant share of revenue is derived from a limited number of key customers. This concentration presents a vulnerability, where any disruption—such as order delays, contract reallocation, or programmatic shifts—could impact financial stability.

Additionally, the company operates within a globally interconnected supply chain, making it susceptible to macroeconomic disruptions such as component shortages, logistics bottlenecks, and currency fluctuations. These external variables can affect both costs and delivery timelines. The evolving defence manufacturing landscape is also becoming increasingly competitive. New entrants, both domestic and international, are raising the bar on cost efficiency and innovation. To maintain its competitive edge, the company must continually invest in capabilities, process innovation, and differentiated value propositions.

Review of Performance

Sector-wise performance

Rossell Techsys has demonstrated stable and diversified performance across the Defence, Aerospace, and Space sectors, driven by strong execution capabilities, high-quality engineering, and robust client partnerships.

In the Defence segment, the company continued to deliver complex electrical and electronic sub-systems for global fighter aircraft and surveillance platforms. Strong relationships with OEMs enabled the execution of multiple high-value contracts, with a focus on wire harnesses, LRUs, and integration-ready assemblies. The segment remains the core revenue driver and benefits from increasing defence budgets and offset obligations worldwide.

In the Aerospace (Civil Aviation) segment, Rossell supported global commercial aircraft programmes by supplying certified aerospace-grade harnesses and cockpit panel assemblies. With the rebound in global air travel and increased aircraft production, the company is well-positioned to grow its civil aviation revenue stream.

In the Space segment, Rossell is gaining traction by supporting critical components for space vehicles and satellite integration systems. Its precise, low-defect manufacturing aligns with the high-reliability standards demanded in space exploration projects, both in India and globally.

Financial Performance Analysis

Rossell Techsys reported a strong financial performance in Q4 FY 2024–25, reflecting robust operational execution and growing customer engagement across defence, aerospace, and space verticals. The company recorded total income of 8,914.5 lakhs, marking a 55.2% year-on-year growth over 5,743.2 lakhs in Q4 FY24, and a 17.3% increase quarter-on-quarter from 7,598.8 lakhs in Q3 FY25.

Gross profit for the quarter stood at 4,051.8 lakhs, up by 47.1% YoY, while maintaining a healthy gross profit margin of 45.5%. EBITDA rose significantly by 119.3% YoY to 1,659.0 lakhs, reflecting improved cost control, process efficiency, and higher-value product deliveries. EBITDA margin improved to 18.6%, compared to 13.2% in the same quarter last year.

Profit After Tax (PAT) surged by 351.3% YoY to 686.2 lakhs, with the PAT margin improving to 7.7%, up from 2.6% in Q4 FY24. The company also expanded its strategic agreements during the quarter, closing with a strong open order book of over 2,750 crores, providing healthy revenue visibility for upcoming quarters. These results highlight Rossells ability to scale profitably while maintaining high delivery performance and customer satisfaction in a competitive global environment.