Shigan Quantum Technologies Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANAL YSIS

In recent years, India has made substantial strides toward becoming a leading global automotive market, driven by rising incomes, growing demand for personal mobility, and supportive government policies. The automotive industry currently contributes 7.1% to Indias Gross Domestic Product (GDP) and is anticipated to be a key driver in the countrys goal of achieving a US$5 trillion economy by 2027. As the worlds fifth-largest automobile market, India ranks as the fifth-largest car manufacturer and the seventh-largest commercial vehicle manufacturer globally. The Indian automotive sector, including component manufacturing, is projected to reach ^16.16-18.18 trillion (US$251.4-282.8 billion) by 2026. Currently, the industry contributes approximately 6.5% of Indias overall GDP.

In the fiscal year 2022-2023, the Indian automotive industry produced a total of 25,931,867 vehicles, including passenger vehicles, commercial vehicles, three-wheelers, and two- wheelers, compared to 23,040,066 vehicles in the previous year.

*The above chart depicts Indias passenger & commercial Market Trends Currently, India has 5,500 CNG stations, with a target to increase this number to 17,700 by 2030. This expansion is expected to significantly boost gas mobility in the transport sector, aiming for natural gas to account for 15% of all fuel used in transportation.

Aggressive Localization of CNG/LNG Components

The sale of natural gas vehicles by OEMs has surpassed 700,000 units annually, reflecting a 184% increase over the past two years. OEMs are actively involved in this growth.

The Society of Indian Automobile Manufacturers (SIAM), the apex national body representing major vehicle and engine manufacturers in India, views the hydrogen economy as a critical component for energy security and domestic technological advancement. Key SIAM members, such as Ashok Leyland, Tata Motors, and Mahindra & Mahindra, are actively developing hydrogen fuel cell systems and vehicles. These initiatives include both hydrogen-powered internal combustion engines and fuel cell electric vehicles, with ongoing efforts to indigenize fuel cell stacks.

The central government has approved the National Green Hydrogen Mission with a budget of ^19,744 crore. This includes ^17,490 crore for the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme, ^1,466 crore for pilot projects, ^400 crore for research and development, and ^388 crore for other mission components. The Ministry of New and Renewable Energy (MNRE) will oversee the scheme and establish implementation guidelines.

According to the Oil and Gas Forecast 2050, renewable energy sources are expected to increase, with oil and gas projected to account for 44% of the worlds primary energy supply by 2050. The report anticipates that gas will become the primary energy source toward 2050, experiencing peak demand by 2035. The Government of India is proactively contributing to global sustainability and energy transition efforts. Indias ambitio us targets, including achieving Net Zero by 2070 and a 45% reduction in emissions intensity of GDP by 2030 compared to 2005 levels, are central to this agenda. The rapidly growing Indian trucking market, expected to expand from 4 million trucks in 2022 to approximately 17 million by 2050, presents significant opportunities for emission reduction and investment.

In January 2024, NITI Aayog and the Embassy of the Netherlands signed a Statement of Intent (SOI) to foster bilateral cooperation on energy transition projects. This engagement aims to promote coordinated policy development in areas such as energy access, sustainability, and improved energy infrastructure. The SOI emphasizes collaboration among industry bodies, private enterprises, and sector experts to generate actionable policy inputs.

One outcome of this partnership is the report, "LNG as a Transportation Fuel in the Medium & Heavy Commercial Vehicle Segment," which advocates for the use of LNG to reduce CO2 emissions and support the national goal of increasing the share of natural gas in the energy mix to 15% by 2030.

Based on the analysis, LNG and CNG are expected to coexist in the medium and heavy-duty transport sector over the next decade. CNG may serve as an alternative to diesel in urban areas due to its range limitations and the higher availability of CNG refuelling infrastructure through City Gas Distribution networks. LNG, on the other hand, offers a viable, economical, and environmentally friendly option for medium and heavy-duty vehicles. To support the development of an LNG-based transport ecosystem, there is a focus on establishing LNG filling stations along key transport routes, such as the Golden Quadrilateral. The adoption of LNG in the transport sector will also help reduce the import bill.

*The above chart depicts Indias current LNG Market and projected LNGs HDVs

OUR COMPANY

Our company is a leader in designing, developing, and manufacturing a wide array of alternative fuel systems, including CNG, LNG, and hydrogen fuel kits. We cater to OEMs and other clients with solutions for heavy-duty, light-duty, and off-highway vehicles. Our expertise in CNG and LNG fuel kits, gained through extensive in-house knowledge and technical support, positions us as a prominent player in the automotive industry. We maintain strategic partnerships with multinational corporations, securing critical technologies through long-term user agreements and manufacturing licenses. This collaboration allows us to develop exclusive products customized to our needs, for which we hold exclusive manufacturing rights in India.

Since April 2020, our company has broadened its scope by venturing into the fire safety sector. We now manufacture Fire Detection & Alarm Systems, Fire Detection & Suppression Systems (FDAS & FDSS), Fire Protection Systems (FPS), and have recently added Surface Mount Technology (SMT) to our portfolio. This diversification not only enhances our market presence but also strengthens our competitive edge, demonstrating our capability to adapt and innovate across different industry sectors.