Unimech Aerospace and Manufacturing Ltd Management Discussions

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the Restated Consolidated Financial Information. The Restated Consolidated Financial Information. has been prepared by our management as required under the SEBI ICDR Regulations read with the ICAI Guidance Note. For more information, see “Risk Factors Internal Risk Factors 59. Our Company has prepared financial statements under Indian Accounting Standards. Significant differences exist between Indian Accounting Standards and other accounting principles.” on page 63.

This Draft Red Herring Prospectus also contains forward-looking statements that involve risks, assumptions, estimates and uncertainties. Our actual results could differ materially from those anticipated in these forward looking statements as a result of certain factors, including but not limited to the considerations described below. For details, see “Forward-Looking Statements” beginning on page 26.

Unless otherwise indicated or the context otherwise requires, the financial information for the financial years ended March 31, 2022, 2023 and 2024, included herein is derived from the Restated Consolidated Financial Information. included in this Draft Red Herring Prospectus.

Certain non-GAAP financial measures and certain other statistical information relating to our operations and financial performance have been included in this section and elsewhere in this Draft Red Herring Prospectus. Such non-GAAP financial measures should be read together with the nearest GAAP measure. See “Risk Factors 60. This Draft Red Herring Prospectus contains certain non-GAAP financial measures and certain other selected statistical information related to our operations and financial performance. These non-GAAP measures and statistical information may vary from any standard methodology that is applicable across the manufacturing industry, and therefore may not be comparable with financial or statistical information of similar nomenclature computed and presented by other manufacturing companies.” on page 63.

Certain names of our top 10 customers and top 10 suppliers are not mentioned in this Draft Red Herring Prospectus due to confidentiality reasons and non-receipt of consents.

The industry-related information contained in this section is derived from the industry report titled ‘Report Overview of Global Tooling & PEC Market dated August 17, 2024 prepared by Frost & Sullivan (India) Private Limited (the “F&S Report”). We have exclusively commissioned and paid for the F&S Report for the purposes of confirming our understanding of the industry exclusively in connection with the Offer. We officially engaged Frost & Sullivan (India) Private Limited in connection with the preparation of the F&S Report pursuant to an engagement letter dated March 20, 2024. A copy of the F&S Report shall be available on the website of our Company at https://unimechaerospace.com/investorrelations/ from the date of the Red Herring Prospectus until the Bid/Offer Closing Date. Unless otherwise indicated, the industry-related information contained in this section is derived from the F&S Report (extracts of which have been appropriately incorporated as part of “Industry Overview” beginning on page 141).

Overview

We are a global high precision engineering solutions company specializing in manufacturing of complex products with “build to print” and “build to specifications” offering, which involves machining, fabrication, assembly, testing and creating new products basis the specific requirements of our clients for the aerospace, defence, energy and semi-conductor industries. We have established ourselves as a leading manufacturer of complex tooling, mechanical assemblies, electro-mechanical turnkey systems and precision components, widely used in the aeroengine and airframe tooling for production, MRO and line maintenance activities (Source: F&S Report).

Our product portfolio includes, inter alia, engine lifting and balancing beams, assembly, disassembly and calibration tooling, ground support equipment, airframe assembly platforms, engine transportation stands, mechanical & electro-mechanical turnkey systems, and precision components. For further details, please see “ Our Products” on page 191.

We are a key link in the global supply chain for global aerospace, defence, semi-conductor and energy OEMs and their licensees for the supply of critical parts like aero tooling, ground support equipment, electro-mechanical sub-assemblies and other precision engineered components (Source: F&S Report). Our key clients include top global airframe and aero-engine OEMs and their approved licensees.

The salient features of our products are complexity and a “high-mix, low volume nature”, characterized by high mix products which are not mass manufactured. We offer a wide range of products (“SKUs”) but produce relatively small quantities of each based on specific customer requirements. Our ability to efficiently manufacture even single units of a particular SKU provides us with the flexibility to optimize pricing and maintain high profit margins. Factors such as on-time delivery and product quality significantly influence our pricing strategy. We adhere to stringent quality standards and measures as per AS9100D & BS EN ISO 9001:2015, being the industry norms for aerospace. Between Fiscals 2022 and 2024, we have manufactured 2,356 SKUs in tooling and precision complex sub-assemblies category and 624 SKUs in the precision machined parts category, supplying to more than 26 customers across 7 countries.

Our diverse capabilities allow us to service the customers globally, which has established us as an export-oriented company with customers across USA, Germany and United Kingdom. Our product and service exports aggregated to 331.01 million, 896.45 million, and 2,038.49 million, contributing 91.06%, 95.20%, and 97.64% of our total revenue from operations for Fiscals 2022, 2023 and 2024. For further details, please see “Managements Discussion and Analysis of Financial Condition and Results of Operations” on page 298.

We possess unique “build to print” capabilities, wherein we manufacture products based on client designs, and “build to specifications” capabilities, wherein we assist clients in designing the products to be manufactured basis specifications. Our orders typically begin with the receipt of purchase orders, along with designs or specifications from the customers. Upon development of the design, they are converted into 3-D models with the help of software used by our experienced engineers.

For further details, please see “Our Strengths Advanced manufacturing capabilities capable of delivering high precision engineering solutions” on page 182.

We focus on timely deliveries of our products. Our systems and processes ensure efficient order fulfilment and on-time delivery. As on June 30, 2024, our order in-hand was 992.38 million, with a delivery timeline ranging between 4 to 16 weeks.

As of March 31, 2024, we had two manufacturing facilities, Unit I and Unit II, in Bangalore which is spread across an aggregate area of over 1,20,000 sq. ft. Our facility in Unit I in Peenya, Bangalore, is spread across an area of over 30,000 sq. ft. and our Unit II facility in Devanahalli is situated in a Special Economic Zone (“SEZ”) near Bangalore International Airport which is spread across an area of over 90,000 sq. ft. Our both manufacturing facilities are accredited with AS 9001D, BS EN ISO 9001 and ISO 45001:2018.

Principal Factors Affecting Our Financial Condition and Results of Operations

Our business, results of operations and financial condition are affected by a number of factors, including:

1. Economic conditions in the markets in which we operate

Our financial performance is closely tied to economic conditions across our key markets, including India, United States, Germany and United Kingdom. We generate our revenue from the sale of high precision engineered products including aero tooling, ground support equipment, electro-mechanical sub-assemblies and other precision engineered components, primarily to several global original equipment manufacturers (“OEMs”), focusing on sectors such as aerospace, defence, semiconductor, and energy. Our product exports aggregated to 331.01 million, 896.45 million, and 2038.49 million, contributing 91.06%, 95.20%, and 97.64% of our total revenue from operations for Fiscals 2022, 2023 and 2024.

Our export business is dependent on the performance of our customers who operate in industries such as aerospace, defence, semi-conductor and energy. The following table sets out our revenue from operations by geographical spread for the financial years / periods indicated:

(in million, except percentages)

Geography	Fiscal 2024		Fiscal 2023		Fiscal 2022
	Revenue from operations ( million)	% of total revenue from operations	Revenue from operations ( million)	% of total revenue from operations	Revenue from operations ( million)	% of total revenue from operations
India	49.26	2.36	45.21	4.80	32.48	8.93
United States	1,924.57	92.19	724.18	76.91	277.64	76.38
Germany	113.41	5.43	172.18	18.28	51.50	14.17
United Kingdom	Nil	Nil	Nil	Nil	0.91	0.25
Others	0.50	0.02	0.09	0.01	0.96	0.27
Total	2087.75	100.00	941.66	100.00	363.49	100.00

We are exposed to fluctuations in the performance of the industries to which we supply our products across the mentioned regions. The markets where we operate in India may experience different dynamics and be subject to distinct market and regulatory developments compared to other global markets. Further, the industries served by our customers have historically exhibited significant periodic fluctuations in overall demand for end goods, leading to corresponding variations in demand for our products. The timing and duration of these industry cycles are inherently unpredictable. The production and sales of the end goods for which we provide products are influenced by numerous external factors beyond our control. These include changes in government policies, shifts in consumer preferences, fluctuations in fuel prices, trends toward aircraft electrification, demographic changes, employment and income levels, interest rates, disruptions in the supply chain, aging of aircraft, labour relations, regulatory requirements, availability and cost of credit, and broader economic and industry conditions.

Economic downturns or reductions in defence budgets can result in decreased demand for our products, which encompass specialized tools and components for aircraft and defence systems. For instance, fluctuations in global GDP, shifts in government defence expenditures, and changes in commercial airline activities directly impact our sales. We supply critical components to OEMs, as well as defence contractors, whose demand is influenced by these economic variables. Furthermore, economic instability can impede capital expenditure in the aerospace sector, potentially delaying or reducing investments in new technologies and infrastructure, thereby affecting our growth prospects.

2. Implementation of technologically advanced processes and innovation

The aerospace and defence sectors are characterized by rapid technological advancements. Our ability to innovate and adapt to new technologies is crucial for maintaining competitiveness. We believe that our growth over the years is attributable to our core capabilities, including our “build to print” and “build to specification” capabilities, which are supported by our technological prowess.

Our integrated design, engineering, and production capabilities, combined with expertise in collaboratively developing customized solutions for industries such as aerospace, defence, semi-conductor, and energy, have enabled us to deliver quality solutions to our domestic and global customers.

In case there are any other new technological developments discovered that significantly decreases the cost of production, in order to compete effectively, we may be required to replace our existing machines with the new ones and thereby incur additional capital expenditure, which would have a material adverse effect on our financial condition and results of operations. Although we seek to identify trends and introduce new methods of engineering and equipment, we recognise that customer preferences cannot be predicted with certainty and can change rapidly, and that there is no certainty that such methods will be commercially viable or effective or accepted by our customers. Our failure to successfully adopt such technologies in a cost effective and a timely manner could increase our costs and lead to us being less competitive in terms of our prices or quality of products we sell which could significantly affect our results of operations and financial performance. Further, as our business is currently concentrated to a select number of significant customers, we may experience reduction in cash flows and liquidity if we lose one or more of our major customers or if the amount of business from them is significantly reduced for any reason.

3. Concentration of customers

Our financial performance has largely been driven by, and a key factor to our future success will be, our ability to continue to deliver value for our customers, increase our customer base, and deepen our relationships with our existing customers. Our experience in developing complex critical safety systems and solutions has led to established relationships with several customers.

We derived more than 95% of our revenue from operations from the sale of products to our top 10 customers in Fiscal 2022, Fiscal 2023 and Fiscal 2024. The table below sets forth the revenue derived from our top 10 customers (determined based on revenue derived from such customers in Fiscal 2024) during the respective financial periods:

Particulars	Fiscal 2022		Fiscal 2023		Fiscal 2024
	Amount ( million)	% of total revenue from operations	Amount ( million)	% of total revenue from operations	Amount ( million)	% of total revenue from operations
Top 3 customers	262.24	72.15%	840.26	89.23%	1964.32	94.09%
Top 5 customers	323.39	88.97%	884.00	93.88%	2021.01	96.80%
Top 10 customers	351.39	96.67%	923.85	98.11%	2076.25	99.45%

Our top 10 customers include HYDRO Systems GmbH & Co. Kg, Nuclear Power Corporation of India Limited and Rhinestahl Corporation. These customers may not be our top 10 customers in each of the above Fiscals and the disclosure of names has only been made for such customers who have consented to being named. Remaining names from our top 10 customers are not mentioned in this Draft Red Herring Prospectus due to confidentiality reasons and non-receipt of consents.

Going forward, we expect the significance of our top ten customers to remain high. A change in our relationship with any of our significant customers will impact our business leading to a reduction in our sales. Furthermore, the loss of any of our top five customers, including as a result of any dispute with or disqualification by them, will have an adverse effect on our business and results of operations. For further information, see “Risk Factors - Internal Risk Factors 2. We are dependent on our top 10 customers who contribute more than 95% of our total revenue from operations in each of the last three Fiscals and the loss of any of these customers or a significant reduction in purchases by any of them could adversely affect our business, results of operations and financial condition.” on page 29.

The demand of our top customers products has a strong influence on our revenue from operations as our sales are directly impacted by the production and inventory levels of our customers products. Increased sales of our customers products tend to increase our revenue from operations, while a slow-down in the demand for our customers products tends to lead to a lower revenue from operations. We expect the successful launches of new models by our top customers to positively impact our results of operations, increasing our revenue from operations from sale of our products. Accordingly, our revenue from operations has generally increased with the growth of our customers business over time.

Our sales of products to our customers also depend largely on the number and type of products that we supply to them, and our ability to increase our overall share of their purchases. The effect of variations in our customers purchasing patterns is dependent on the accuracy of order forecasts provided by them. It may be difficult for us to predict with certainty whether our customers will decide to increase or decrease the inventory levels or levels of production of a particular model to which we supply our products, the strategic direction they will pursue, when they might launch new models, or open new facilities, or whether future inventory levels will be consistent with historical levels. For instance, some are pursuing a strategy of localization of production for each market, while others are consolidating their global platforms in one or more low-cost manufacturing jurisdiction for eventual distribution to other countries. In addition, certain customers are seeking to consolidate their suppliers, particularly with suppliers who are able to manufacture complex and high-quality components, scale up production and supply products across a number of geographies. Any reduction in orders, delays in contract renewals, or changes in procurement strategies by these customers could materially affect our financial performance. Therefore, diversifying our customer base is essential to mitigate this risk. We are continuously exploring new markets and customer segments to reduce our dependence on a few major clients.

4. Ability to meet stringent quality standards and specific requirements of the customers

Our Company has existing relationships with global OEMs and licenses. As key customers typically have specific requirements, we believe that our continued relationships with these customers plays a significant role in determining our continued success and results of operations. Our ability to develop and deepen our relationships with our customers has accelerated our growth. We also focus on assisting customers meet their requirements across the spectrum of their engagement with us, including in terms of cost, productivity, product reliability and low time to market. This, together with our high delivery standards and performance excellence, has enabled us to acquire, service and deepen and lengthen our relationship with diverse range of high-level clients ranging from industry leaders to government undertakings.

Our domain expertise in various aspects such as precision engineering and ability to build to specifications, as well as our adoption of technologically advanced and cost-competitive manufacturing processes have been instrumental in obtaining repeat orders from our key customer group. Our ability to meet the stringent quality standards and performance requirements demanded by our customers is crucial, given the critical applications of our products in various industries. If we fail to deliver products or services that conform to customer specifications, we may be held accountable for repair or replacement costs of defective items.

Ensuring consistent compliance with these technical specifications and quality standards is essential to maintaining our supply capabilities. Failures to achieve or maintain such compliance could disrupt our ability to fulfill customer orders promptly, potentially harming our reputation and business. Financially, this could impact our results of operations, financial condition, and cash flows, especially where insurance coverage may not suffice to cover all liabilities. Our contracts also obligate us to indemnify customers against liabilities arising from defects or damages in our products or services. Failure to adhere to contract terms, delivery schedules, specifications, or quality standards could lead to order cancellations, recalls, invocation of bank guarantees, warranty claims, indemnity demands, and financial penalties. Such instances can result in cost overruns, impact payment milestones, and detrimentally affect our business reputation and financial performance.

Our operations are subject to various risks, including manufacturing defects, equipment failures, and safety incidents. For instance, the precision required in producing components for MRO aircraft structure gantries, ground support equipment etc. necessitates stringent quality control measures. Implementing robust quality assurance processes and adhering to strict safety protocols are essential to minimize operational risks. Additionally, maintaining efficient production processes and managing operational costs are critical for profitability. We invest in machinery and continuous training for our workforce to ensure high standards of operational excellence and safety.

5. Supply chain and availability of raw materials

Our profitability depends upon our ability to efficiently procure various components, finished and semi-finished parts, subsystems, and raw materials such as steel, aluminium alloys, titanium alloys, composite materials, copper, castings, forgings, tools, gauges, standard parts and tools such as hoist ring, hydraulic cylinders, lifting slings & shackles, ball lock pins, key inserts, knobs & handles, bushes, bearings, hydraulic fittings, casters, screws & nuts and gear box, other base metals, and electronic components at competitive prices.

The prices of these materials are subject to cyclical fluctuations, supply and demand dynamics, and order quantities. Unexpected price increases or volatility in material costs may lead to actual costs differing from our estimates. We procure our raw materials, including steel, aluminium alloys, titanium alloys, composite materials, copper, castings, forgings, tools, gauges, standard parts, electronic components from third parties based on purchase orders and generally do not have firm commitments from our suppliers. The absence of long-term contracts at fixed prices and the need to maintain a continued supply of raw materials may make it difficult to resist price increases imposed by our suppliers. Consequently, our profitability could be adversely affected if we are unable to recover these increased costs from our customers. For more detailed information, please refer to the Risk factors section on “Risk Factors Internal Risk Factors 22. Our business and profitability is substantially dependent on the availability and cost of our raw materials, and any disruption to the timely and adequate supply of raw materials, or volatility in the prices of raw materials may adversely impact our business, results of operations and financial condition. We depend on these third-party suppliers of raw materials and do not have firm commitments for supply or exclusive arrangements with any of our suppliers and are required to pay advances from time to time. The absence of long-term contracts or exclusive arrangements and non-recovery of advances, exposes us to potential supply chain disruptions which could significantly impact our production capacity, leading to delays in order fulfilment and potential loss of revenue.” on page 45.

6. Reliance on sales outside of India and foreign exchange rate risk

Although our Companys reporting currency is in Indian Rupees, we transact a significant portion of our business in several other currencies. Further, a large part of our revenues is derived from sales to customers based outside of India. In the Fiscals 2024, 2023 and 2022, our revenues from operations to customers based outside of India were 2,038.49 million, 896.45 million and 331.01 million, respectively, which represented 97.64% and 95.20% and 91.06%, respectively of our total income.

The exchange rate between the Indian Rupee and the currencies in which we receive payments for such exports, i.e., primarily the USD and Euro, has fluctuated in the past and our results of operations have been impacted by such fluctuations in the past and may be impacted by such fluctuations in the future. For further details, please refer to “Certain Conventions, presentation of financial, industry and market data and currency of presentation” on page 23 of this Draft Red Herring Prospectus.

Moreover, we expect that our cost of borrowing as well as our cost of imported raw materials, overseas professional costs, freight and other expenses incurred by us may rise during a sustained depreciation of the Indian Rupee against USD or Euro. Certain portions of our income and expenses are generated or incurred in other currencies and certain portions of our assets (trade receivables and cash and cash equivalents) and liabilities (trade payables and borrowings) are in other currencies, such as USD and Euro. Therefore, our exchange rate risk primarily arises from currency mismatches between our income and our expenditure which we seek to mitigate by matching income currency to expenditure currency to the extent possible. We do not have a formal hedging policy and accordingly, may be subject to foreign currency exposure and fluctuations in the exchange rates between the Indian Rupee and other currencies.

7. Competition

While our listed peers listed in India, like us, operate in the same industry and may have similar offerings or end use applications, our business may be different in terms of differing business models, different product verticals serviced or focus areas or different geographical presence or serving certain segments or sub-segments of our customer base. We believe that we have no peers that operate in the full spectrum of our product range, manufacturing capability, customer base, geographical market and price points. Our Company is a leading manufacturer of complex tooling, mechanical assemblies, electro-mechanical turnkey systems and precision components, widely used in the aeroengine and airframe tooling for production, MRO and line maintenance activities.

We have considered Azad Engineering Limited, Dynamatic Technologies Limited, MTAR Technologies Limited, Data Patterns (India) Limited and Paras Defence and Space Technologies Limited as listed peers, which are into the manufacturing of certain components used in the aerospace and defence industry.

Key Performance Indicators and Certain Non-GAAP Measures

Particulars	Financial year ended March 31,2024	Financial year ended March 31,2023	Financial year ended March 31,2022
Key Financial Metrics:
Revenue from operations	2,087.75	941.66	363.49
Revenue from operations growth (%)(1)	121.71%	159.06%	-*
Gross profit(2)	1,375.93	677.69	263.29
Gross Margin(3) (%)	65.90%	71.97%	72.43%
EBITDA(4)	791.86	345.63	77.26
EBITDA Margin(5) (%)	37.93%	36.70%	21.25%
Profit after tax for the period / year	581.34	228.13	33.92
Profit Margin(6) (%)	27.85%	24.23%	9.33%
Fixed Asset Turnover Ratio(7) (Times)	5.16	3.51	-**
Return on Capital Employed(8) (ROCE) (%)	54.36%	42.87%	10.34%
Return on Equity (9) (%)	53.53%	46.71%	12.26%
Number of Plants#	2	2	2
Installed Capacity# (No. of Hours)	2,22,990	1,25,100	99,810
Number of Customers	16	15	18
Number of Countries	5	5	5
Operating Metrics:
Customer Concentration (top 5)	96.80%	93.88%	88.97%
Customer Concentration (top 10)	99.45%	98.11%	96.67%
Trade Receivable Days (10)	82	125	75
Trade Payable Days (11)	66	68	98^
Inventory Days (12)	101	218	163

 

Particulars	Financial year ended March 31,2024	Financial year ended March 31,2023	Financial year ended March 31,2022
Cash Conversion Cycle (13) (Days)	117	275	140

* Not included as the comparative period figures under IND AS for FY 2021 as on March 31, 2021are not available

** Not included as the comparative period figures under IND AS for FY 2021 as on March 31, 2021 are not available which will be used for calculating the Average Fixed Assets

# Number of plants and installed capacity (no. of hours) is derived based on the ICE certificate dated August 19, 2024 Notes: Formula for ratios are as below

1. Revenue from operations growth (year on year) means the annual growth in Revenue from operations.

2. Gross Profit is calculated as Revenue from operations less Cost of Goods Sold. Cost of goods sold is the sum of Cost of materials consumed, Purchases of stock-in-trade and increase/ decrease in inventories.

3. Gross Margin is calculated as Gross Profit divided by Revenue from Operations.

4. EBITDA is calculated as restated profit before tax plus finance costs, depreciation and amortisation expense less other income.

5. EBITDA Margin is calculated as EBITDA divided by Revenue from Operations.

6. Profit Margin is calculated as restated profit after tax for the year divided by Revenue from Operations.

7. Fixed Asset Turnover Ratio is calculated as Revenue from operations divided by Average Fixed Assets. Average Fixed Assets is calculated as the sum of Property, plant and equipment, Intangible assets and Right-of-use assets

8. Return on Capital Employed is calculated as Earnings before Interest and Tax divided by the sum of Total Equity and Total Debt

9. Return on Equity is calculated as Profit After Tax divided by Total Equity

10. Trade Receivable days is calculated as Trade receivable outstanding at the end of the year divided by Revenue from operations for the year multiplied by 365. 11. Trade Payable days is calculated as Trade payables outstanding at the end of the year divided by Total Purchases made for the year multiplied by 365. 12. Inventory days is calculated as Inventory outstanding at the end of the year divided by Total Cost of Goods Sold multiplied by 365. 13. Cash conversion cycle is calculated Days of inventory outstanding plus days of sales outstanding less days payables outstanding.

Significant Accounting Policies

The significant accounting policies adopted in the preparation of our Financial Statements are set forth below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of measurement

The Restated Consolidated Financial Information have been prepared on a historical cost basis, except for net defined benefit employee obligations which is measured at the present value of defined benefit obligation.

Current versus non-current classification

Based on the time involved between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Group has identified twelve months as its operating cycle for determining current and non-current classification of assets and liabilities in the balance sheet.

Presentation currency and rounding off

All amounts disclosed in Restated Consolidated Financial Information and notes have been rounded off to the nearest millions and decimals thereof, as per requirement of Schedule III of the Act, unless otherwise stated. Amounts mentioned as "0.00" in the denote amounts rounded off being less than one lakh rupees.

Basis of Consolidation

"The Restated Consolidated Financial Information comprise the financial statements of the Company and its subsidiaries as at March 31, 2024.

Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present:

(i) power over the investee,

(ii) exposure to variable returns from the investee, and

(iii) the ability of the investor to use its power to affect those variable returns.

Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

Restated Consolidated Financial Information are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the Group uses accounting policies other than those adopted in the Restated Consolidated Financial Information for like transactions and events in similar circumstances, appropriate adjustments are made to that Group members financial statements in preparing the Restated Consolidated Financial Information to ensure conformity with the Groups accounting policies.

The Restated Consolidated Financial Information of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent company, i.e., year ended on March 31. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes, additional financial information as of the same date as the financial statements of the parent to enable the parent to consolidate the financial information of the subsidiary, unless it is impracticable to do so."

Consolidation procedure:

(a) Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries. For this purpose, income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the Restated Consolidated Financial Information at the acquisition date.

(b) Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill.

(c) Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets, such as inventory and fixed assets, are eliminated in full) intragroup losses may indicate an impairment that requires recognition in the Restated Consolidated Financial Information.

Profit or loss and each component of other comprehensive income ("OCI") are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Groups accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Summary of material accounting policies

Property, plant and equipment

Property, Plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the statement of profit and loss during the year in which they are incurred.

Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under Capital work-in-progress.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Particulars	Useful Life
Factory buildings	30 years
Plant and equipment	4, 7.5 & 15 years
Furniture and fixtures	4 years
Computers	3 years
Office equipment	4 to 5 years
Vehicles	8 years
Leasehold improvements	Over useful life as per Schedule II or the remaining period of Lease term, whichever is lower

The Group, based on technical assessment made by technical expert and management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. The residual values are not more than 5% of the original cost of the asset.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets (Software) and development costs are amortised over the useful economic life of 3 years on straight line basis and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortisation period and the amortisation method for an intangible asset are reviewed at least at the end of each reporting period.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.

Leases

The Group assesses at contract inception whether a contract is or contains a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

i) Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. The right-of-use assets are also subject to impairment.

ii) Lease Liabilities

"At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset."

iii) Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Inventories

"Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials (Including packing materials): Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average method.

Finished goods and work in progress: Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs. Cost is determined on weighted average method.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition and charged to statement of profit and loss on purchase.

Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis."

Impairment of non-financial assets

"The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators."

Foreign currencies

The Groups Restated Consolidated Financial Information are presented in INR, which is also the Group functional currency.

Transactions in foreign currencies are initially recorded by the Group at functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

Revenue from contract with customer

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment and sale of services is recognised at the point in time by measuring the progress towards complete satisfaction of performance obligations during the reporting period.

Revenue is measured at transaction price (net of variable consideration, if any). The transaction price is the consideration received or receivable and is reduced by rebates, allowances and taxes and duties collected on behalf of the government.

Revenue also includes adjustments made towards liquidated damages and price variations wherever applicable.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

Taxes

Tax expense comprises current tax expense and deferred tax.

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.

Deferred tax

"Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity which intends either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered."

MAT:

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognised for MAT credit available only to the extent that it is probable that the Group will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Group recognises MAT credit as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.

Provisions

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Warranty provisions

The Group provides warranties for general repairs of defects that existed at the time of sale, as required by law. Provisions related to these assurance-type warranties are recognised when the product is sold, or the service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.

Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined contribution scheme. The Group has no obligation, other than the contribution payable to the provident fund. The Group recognises contribution payable to the provident fund scheme as an expense, when an employee renders the related service.

The Group operates a defined benefit gratuity plan in India. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.

Remeasurements, comprising of actuarial gains and losses, are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Group measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Group recognises expected cost of short-term employee benefit as an expense, when an employee renders the related service.

The Group treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the reporting date. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer the settlement for at least twelve months after the reporting date.

Longevity bonus liability is accrued for certain class of key managerial persons, as may be decided by the Board from time to time to recognise their immense contribution in driving the organisation, and payable upon their resignation or exit from the Company or substantial changes in the composition of the parent companys Board. Amount to be payable is calculated based on latest remuneration of the year multiplied by number of years. Longevity bonus is recognised as liability at the present value of the defined benefit obligation using actuarial valuation at the Balance sheet date.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost. The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and the Groups business model for managing them.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified as financial assets at amortised cost (debt instruments). A financial asset is measured at the amortised cost if both the following conditions are met:

a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and

b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as borrowings, payables or other financial liabilities, as appropriate. All financial liabilities are recognised initially at fair value, net of directly attributable transaction costs.

Subsequent measurement

For purposes of subsequent measurement, financial liabilities are classified as financial liabilities at amortised cost (loans and borrowings).

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate ("EIR") method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Cash and cash equivalents

Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss attributable to equity holders of the parent company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.

The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders of the Company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

Interest Income

Interest income is recognised using effective interest rate method. The effective interest rate is rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset.

Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue recognition - estimating variable consideration

If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

Leases - estimating the incremental borrowing rate (IBR)

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group would have to pay, which requires estimation when no observable rates are available. The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the companys credit rating).

Provision for expected credit losses (ECLs) of trade receivables and contract assets

The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for its customer segments that have similar loss patterns. The provision matrix is initially based on the Groups historical observed default rates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Groups historical credit loss experience and forecast of economic conditions may also not be representative of customers actual default in the future.

Defined benefit plan (post-employment gratuity)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate; future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Useful lives of property, plant and equipment and intangible assets

Management reviews its estimate of the useful lives of property, plant and equipment and intangible assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of property, plant and equipment, right of use assets and intangible assets.

Provision for warranties

The Groups product warranty obligations and estimations thereof are determined using historical information of claims received up to the year end and the managements estimate of further liability to be incurred in this regard during the warranty period, computed on the basis of past trend of such claims.

Deferred tax assets

Valuation of deferred tax assets is dependent on managements assessment of future recoverability of the deferred tax benefit. Expected recoverability may result from expected taxable income in the future, planned transactions or planned optimising measures. Economic conditions may change and lead to a different conclusion regarding recoverability.

Principal Components of Statement of Profit and Loss

Income

Our income comprises revenue from operations and other income. We generate majority of our revenue from the sale of products.

Revenue from operations

Our revenue from operations primarily includes (i) sale of goods, (ii) sale of services, and (iii) other operating income, which includes duty drawbacks, merchant exporter incentive, rental income and scrap sales.

Other income

Our other income primarily includes

(i) interest income,

(ii) unwinding of discount on security deposits at amortised cost,

(iii) net gains on foreign exchange transactions,

(iv) subsidy interest,

(v) profit on sale of assets,

(vi) miscellaneous income, and

(vii) profit on sale of investments.

Expenses

Our expenses include the below mentioned expenses:

Cost of materials consumed

Our cost of materials consumed primarily consists of the cost of raw materials and packing materials that we use in the manufacture of our products. Its calculation includes opening stock of raw materials at the beginning of the year, plus purchases, less closing stock of raw material at the end of the year.

Changes in inventories of finished goods, stock-in trade and work-in-progress

Changes in inventories of finished goods, stock in trade and work in progress represents the difference between our opening and closing stock of inventory during the financial year.

Sub-contractors charges

Our sub-contractors charges represents the job working charges paid to third parties to perform certain manufacturing processes such as welding, tooling, manufacturing of precision components etc.

Employee benefits expense

Our employee benefits expense primarily include

(i) salaries, wages and bonus to the employees and consultancy charges paid to the directors,

(ii) contribution to provident and other funds,

(iii) gratuity and compensated absences expenses and

(iv) staff welfare expenses.

Finance costs

Our finance costs primarily include

(i) interest on borrowing at amortised cost,

(ii) interest on income tax,

(iii) interest on lease liabilities,

(iv) guarantee commission expenses,

(v) loan processing fee,

(vi) bank guarantee issue charges, and

(vii) interest on delayed payments to micro enterprises and small enterprises.

Depreciation and Amortisation expense

Depreciation and amortization expenses are primarily of depreciation on our property, plant and equipment and amortization of lease hold land, right-of-use assets and intangible assets.

Other Expenses

Our other expenses primarily include

(i) rent,

(ii) manpower support cost,

(iii) utilities,

(iv) repairs and maintenance,

(v) factory expenses,

(vi) freight outward,

(vii) security charges,

(viii) office expenses,

(ix) printing and stationary,

(x) information and technology expenses,

(xi) insurance,

(xii) legal and professional charges,

(xiii) recruitment cost,

(xiv) audit fee,

(xv) sales promotion,

(xvi) expected credit loss allowance,

(xvii) travelling and conveyance,

(xviii) communication expenses,

(xix) rates and taxes,

(xx) bank charges,

(xxi) rework and warranty costs,

(xxii) loss on sale of assets,

(xxiii) contributions towards corporate social responsibility,

(xiv) loss on foreign exchange transactions (net),

(xxv) subscription charges,

(xxvi) bad debts and

(xxvii) miscellaneous expenses.

Tax Expenses

Our tax expenses primarily include current tax and deferred tax.

Profit / (loss) after tax

Profit after tax for the period includes the profit for the year after tax expenses.

Our Restated Consolidated Financial Information

The following table sets forth select financial data from our statement of profit and loss for Fiscals 2024, 2023 and 2022, the components of which are also expressed as a percentage of total income for such periods.

Particulars	As at and for Fiscal 2024		As at and for Fiscal 2023		As at and for Fiscal 2022
	(In million)	(As a % of total income)	(In million)	(As a % of total income)	(In million)	(As a % of total income)
Income
Revenue from operations	2087.75	97.66%	941.66	99.20%	363.49	98.03%
Other income	50.11	2.34%	7.64	0.80%	7.32	1.97%
Total Income	2137.86	100.00%	949.30	100.00%	370.81	100.00%
Expenses
Cost of materials consumed	486.31	22.75%	297.51	31.34%	89.32	24.09%
Purchase of stock-in- trade	6.08	0.28%	10.49	1.11%	0.00	0.00%
Changes in inventories of finished goods work-in-progress	(49.71)	(2.33%)	(118.16)	(12.45%)	(18.01)	(4.86%)
Subcontractors	269.14	12.59%	74.13	7.81%	28.89	7.79%
Charges
Employee benefits expense	324.40	15.17%	156.07	16.44%	82.67	22.29%
Finance costs	32.32	1.51%	18.82	1.98%	16.44	4.43%
Depreciation expense	44.64	2.09%	40.80	4.30%	30.95	8.35%
Other expenses	259.68	12.15%	175.99	18.54%	103.37	27.88%
Total expenses	1372.86	64.22%	655.65	69.07%	333.63	89.97%
Restated Profit before tax for the year	765.00	35.78%	293.65	30.93%	37.18	10.03%
Tax expenses:
Current tax	154.57	7.23%	57.75	6.08%	9.83	2.65%
Tax pertaining to earlier years	28.95	1.35%	0.00	0.00%	0.00	0.00%
Deferred tax	0.14	0.01%	7.77	0.82%	(6.57)	(1.77%)
Total tax expense	183.66	8.59%	65.52	6.90%	3.26	0.88%
Restated Profit for the year	581.34	27.19%	228.13	24.03%	33.92	9.15%
Restated total other comprehensive income/(loss) for the year	(0.87)	(0.04%)	(16.26)	(1.71%)	0.01	0.00%

 

Particulars	As at and for Fiscal 2024		As at and for Fiscal 2023		As at and for Fiscal 2022
	(In million)	(As a % of total income)	(In million)	(As a % of total income)	(In million)	(As a % of total income)
Restated Total comprehensive income for the year	580.47	27.15%	211.87	22.32%	33.93	9.15%

COMPARISON OF THE RESULTS OF OPERATIONS

Fiscal 2024 Compared to Fiscal 2023

Total Income

Our total income increased by 125.20% to 2,137.86 million for Fiscal 2024 from 949.30 million for Fiscal 2023, on account of the factors discussed below.

Revenue from operations

Our revenue from operations comprising revenue from sale of products, sale of services and other operating income increased by 121.71% to 2,087.75 million for Fiscal 2024 from 941.66 million for Fiscal 2023, primarily due to increase in our total annualized capacity (including capacity of our Material Subsidiary) by 78.25% to 222,990 hours for Fiscal 2024 from 125,100 hours in Fiscal 2023 and number of purchase orders increased by 70.10% to 3,174 for Fiscal 2024 from 1,866 in Fiscal 2023.

Our sale of goods increased by 131.56% from 896.80 million in Fiscal 2023 to 2,076.65 million in Fiscal 2024 owing to increase in revenues from our existing customers as well as increase in revenues from new customers.

Our sale of services decreased by 88.03% from 29.00 million in Fiscal 2023 to 3.47 million in Fiscal 2024, owing to more job work being done for one of the customers in Fiscal 2023.

Our other operating income decreased by 51.89% from 15.86 million in Fiscal 2023 to 7.63 million in Fiscal 2024, due to decrease in rental income, scrap sales, duty drawback, merchant export incentives and other sales.

Other income

Our other income increased by 555.89% to 50.11 million for Fiscal 2024 from 7.64 million for Fiscal 2023, primarily due to increase in the interest income due to increase in fixed deposits, net gain on the foreign exchange transactions.

Interest income increased by 294.12% to 15.41 million for Fiscal 2024 from 3.91 million for Fiscal 2023 primarily due to increase in bank deposits. Unwinding of discount on security deposits decreased by 25.00% to 0.18 million for Fiscal 2024 from 0.24 million for Fiscal 2023. Gain on foreign exchange transactions (net) increased by 1391.43% to 31.32 million for Fiscal 2024 from 2.10 million for Fiscal 2023 primarily due to increase in exports and depreciation of Indian rupee with respect to US dollar. Subsidies increased by 940.00% to 1.56 million for Fiscal 2024 from 0.15 million for Fiscal 2023 due to one time grant received from state government on purchase of new machineries. Profit on sale of assets increased by 246.67% to 1.04 million for Fiscal 2024 from 0.30 million for Fiscal 2023 due to sale of old and unused machines. We did not incur any profit on sale of investments in Fiscal 2023 as compared to 0.02 million for Fiscal 2024 due to sale of investment in Unimech Healthcare India Private Limited, which was our subsidiary. This was offset by miscellaneous income that decreased by 38.30% to 0.58 million for Fiscal 2024 from 0.94 million for Fiscal 2023 on account of provisions no longer required being written back in Fiscal 2023, however, there was no such writing back of provisions in Fiscal 2024.

Expenses

Our expenses increased by 109.39% to 1372.86 million for Fiscal 2024 from 655.65 million for Fiscal 2023, on account of the factors discussed below.

Cost of materials consumed

Our cost of materials consumed increased by 63.46% to 486.31 million for Fiscal 2024 from 297.51 million for Fiscal 2023, primarily due to increase in purchase of raw materials on account of corresponding increase in revenue from operations.

Changes in inventories of finished goods and work-in-progress

Our cost of changes in inventories decreased by 57.93% to (49.71) million for Fiscal 2024 from (118.16) million for Fiscal 2023. Our inventories majorly represent work-in-progress and finished goods. The difference in change in inventories is primarily due to work-in-progress which was 26.14 million at the beginning of Fiscal 2023 and 109.11 million at the end of Fiscal 2023, finished goods which was Nil at the beginning of Fiscal 2023 and 28.02 million at the end of Fiscal 2023 and work-in-progress which was 109.11 million at the beginning of Fiscal 2024 and 22.31 million at the end of Fiscal 2024 and finished goods which was 28.02 million at the beginning of Fiscal 2024 and 171.70 million at the end of Fiscal 2024.

Sub-contractors charges

Sub-contractors charges increased by 263.06% to 269.14 million for Fiscal 2024 from 74.13 million for Fiscal 2023 primarily due to corresponding increase in revenue and capacity constraints in the initial part of the fiscal year leading to more outsourcing of manufacturing processes to meet the delivery schedules.

Employee benefits Expense

Our employee benefits expense increased by 107.86% to 324.40 million for Fiscal 2024 from 156.07 million for Fiscal 2023, primarily due to increase in salaries, wages and bonus. This was due to regular salary hikes and performance bonus given to all employees including KMPs. Also, the number of employees as on March 31, 2024 increased to 268 from 194 employees as on March 31, 2023.

Salaries, wages and bonus increased by 107.79% to 302.19 million for Fiscal 2024 from 145.43 million for Fiscal 2023. Contribution to provident and other funds increased by 31.13% to 5.35 million for Fiscal 2024 from 4.08 million for Fiscal 2023. Gratuity and compensated absences expenses increased by 88.60% to 2.15 million for Fiscal 2024 from 1.14 million for Fiscal 2023. Staff welfare expenses increased by 171.40% to 14.71 million for Fiscal 2024 from 5.42 million for Fiscal 2023.

Finance costs

Our finance costs increased by 71.73% to 32.32 million for Fiscal 2024 from 18.82 million for Fiscal 2023, primarily due to increase in total borrowings to 288.56 million in Fiscal 2024 from 222.59 million in Fiscal 2023 and guarantee commission paid on guarantee provided for the loans availed by Innomech Aerospace Toolings Private Limited from the banks.

Interest on borrowings at amortised cost increased by 60.03% to 20.26 million for Fiscal 2024 from 12.66 million for Fiscal 2023 primarily due to increase in total borrowings (current and non-current borrowings) to 288.56 million in Fiscal 2024 from 222.59 million in Fiscal 2023. We did not incur any interest on income tax in Fiscal 2024 as compared to 3.78 million for Fiscal 2023 since in Fiscal 2023 there was a short payment of advance tax, however, there is no such short payment in Fiscal 2024. Interest on lease liabilities decreased by 31.07% to 1.42 million for Fiscal 2024 from 2.06 million for Fiscal 2023 due to decrease in the carrying amount of total lease liabilities as per Ind AS 116. We did not incur any guarantee commission expenses in Fiscal 2023 as compared to 10.50 million for Fiscal 2024 due to guarantee commission being charged for the increased borrowings done by our Material Subsidiary. We did not incur any loan processing fees in Fiscal 2024 as compared to 0.18 million for Fiscal 2023. We did not incur any bank guarantee issue charges in Fiscal 2023 as compared to 0.03 million for Fiscal 2024. Interest on delayed payments to micro enterprises and small enterprises decreased by 21.43% to 0.11 million for Fiscal 2024 from 0.14 million for Fiscal 2023.

Depreciation and amortisation expense

Our depreciation and amortisation expense increased by 9.41% to 44.64 million for Fiscal 2024 from 40.80 million for Fiscal 2023, primarily due to increase in property, plant and equipment to 450.72 million in Fiscal 2024 from 215.71 million in Fiscal 2023.

Depreciation and amortisation on property, plant and equipment increased by 26.10% to 33.67 million for Fiscal 2024 from 26.70 million for Fiscal 2023 primarily due to additions in factory buildings and plant & equipment. Amortisation of lease hold land remained unchanged for Fiscal 2024 and for Fiscal 2023. Amortisation on right-of-use assets decreased by 24.58% to 8.59 million for Fiscal 2024 from 11.39 million for Fiscal 2023 due to no major additions in right-of-use assets. Amortisation on intangible assets decreased by 15.42% to 1.81 million for Fiscal 2024 from 2.14 million for Fiscal 2023 due to significant additions in intangible assets in the second half of the Fiscal 2024 because of which amortization was not calculated for the entire fiscal year resulting in amortization of intangible assets decreasing.

Other expenses

Our other expenses increased by 47.55% to 259.68 million for Fiscal 2024 from 175.99 million for Fiscal 2023, primarily due to increase in manpower support cost to 45.79 million in Fiscal 2024 from 19.73 million in Fiscal 2023 due to increase in production capacity, legal and professional charges increased to 108.05 million in Fiscal 2024 from 74.67 million in Fiscal 2023 in the ordinary course of business, travelling and conveyance increased to 13.17 million in Fiscal 2024 from 7.68 million in Fiscal 2023 in the ordinary course of business, rates and taxes increased to 14.82 million in Fiscal 2024 from 4.03 million in Fiscal 2023 due to stamp duty paid towards increasing the authorised share capital, and rework and warranty costs increased to 13.32 million in Fiscal 2024 from 8.89 million in Fiscal 2023 in the ordinary course of business. This was partially offset by decrease in freight outward to 0.01 million in Fiscal 2024 from 7.66 million in Fiscal 2023 and sales promotion to 1.47 million in Fiscal 2024 from 12.40 million in Fiscal 2023.

Tax expense

Our tax expense increased by 180.31% to 183.66 million for Fiscal 2024 from 65.52 million for Fiscal 2023, primarily due to increase in profit before tax to 765.00 million in Fiscal 2024 from 293.65 million in Fiscal 2023.

Profit after tax for the period

As a result of the foregoing factors, our profit after tax for the period increased by 154.83% to 581.34 million for Fiscal 2024 from 228.13 million for Fiscal 2023.

Fiscal 2023 Compared to Fiscal 2022

Total Income

Our total income increased by 156.01% to 949.30 million for Fiscal 2023 from 370.81 million for Fiscal 2022, on account of the factors discussed below.

Revenue from operations

Our revenue from operations comprising revenue from sale of products, sale of services and other operating income increased by 159.06% to 941.66 million for Fiscal 2023 from 363.49 million for Fiscal 2022, primarily due to increase in business volumes from existing and new customers. Our total annualized capacity (including capacity of our Material Subsidiary) increased by 25.34% to 125,100 hours in Fiscal 2023 from 99,810 hours in Fiscal 2022.

Our sale of goods increased by 157.42% from 348.38 million in Fiscal 2022 to 896.80 million in Fiscal 2023 due to increase in business volumes from existing and new customers.

Our sale of services increased by 217.98% from 9.12 million in Fiscal 2022 to 29.00 million in Fiscal 2023, attributable to job works being done for one of the customers in Fiscal 2023. increased expenses.

Our other operating income increased by 164.77% from 5.99 million in Fiscal 2022 to 15.86 million in Fiscal 2023, due to increase in rental income, scrap sales, duty drawback, merchant export incentives and other sales.

Other income

Our other income increased by 4.37% to 7.64 million for Fiscal 2023 from 7.32 million for Fiscal 2022, primarily due to increase in net gain on the foreign exchange transactions, increase in subsidies and unwinding of discount on security deposits.

Interest income decreased by 4.17% to 3.91 million for Fiscal 2023 from 4.08 million for Fiscal 2022 primarily due to a decrease in interest income from fixed deposits. Unwinding of discount on security deposits increased by 60.00% to 0.24 million for Fiscal 2023 from 0.15 million for Fiscal 2022. Gain on foreign exchange transactions (net) increased by 103.88% to 2.10 million for Fiscal 2023 from 1.03 million for Fiscal 2022 due to increase in exports and depreciation of Indian rupee with respect to US dollar. Subsidies increased by 50.00% to 0.15 million for Fiscal 2023 from 0.10 million for Fiscal 2022 due to one time grant received from state government on purchase of machineries. Profit on sale of assets increased by 100.00% to 0.30 million for Fiscal 2023 from Nil for Fiscal 2022. Miscellaneous income increased by 118.60% to 0.94 million for Fiscal 2023 from 0.43 million for Fiscal 2022 on account of provisions no longer required being written back.

Expenses

Our expenses increased by 96.52% to 655.65 million for Fiscal 2023 from 333.63 million for Fiscal 2022, on account of the factors discussed below.

Cost of materials consumed

Our cost of materials consumed increased by 233.08% to 297.51 million for Fiscal 2023 from 89.32 million for Fiscal 2022, primarily due to increase in purchase of raw materials on account of corresponding increase in revenue from operations.

Changes in inventories of finished goods, stock in trade and work-in-progress

Our cost of changes in inventories increased by 556.08% to (118.16) million for Fiscal 2023 from (18.01) million for Fiscal 2022. Our inventories majorly represent work-in-progress and finished goods. The difference in change in inventories is primarily due to work-in-progress which was 8.13 million at the beginning of Fiscal 2022 and 26.14 million at the end of Fiscal 2022 and finished goods which was Nil at the beginning of Fiscal 2022 and Nil at the end of Fiscal 2022 and work-in-progress which was 26.14 million at the beginning of Fiscal 2023 and 109.11 million at the end of Fiscal 2023 and finished goods which was Nil at the beginning of Fiscal 2023 and 28.02 million at the end of Fiscal 2023.

Sub-contractors charges

Subcontractors cost increased by 156.59% to 74.13 million for Fiscal 2023 from 28.89 million for Fiscal 2022 primarily due to corresponding increase in revenue and capacity constraints during the Fiscal Year leading to more outsourcing of manufacturing processes to meet the delivery schedules.

Employee benefits expense

Our employee benefits expense increased by 88.79% to 156.07 million for Fiscal 2023 from 82.67 million for Fiscal 2022, primarily due to increase in salaries, wages and bonuses of all employees including KMPs. The number of employees as on March 31, 2023 increased to 194 employees in Fiscal 2023 from 115 employees as on March 31, 2022.

Salaries, wages and bonus increased by 88.67% to 145.43 million for Fiscal 2023 from 77.08 million for Fiscal 2022. Contribution to provident and other funds increased by 108.16% to 4.08 million for Fiscal 2023 from 1.96 million for Fiscal 2022. Gratuity and compensated absences expenses increased by 65.22% to 1.14 million for Fiscal 2023 from 0.69 million for Fiscal 2022.Staff welfare expenses increased by 84.35% to 5.42 million for Fiscal 2023 from 2.94 million for Fiscal 2022.

Finance costs

Our finance costs increased by 14.48% to 18.82 million for Fiscal 2023 from 16.44 million for Fiscal 2022, primarily due to increase in interest on income tax due to short payment of advance tax.

Interest on borrowings at amortised cost increased by 8.02% to 12.66 million for Fiscal 2023 from 11.72 million for Fiscal 2022 due to increase in total borrowings. Interest on income tax increased by 148.68% to 3.78 million for Fiscal 2023 from

1.52 million for Fiscal 2022 as there was short payment of advance tax in Fiscal 2023. Interest on lease liabilities decreased by 26.43% to 2.06 million for Fiscal 2023 from 2.80 million for Fiscal 2022 due to no new additions in lease liabilities. Loan processing fee decreased by 21.74% to 0.18 million for Fiscal 2023 from 0.23 million for Fiscal 2022. Interest on delayed payments to micro enterprises and small enterprises decreased by 17.65% to 0.14 million for Fiscal 2023 from 0.17 million for Fiscal 2022 in the ordinary course of business.

Depreciation and amortisation expense

Our depreciation and amortisation expense increased by 31.83% to 40.80 million for Fiscal 2023 from 30.95 million for Fiscal 2022, primarily due to increase in property, plant and equipment to 215.71 million in Fiscal 2023 from 160.25 million in Fiscal 2022.

Depreciation and amortisation on property, plant and equipment increased by 40.53% to 26.70 million for Fiscal 2023 from 19.00 million for Fiscal 2022 due to due to additions in factory buildings and plant & equipment. Amortisation of lease hold land remained unchanged for Fiscal 2023 from Fiscal 2022. Amortisation on right-of-use assets increased by 21.82% to 11.39 million for Fiscal 2023 from 9.35 million for Fiscal 2022 due to significant addition in right-of-use assets in the second half of Fiscal 2022 on which amortization was not calculated for the entire year. Whereas, in Fiscal 2023, these assets were amortized for the entire year with no major additions during Fiscal 2023. Amortisation on intangible assets increased by 5.42% to 2.14 million for Fiscal 2023 from 2.03 million for Fiscal 2022 due to significant additions in intangible assets in the second half of the Fiscal 2023 because of which amortization was not calculated for the entire Fiscal Year.

Other expenses

Our other expenses increased by 70.25% to 175.99 million for Fiscal 2023 from 103.37 million for Fiscal 2022, primarily due to increase in manpower support cost to 19.73 million in Fiscal 2023 from 9.11 million in Fiscal 2022 due to increase in production capacity, freight outward to 7.66 million in Fiscal 2023 from 3.64 million in Fiscal 2022 in the ordinary course of business, legal and professional charges increased to 74.67 million in Fiscal 2023 from 41.84 million in Fiscal 2022 and sales promotion charges increased to 12.40 million in Fiscal 2023 from 1.83 million in Fiscal 2022 due to increased advertising activities in Fiscal 2023, travelling and conveyance charges increased to 7.68 million in Fiscal 2023 from 4.62 million in Fiscal 2022 in the ordinary course of business, rates and taxes increased to 4.03 million in Fiscal 2023 from 1.73 million in Fiscal 2022 and rework and warranty costs increased to 8.89 million in Fiscal 2023 from 4.65 million in Fiscal 2022 in the ordinary course of business.

Tax expense

Our tax expense increased by 1909.20% to 65.52 million for Fiscal 2023 from 3.26 million for Fiscal 2022, primarily due to increase in profit before tax to 293.65 million in Fiscal 2023 from 37.18 million in Fiscal 2022.

Profit after tax for the period

As a result of the foregoing factors, our profit after tax for the period increased by 572.57% to 228.13 million for Fiscal 2023 from 33.92 million for Fiscal 2022.

Liquidity and Capital Resources

Historically, our primary liquidity requirements have been to finance our working capital needs for our operations. We have met these requirements through cash flows from operations, equity infusions from shareholders and borrowings. As of March 31, 2024, we had 1136.59 million in current assets including 197.33 million in inventories, 468.42 million in trade receivables, 71.78 million in cash and cash equivalents, 239.04 million in other financial assets and 115.83 million in other current assets.

For the Fiscals 2024, 2023 and 2022, our total liabilities based on our Restated Consolidated Financial Information amounted 670.39 million, 444.96 million and 292.17 million, respectively.

We have received credit ratings of “A- with a stable outlook” from CRISIL Ratings, reflecting its strong market position, experienced management, and robust financial profile. Key strengths include a diverse product portfolio, consistent profitability, and a conservative financial structure. However, our Companys exposure to cyclical end-markets and customer concentration pose potential risks.

Cash Flows Based on Restated Consolidated Financial Information

The table below summarizes the statement of cash flows, as per our cash flow statements, for the periods indicated:

Particulars	Fiscal
	2024	2023	2022
	(in million)
Net cash generated from operating activities	236.33	13.54	15.28
Net cash generated from / (used in) investing activities	(239.22)	(59.19)	8.15
Net cash generated from / (used in) financing activities	55.80	29.36	(1.68)
Cash and cash equivalents at the end of the year	71.78	18.75	34.49

Operating Activities

Fiscal 2024

Our net cash inflow from operating activities was 236.33 million in Fiscal 2024. Our operating cash flows before working capital changes was 823.24 million in Fiscal 2024. The movements in working capital in Fiscal 2024 primarily consisted of

(i) increase in trade receivables of 141.29 million,

(ii) increase in inventories of 48.96 million,

(iii) increase in other current financial assets of 182.63 million,

(iv) increase in other current assets of 71.15 million,

(v) increase in other non-current assets of 83.02 million,

(vi) increase in trade payables of 62.52 million,

(vii) increase in other current liabilities of 0.13 million,

(viii) increase in provision of 122.07 million and decrease in other financial liabilities of 1.79 million.

Fiscal 2023

Our net cash inflow from operating activities was 13.54 million in Fiscal 2023. Our operating cash flows before working capital changes was 364.18 million in Fiscal 2023. The movements in working capital in Fiscal 2023 primarily consisted of

(i) increase in trade receivables of 183.50 million,

(ii) increase in inventories of 110.49 million,

(iii) increase in other current financial assets of 15.81 million,

(iv) increase in other current assets of 12.21 million,

(v) increase in other non-current assets of 2.07 million,

(vi) decrease in trade payables of 23.11 million,

(vii) decrease in other current liabilities of 0.87 million,

(viii) increase in provision of 22.48 million and increase in other financial liabilities of 23.71 million.

Fiscal 2022

Our net cash inflow from operating activities was 15.28 million in Fiscal 2022. Our operating cash flows before working capital changes was 87.47 million in Fiscal 2022. The movements in working capital in Fiscal 2022 primarily consisted of

(i) increase in trade receivables of 8.26 million,

(ii) increase in inventories of 31.76 million,

(iii) increase in other current financial assets of 50.79 million,

(iv) increase in other current assets of 16.44 million,

(v) decrease in other non-current assets of 0.45 million,

(vi) increase in trade payables of 4.67 million,

(vii) increase in other current liabilities of 4.08 million,

(viii) increase in provision of 15.71 million and increase in other financial liabilities of 8.72 million.

Investing Activities

Fiscal 2024

Our net used in investing activities was (239.22) million in Fiscal 2024. This was primary due to purchase of property, plant and equipment including capital advances of 277.99 million, payment for acquisition of intangible assets of 0.29 million, Proceeds from sale of bank deposits of 18.84 million, proceeds from sale of investments of 0.12 million, proceeds from disposal of property, plant and equipment of 4.20 million and interest received of 15.90 million.

Fiscal 2023

Our net used in investing activities was (59.19) million in Fiscal 2023. This was primary due to purchase of property, plant and equipment including capital advances of 54.12 million, Payments for acquisition of intangible assets of 0.36 million, Proceeds from sale of bank deposits of 0.79 million, investment in bank deposits of (3.77) million, Payments for purchase of investments of 10.10 million, proceeds from disposal of intangible assets of 1.25 million and interest received of 7.12 million.

Fiscal 2022

Our net cash flow in investing activities was 8.15 million in Fiscal 2022. This was primary due to purchase of property, plant and equipment including capital advances of 28.54 million, proceeds from closure of bank deposits of 33.03 million, proceeds from disposal of property, plant and equipment of 2.81 million, and payments for purchase of investments of (8.39) million and Interest received of 9.24 million.

Financing Activities

Fiscal 2024

Our net cash usage from financing activities was 55.80 million in Fiscal 2024. This was primarily due to proceeds from borrowings of 96.99 million, finance costs paid of 1.13 million, Interest paid on borrowings and guarantee commission of 30.16 million, principal paid for lease liability of 8.48 million and interest paid on lease liabilities of 1.42 million.

Fiscal 2023

Our net cash generated from financing activities was 29.36 million in Fiscal 2023. This was primarily due to proceeds from issue of equity shares of 10.10 million, proceeds from borrowings of 48.93 million, finance costs paid of 3.28 million, Interest paid on borrowings and guarantee commission of 13.65 million, principal paid for lease liability of 10.68 million, and interest paid on lease liabilities of 2.06 million.

Fiscal 2022

Our net cash usage from financing activities was (1.68) million in Fiscal 2022. This was primarily due to proceeds from borrowings of 27.39 million, finance costs paid of 3.05 million, Interest paid on borrowings and guarantee commission of 14.62 million, principal paid for lease liability of 8.60 million, and interest paid on lease liabilities of 2.80 million.

Financial Indebtedness

As of March 31, 2024, we had Indian rupee loans of 135.55 million, USD loans of 153.01 million, with a debt^* to equity ratio of 0.27 as per the Restated Consolidated Financial Information. Some of our financing agreements include various conditions and covenants that require us to obtain lender consents prior to carrying out certain activities and entering into certain transactions. We cannot assure you that we will be able to obtain these consents and any failure to obtain these consents could have significant adverse consequences for our business. For further information on our agreements governing our outstanding indebtedness, see “Financial Indebtedness” on page 294.

*Debt comprises of current borrowings and non-current borrowings.

Contractual Obligations and Commitments

The table below sets forth our contractual obligations as of March 31, 2024 as per the Restated Consolidated Financial Information. These obligations primarily include:

Particulars	Total	Less than 1 year	1 year to 3 years	3 year to 5 years
	( in million)
Current Borrowings	163.38	163.37	0.00	0.00
Long-term Borrowings	125.18	0.00	105.88	19.60
Lease Liabilities	10.40	10.40	0.00	0.00
Trade Payables	135.22	135.23	0.00	0.00
Other Financial Liabilities	33.68	33.68	0.00	0.00
Total	467.86	342.68	105.88	19.60

The table below sets forth our contractual commitments as of March 31, 2024 as per the Restated Consolidated Financial Information. These commitments primarily include:

Particulars	Fiscal 2024	Fiscal 2023	Fiscal 2022
Property, plant and equipment	80.44	56.44	0.92
Particulars	Fiscal 2024	Fiscal 2023	Fiscal 2022
Total	80.44	56.44	0.92

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.

Related Party Transactions

We enter into various transactions with related parties. For further information see “Restated Consolidated Financial Information Note 35” on page 279.

Quantitative and Qualitative Disclosures about Market Risk

Our principal financial liabilities comprise of borrowings, lease liabilities, trade payables, employee benefits payable, deposits, interest accrued but not due on borrowings. These financial liabilities are directly derived from its operations. Our principal financial assets include current loans, investments, trade receivables, bank balances and cash and cash equivalents.

We are exposed to credit risk, liquidity risk and market risk. Our senior management oversees the management of these risks. Our senior management ensures that our financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with our policies and risk objectives.

Credit Risk

Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises principally from the groups receivables from deposits with landlords and other statutory deposits with regulatory agencies and also arises from cash held with banks and financial institutions. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The group assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.

Trade receivables

Customer credit risk is managed by each business unit subject to established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

Liquidity Risk

Liquidity risk is defined as the risk that our Company will not be able to settle or meet its obligations on time or at a reasonable price. Our Company manages liquidity risk by maintaining sufficient cash and by having access to funding through an adequate amount of committed credit lines. Management monitors our Companys net liquidity position through rolling forecasts on the basis of expected cash flows.

Market Risk

Market risk is the risk of loss of future earnings, fair value or future cash flows that may result from a change in the price of the financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivable and payables and loans and borrowings. Our Company is exposed to market risk primarily related to foreign exchange rate risk (currency risk) and interest rate risk. Thus, our Companys exposure to market risk is a function of borrowing activities, revenue generating and operating activities in foreign currencies.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our Company exposure to the risk of changes in market interest rates relates primarily to our Companys long-term debt obligations with floating interest rates. Our Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

Our Company manages its interest rate risk by having a balanced portfolio of fixed borrowings amounting to Nil as at March 31, 2024 and variable rate borrowings amounting to 288.56 million as at March 31, 2024.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our Companys exposure to the risk of changes in foreign exchange rates relates primarily to our Companys operating activities (when revenue or expense is denominated in a different currency from our Companys functional currency).

For further information, see “Restated Consolidated Financial Information Note 39” on page 285.

Capital Expenditures

Our historical capital expenditures were, and we expect our future capital expenditures to be, primarily for capital expansion of property, capacity expansion and purchase of plant and equipment. For the Fiscal Years 2022, 2023 and 2024 and, our capital expenditures (comprising of property, plant & equipment and capital work-in-progress) were 45.99 million, 82.57 million and 267.28 million, respectively as per our Restated Consolidated Financial Information

Change in accounting policies

Other than as disclosed in the Restated Consolidated Financial Information, there have been no changes in accounting policies in the Fiscals 2024, 2023 and 2022.

Segment Reporting

Our business activity primarily falls within a single reportable segment, i.e., manufacturing too lings and components to be used in the aerospace sector and we do not follow any segment reporting.

Significant Economic Changes

Other than as described above under the heading titled “Principal Factors Affecting Our Financial Condition and Results of Operations,” to the knowledge of our management, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations.

Unusual or Infrequent Events of Transactions

Except as described in this Draft Red Herring Prospectus, there have been no other events or transactions that, to our knowledge, may be described as “unusual” or “infrequent”.

Known Trends or Uncertainties

Our business has been affected and we expect will continue to be affected by the trends identified above in the heading titled

“Principal Factors Affecting Our Financial Condition and Results of Operations” on page 299 and the uncertainties described in the section titled “Risk Factors” beginning on page 28. To our knowledge, except as described or anticipated in this Draft Red Herring Prospectus, there are no known factors which we expect will have a material adverse impact on our revenues or income from continuing operations.

Future Relationship Between Cost and Income

Other than as described in this Draft Red Herring Prospectus, to the knowledge of our management, there are no known factors that might affect the future relationship between costs and revenues.

New products, Services or Business Segments

Other than as described in “Our Business” on page 180 of this Draft Red Herring Prospectus, there are no new products or business segments in which we operate.

Seasonality of Business

Given the nature of our business operations, we generally do not believe that our business is seasonal.

Suppliers or Customer Concentration

We derived more than 95% of our revenue from operations from the sale of products to our top 10 customers in Fiscal 2022, Fiscal 2023 and Fiscal 2024. For further details, please refer “Risk Factors Internal Risk Factors 2. We are dependent on our top 10 customers who contribute more than 95% of our total revenue from operations in each of the last three Fiscals and the loss of any of these customers or a significant reduction in purchases by any of them could adversely affect our business, results of operations and financial condition.” on page 29 of the Draft Red Herring Prospectus. Other than as described in “Risk Factors Internal Risk Factors 22. Our business and profitability is substantially dependent on the availability and cost of our raw materials, and any disruption to the timely and adequate supply of raw materials, or volatility in the prices of raw materials may adversely impact our business, results of operations and financial condition. We depend on these third-party suppliers of raw materials and do not have firm commitments for supply or exclusive arrangements with any of our suppliers and are required to pay advances from time to time. The absence of long-term contracts or exclusive arrangements and non-recovery of advances, exposes us to potential supply chain disruptions which could significantly impact our production capacity, leading to delays in order fulfilment and potential loss of revenue.” on page 45 of the Draft Red Herring Prospectus, we are not dependent on major suppliers for a significant portion of our revenue.

Competitive Conditions

We expect to continue to compete with existing and potential competitors. For details, please refer to the discussions of our competition in “Risk Factors” and “Our Business” on pages 28 and 180, respectively.

Reservations, Qualifications and Adverse Remarks Included by Auditors

Set out below are the reservations, qualifications and adverse remarks included by the Auditors in their report for the financial years indicated:

Financial Period/Year	Nature of Adverse Observation (Reservations, qualifications, adverse remarks, matters of emphasis or Other Matter)	Details of Adverse Observations*	Companys response to reservations, qualifications, adverse remarks or matters of emphasis, including any corrective measures	Impact on the financial statements and financial position of the Company
Financial year ended March 31, 2024	Other Matters - Audit a. of the Consolidated Financial Statements	We did not audit the special purpose financial statements of one subsidiary, whose financial statements reflect total assets of 152.56 lakhs as at December 18, 2023, total revenues of 25.43 lakhs and net cash outflows amounting to (4.04) lakhs for the period ended on that date, as considered in the consolidated financial statements. These special purpose financial statements have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the consolidated financial statements, in so far as it relates to the amounts and disclosures included in respect of this subsidiary and our report in terms of sub-section (3) of Section 143 of the Act, in so far as it relates to the aforesaid subsidiaries, is based solely on the reports of the other auditors.	NIL	NIL
	b.	The consolidated financial statements of the Company for the year ended March 31, 2023, were audited by another auditor whose report dated September 29, 2023 expressed an unmodified opinion on those statements.
	c.	The comparative financial information of the Group for the year ended March 31, 2023 and the transition date opening balance sheet as at April 01, 2022 included in these consolidated financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2021, specified under Section 133 and other relevant provisions of the Act audited by the predecessor auditor whose report for the year ended March 31, 2023 and March 31, 2022 dated September 29, 2023 and September 29, 2022 respectively expressed an unmodified audit opinion on those consolidated financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have been audited by us.
		Our opinion on the consolidated financial statements is not modified in respect of the above matters.
Financial year ended March 31, 2023	Matters of Emphasis - Audit of the Special Purpose Consolidated Financial Statements	Emphasis of matter - Basis of Accounting and Restriction on Distribution and Use:	NIL	NIL
		Without modifying our opinion, we draw attention to Note 2.1 to the Special Purpose Ind AS Consolidated Financial Statements, which describe the purpose and basis of accounting of the Special Purpose Ind AS Consolidated Financial Statements. These Special Purpose Ind AS Consolidated Financial Statements are prepared by the management of the Group, solely for the purpose of the preparation of restated consolidated financial information to be included in the Draft Red Herring Prospectus (“DRHP”), Red Herring Prospectus (“RHP”) and Prospectus (collectively referred to “Offer Documents”) in connection with its proposed Initial Public Offering (IPO) of equity shares of Holding Company as required by Section 26 of Part I of Chapter III of the Act, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time (the "ICDR Regulations"), the SEBI Communications and the Guidance Note on Reports in Company Prospectus (Revised 2019) issued by the ICAI. As a result, the Special Purpose Ind AS Consolidated Financial Statements may not be suitable for another purpose.
		Our report is intended solely for the use of Holding Companys Board of Directors for their purpose as specified above and should not be distributed to or used by any other parties. M S K A & Associates shall not be liable to the Holding Company or to any other concerned for any claims, liabilities or expenses relating to this assignment. Accordingly, we do not accept or assume any liability or any duty of care for any other purpose or to any other person to whom this report is shown or into whose hands it may come without our prior consent in writing.
Financial year ended March 31, 2023	Other Matter- Audit of the Special Purpose Consolidated Financial Statements	The Company has prepared a separate set of General Purpose Financial Statements for the year ended March 31, 2023 in accordance with the Accounting Standards specified under Section 133 of the Act read along with the Companies (Accounting Standards) Rules, 2021, and other accounting principles generally accepted in India on which the predecessor auditors have issued a separate auditors report to the shareholders of the Company dated September 29, 2023.
		(b) The Special Purpose Consolidated Financial Statements for the year ended March 31, 2023 has been prepared by the management in accordance with the basis stated in Note 2.1 to the Special Purpose Consolidated Financial Statements solely for the purpose of preparation of Restated Financial Information to be included in the Offer Documents in connection with the proposed IPO of equity shares of the holding Company. Accordingly, the management has not presented the corresponding comparative figures in these financial statements.
		Our opinion is not modified in respect of the above matter.
Financial year ended March 31, 2022	Matters of Emphasis - Audit of the Special Purpose Consolidated Financial Statements	Emphasis of matter-Basis of Accounting and Restriction on Distribution and Use:	NIL	NIL
		Without modifying our opinion, we draw attention to Note 2.1 to the Special Purpose Ind AS Consolidated Financial Statements, which describe the purpose and basis of accounting of the Special Purpose Ind AS Consolidated Financial Statements. These Special Purpose Ind AS Consolidated Financial Statements are prepared by the management of the Group, solely for the purpose of the preparation of restated consolidated financial information to be included in the Draft Red Herring Prospectus (“DRHP”), Red Herring Prospectus (“RHP”) and Prospectus (collectively referred to “Offer Documents”) in connection with its proposed Initial Public Offering (IPO) of equity shares of Holding Company as required by Section 26 of Part I of Chapter III of the Act, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time (the "ICDR Regulations"), the SEBI Communications and the Guidance Note on Reports in Company Prospectus (Revised 2019) issued by the ICAI. As a result, the Special Purpose Ind AS Consolidated Financial Statements may not be suitable for another purpose.
		Our report is intended solely for the use of Holding Companys Board of Directors for their purpose as specified above and should not be distributed to or used by any other parties. M S K A & Associates shall not be liable to the Holding Company or to any other concerned for any claims, liabilities or expenses relating to this assignment. Accordingly, we do not accept or assume any liability or any duty of care for any other purpose or to any other person to whom this report is shown or into whose hands it may come without our prior consent in writing.
Financial year ended March 31, 2022	Other - Audit of the Special Purpose Consolidated Financial Statements	(a) The Group has prepared a separate set of General Purpose Consolidated Financial Statements for the year ended March 31, 2022 in accordance with the Accounting Standards specified under Section 133 of the Act read along with the Companies (Accounting Standards) Rules, 2021, and other accounting principles generally accepted in India on which the predecessor Auditor have issued a consolidated auditors report to the shareholders of the Holding Company dated September 29, 2022.	Nil	Nil
		(b) The Special Purpose Consolidated Financial Statements for the year ended March 31, 2022 has been prepared by the management in accordance with the basis stated in Note 2.1 to the Special Purpose Consolidated Financial Statements solely for the purpose of preparation of Restated Financial Information to be included in the Offer Documents in connection with the proposed IPO of equity shares of the holding Company. Accordingly, the management has not presented the corresponding comparative figures in these financial statements.
		Our opinion is not modified in respect of the above matters.

Companies (Auditors Report) Order, 2020 (CARO 2020):

The audit report dated July 03, 2024 on the audited standalone financial statements of our Company and our Material Subsidiary for the Financial Year 2023-24, a statement on certain matters specified in CARO 2020, which was modified for the qualification or adverse remarks by the respective auditors in the CARO reports of the respective companies delay in payment of disputed statutory dues by our Company and our Subsidiaries are as follows:

Clause 3(vii)(a): According to the information and explanations given to us and the records of our Company examined by us, in our opinion, undisputed statutory dues including Goods and Services tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess, and other statutory dues have generally been regularly deposited with the appropriate authorities during the year, though there has been a slight delay in a few cases.

Clause 3(vii)(b): According to the information and explanation given to us and examination of records of our Company, details of statutory dues referred to in sub-clause (a) above which have not been deposited as on March 31, 2024, on account of any dispute, are as follows:

Unimech:

( million)

Name of the statute	Nature of dues	Amount Demanded	Amount Paid	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Income tax and interest there on	0.92	0.18	AY 2023-24	Commissioner of Income Taxes (Appeals)

Innomech:

( million)

Name of the statute	Nature of dues	Amount Demanded	Amount Paid	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Income tax and interest there on	28.62	5.72	AY 2023-24	Commissioner of Income Taxes (Appeals)

Significant Developments After March 31, 2024

Except as disclosed below and elsewhere in this Draft Red Herring Prospectus, there have been no significant developments after March 31, 2024, the date of the last financial statements contained in this Draft Red Herring Prospectus, to the date of filing of this Draft Red Herring Prospectus, which materially and adversely affects, or is likely to affect, our trading or profitability, or the value of our assets, or our ability to pay our liabilities within the next 12 months:

Sl No. Particulars	Amount (In Million)
1. Preferential allotment of 3,667,090 equity shares of face value of 5 each on 19th July 2024.	2,500.00
2. Borrowings sanctioned from Axis bank to material subsidiary of the Company*	450.00
3. Additions to property, plant and equipment including capital work in progress^	347.09
4. Payment of longevity bonus to executive directors	124.05
5. Investment in ^
- Bonds/ Non convertible debentures	1,460.55
- Commercial Papers	302.90
- Mutual funds	1,248.00
6. The Company has converted itself from Private Limited to Public Limited, pursuant to a special resolution passed in the extraordinary general meeting of the shareholders of the Company held on March 04, 2024 and Consequently the name of the Company has changed to Unimech Aerospace and Manufacturing Limited pursuant to a fresh certificate of incorporation issued by ROC on June 21, 2024.	NA#
7. The Company has constituted an audit committee on July 3, 2024 as mandated under the Provisions of the Companies Act, 2013 and relevant rules thereunder.	NA#
8. A Delaware entity is Incorporated at the United States in the name of ‘Unimech Global Manufacturing Solutions Inc. This Subsidiary has been incorporated for making business acquisitions in the United States.	NA#
9. Company has adopted ESOP Policy in its board meeting dated 21st June 2024, subject to approval of members to grant equity shares of the Company up to 1% of paid up capital of the Company	NA#

* Borrowed two term loans vide sanction letter dated July 19, 2024. Details as below: a. Term Loan of . 262.50 millions towards construction purpose @ repo+1.6% rate of interest, 8.10% at present b. Term loan of . 187.50 millions towards acquisition of plant and machinery @ repo+1.6% rate of interest, 8.10% at present

# Amount not quantifiable

^ Additions to property, plant and equipment and investments are on consolidated basis.