Unimech Aerospace and Manufacturing Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS</dhhead>

GLOBAL ECONOMY

The global economy grew by 3.3% in CY 2024, reflecting a period of relative stability followingyears of pandemic-related and geopolitical disruptions. However, this recovery has proven uneven, with major economies recalibrating priorities amidst a shifting landscape of trade realignments and geopolitical tensions. In early 2025, the global environment experienced a major inflection point when the US introduced sweeping tariffs, triggering retaliatory measures from key trading partners. This disruption has severely impacted global trade flows and supply chains, intensifying the strain on businesses worldwide. Compounding this, volatile policy environments in major economies have eroded investor confidence, making business planning more challenging. As a result, the foundations of global economic cooperation are being tested, with countries re-prioritising domestic longevity over multilateral engagement. Meanwhile, inflation dynamics remain uneven. Global headline inflation is projected to decline to 4.3% in CY 2025, with slower easing than previously anticipated.

Global Economic Growth Projections (in %)

OUTLOOK

The near-term outlook remains uncertain, shaped by policy- driven disruptions and financial fragility. However, the path forward depends on the global economy’s capacity to reset and reform. A moderate recovery is projected for CY 2026, provided there is easing of trade tensions, improved policy coordination, and proactive financial oversight.

(Source: IMF Report on World Economic Outlook, April 2025)

INDIAN ECONOMY

FY 2024-25 was a year of resilient growth for the Indian economy, despite global uncertainties and challenges. The country demonstrated strong economic momentum, supported by robust domestic demand, particularly in

rural areas, and a revival in private consumption. India became the fourth largest economy in the world in CY 2025, with growth projected at 6.5% in FY 2025-26, as per MOSPI. This growth is further driven by robust domestic demand, particularly in rural areas, increase in private investments and a stable macroeconomic environment. The government’s focus on fiscal consolidation, infrastructure development, and supportive policies is expected to further strengthen the nation’s economic expansion.

(Source: Press Information Bureau, April 2025-https://pib.gov.in/ PressReleasePage.aspx?PRID=2123826)

Manufacturing is also showing positive momentum, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) rising to 58.2 in April 2025, indicating strong growth in output, employment, and new export orders. This uptick is fuelled by the government’s strong emphasis on manufacturing, reinforced through the Union Budget 2025-26. In parallel, policies such as the National Manufacturing Mission, targeted tax incentives, and financial support for MSMEs and startups aim to enhance competitiveness, drive innovation, and create large-scale employment. One among the growth sectors is the aviation industry, witnessing a sharp upward trajectory, with passenger traffic projected to grow by 7% in 2025, supported by rising incomes, a burgeoning middle class, and greater air travel affordability. Having returned to pre-pandemic levels, India now accounts for nearly 10% of Asia-Pacific’s air traffic demand, and the government’s push to develop 150 new airports is further fuelling the sector’s expansion. This surge is creating significant opportunities in aerospace tooling and domestic MRO, as airlines look to optimise operations and reduce reliance on overseas services.

Additionally, India’s defence sector has moved beyond policy support to become a revenue-generating, high- growth engine of national manufacturing. With exports touching a record INR 23,622 Crores in FY 2024-25, and plans to increase defence R&D spending tenfold by 2047, the sector is rapidly evolving into a long-term story of innovation, industrial scale, and global relevance. This shift is part of a broader transformation, with rising capital expenditure across infrastructure, logistics, and energy, and an expanded PLI scheme drawing private investments. (Sources:https://www.pmi.spglobal.com/Public/Home PressRelease/4cfa977ceabd44259c08al50b8485b 7c; https://ficci.in/public/storage/SEDocument/20712/ DSyNdso0hGSIZ4JlXdRnQdM8FQ0nUh3ZeE7Zc4lz.pdf; https:// pib.gov.in/PressReleasePage.aspx?PRID=2097886)

OUTLOOK

India’s growth projections remain strong, but global risks still loom. Geopolitical tensions, commodity price fluctuations, US tariffs and external trade risks could irrmact the

country’s economic performance. However, the diversified economy, with its growth sectors, offers a counterbalance to these challenges. Furthermore, the government’s ongoing structural reforms, including initiatives to enhance ease of doing business and attract foreign investment, are expected to support long-term growth.

INDUSTRY OVERVIEW

Aero-Tooling, MRO Tooling, Airframe Structure and GSE Industry

The aerospace industry is witnessing a robust resurgence, driven by surgingglobal passenger traffic, increased defence spending, and next-generation aircraft programmes. With global passenger volumes expected to exceed 10 Billion in

2025, a 6% rise from 2024 and 16% above pre-pandemic levels, the demand for new aircraft, fleet upgrades, and maintenance infrastructure is scaling rapidly. This momentum is underpinned by the expansion of new-age engine platforms and the accelerated output by aircraft OEMs like Airbus and Boeing, fuelling sustained demand across aero-tooling, MRO tooling, airframe structure, and GSE segments.

Tooling Demand from New Engine Programmes and OEM Ramps

A significant growth catalyst for the tooling industry lies in the ongoing deployment and maturing lifecycle of high- volume engine programmes such as: LEAP engines, Pratt & Whitney GTF™ engines, and Rolls-Royce Trent XWB engines.

These engine programmes are not only expanding their assembly lines to meet the demand, but an initial part has started entering the critical maintenance and overhaul phase, creating consistent demand for specialised engine assembly and MRO tooling. With LEAP engines exceeding 10,000 orders and widespread deployment of GTF and XWB engines, tooling demand is surging for fixtures, handling systems, test rigs, and other high-complexity MRO components.

At the airframe level, narrow-body aircraft which account for 75%-80% of OEM deliveries remain the backbone of fleet expansion. Airbus aims to produce 75 A320s/month by

2026, while Boeing targets 38 737 MAX aircraft/month by the end of 2024. These Droduction ramDS are closelv linked

to increased consumption of aero-tooling for structural assembly, jig fabrication, and high-mix component systems.

Key drivers of the tooling industry growth include:

• OEM production acceleration to meet airline orders

• Rise in engine shop visits due to maturing fleets

• Increased localisation of MRO and component manufacturing

• Technology upgrades in tooling to meet high- complexity geometries and materials in next-gen engines and airframes

Geographies Powering the Next Wave of Aerospace Growth

The Asia-Pacific region is projected to add 11,925 aircraft by 2042, making it the fastest-growing aviation market globally. With expanding low-cost carriers and regional airline fleets, demand for tooling and ground support systems is accelerating. Europe and North America continue to support steady volumes through mature OEM and MRO ecosystems.

Importantly, the shortage of new aircraft has forced airlines to extend the life of existing fleets, intensifying the need for engine overhauls, airframe maintenance, and component upgrades. This shift is fuelling the growth of the global MRO market, which was valued at USD 90-100 Billion in 2024 and is expected to reach USD 130-140 Billion by 2030, aligned with a global fleet expansion of 3.2% compound annual growth rate (CAGR). Over the next two decades, the services and aftermarket segment is forecast to generate USD 4.4 trillion, highlighting the magnitude of the opportunity.

Ground Support Equipment (GSE): A Parallel Growth Engine

Parallel to MRO, the Global Ground Support Equipment (GSE) market is experiencing rapid evolution. Valued at an estimated USD 9.95 Billion by 2025, the sector is growing at a CAGR of 8.9%, driven by increased aircraft movements, cargo handling needs, and airport modernisation programmes. Sustainability, modularity, and smart automation are key industry trends, with airports and airlines increasingly investing in green GSE fleets to meet regulatory mandates and ESG commitments.

Precision Tooling Market

The global tooling market, which includes precision tooling, is projected to reach approximately USD 292.87 Billion in

for high-quality, complex components and the continued shift towards automation and smart manufacturing practices. The market is further expected to register a CAGR of 6.86% through 2034.

Moreover, the adoption of Industry 4.0 technologies and growing emphasis on sustainable, cost-efficient production processes are supporting the growth of precision tooling worldwide. These trends are prompting manufacturers to invest in advanced tooling solutions to meet evolving performance, efficiency, and environmental standards.

A. Aerospace and Defence Industry

Aerospace and defence industries rely heavily on precision tooling to manufacture high-performance components. These components are mission- critical components designed to withstand extreme conditions and ensure the safety and reliability of aircraft, spacecraft, and military equipment. The key components that require precision manufacturing in commercial aircraft include the following:

• Engine Systems

• Flight Control Systems

• Fuel Systems

• Environmental Control Systems

• Aerostructures

The global aerospace market reached over USD 850 Billion in CY 2024 and is projected to grow to USD 1.2 Trillion by CY 2030, at a CAGR of 5-6%. Revenues are expected to exceed USD 1 Trillion in CY 2025, supported by a 20% increase in aircraft deliveries and expanding airline fleets in the Asia-Pacific region. In parallel, the global defence market is forecast to grow from USD 527.06 Billion in CY 2025 to USD 676.64 Billion by CY 2029, registering a CAGR of 6.4%.

This scale of growth in both segments is resulting in greater demand for critical systems and subsystems requiring high precision and reliability. Key applications include airframes, engines, avionics, defence-grade components, and satellite systems.

Precision manufacturing plays a vital role in enabling the required accuracy, performance, and lifecycle durability across these use cases.

B. Semiconductor Manufacturing Equipment Market

Semiconductor manufacturing equipment refers to the equipment used in the processes involved in the manufacturing, fabrication, assembly and packaging, dicing, metrology, bonding and water testing of integrated circuits (IC) chips, memory chips and semiconductor wafers. These sophisticated machines facilitate various stages of semiconductor fabrication, including deposition, lithography, etching, and metrology. The global semiconductor manufacturing equipment market is experiencing significant growth, projected to expand from USD 109.24 Billion in 2024 to USD 155.09 Billion by 2029, at a CAGR of 7.3%. This expansion is driven by several factors, including advancements in packaging technologies, increased government support for domestic semiconductor industries, and the establishment of semiconductor fabrication facilities.

The Asia-Pacific region plays a pivotal role in the semiconductor manufacturing equipment market. The surging demand for advanced and highly efficient chips in the consumer electronics and automotive industries is expected to drive market growth in this region . The integration of artificial intelligence (AI) and generative AI (Gen AI) technologies is also poised to significantly transform the market.

India is rapidly positioning itself as a strategic manufacturing hub within the global semiconductor value chain, with a growing focus on the production of critical components and subsystems for semiconductor manufacturing equipment. Supported by the government’s USD 10 Billion Semiconductor Mission, the Production-Linked Incentive (PLI) scheme, and a favourable investment climate, India is witnessing significant capital inflows into semiconductor infrastructure. As the semiconductor ecosystem matures, India is set to play a vital role. (Source:https://www. marketsandmarkets.com/Market- Reports/semiconductor-manufacturing-equipment- market-263678841.html)

C. Energy Sector

The energy sector is experiencing steady growth driven by rising global energy demand, environmental goals, and technological innovation. Valued at around USD 38.8 Billion in 2024, the market is projected to reach USD 44.7 Billion by 2029 with a CAGR of 2.9%. Nuclear power currently provides about 10% of the world’s electricity, playing a vital role in decarbonisation efforts, especially in regions like Europe and rapidly developing countries in Asia-Pacific such as China and India.

Aligned with this global shift, India is accelerating its nuclear energy ambitions, targeting 100 GW of installed nuclear capacity by 2047 as part of its Viksit Bharat strategy. With 24 reactors (8,055 MWe) already operational and 6 under construction (4,768 MWe), expansion efforts are centred around 700 MWe Pressurised Heavy Water Reactors (PHWRs), notably in Kaiga 5 & 6, with upcoming projects in Gorakhpur, Chutka, and Mahi Banswara. India is also advancing plans for large-scale Nuclear Parks (1000-1600 MWe) and Small Modular Reactors (SMRs), with at least five SMRs expected by 2033, enabling flexible deployment and enhanced energy access.

To support this momentum, the government has introduced policy reforms encouraging private sector participation, streamlined approvals, and incentives for indigenous manufacturing. This growing nuclear ecosystem directly benefits the precision manufacturing sector, which plays a vital role in supplying mission-critical components such as drive systems, channel assemblies, and shielding units. (Source:h ttps://www. marketsandmarkets. com/ Market-Reports/nuclear-power-market-90078787; html#:~:text=0verview,and%20dependable%20supply%20 of%20electricity.)

COMPANY OVERVIEW

Unimech Aerospace and Manufacturing Limited (also referred to as ‘UAML’ or ‘The Company’) is a precision engineering company. It offers a comprehensive suite of manufacturing solutions for mission-critical, high- complexity, and low-volume components. UAML’s solutions are built on a foundation of innovation, quality, and compliance, serving global OEMs in the aerospace, defence, nuclear, semiconductor, and energy sectors.

The Company’s product portfolio spans aerospace tooling systems, ground support equipment, electro-mechanical sub-assemblies, and high-precision machined components. Using both ‘build to print’ and ‘build to spec’ models, it offers customised, high-reliability solutions to customers worldwide.

The Company operates three manufacturing facilities with a combined built-up area of 2,13,000 sq. ft. As of March 31, 2025, UAML offers over 4,388 qualified SKUs and serves 30 customers across seven countries, highlighting its global presence and strong international demand.

SEGMENT-WISE PERFORMANCE

The Company operates through two segments:

• Aero-Tooling/MRO Tooling

The segment is the primary revenue driver, involving the design and manufacture of advanced tooling systems for aircraft assembly, maintenance, and ground support. It supplies aero engine and airframe tools serving majorly large aerospace players like Tooling licences, engine OEMs. Aircraft manufacturers as well as Tier-1 suppliers. We are suppliers to Airbus, Boeing, Pratt & Whitney, to name a few. During the year, the segment contributed -85% to total revenue.

• Precision Components and Assemblies

This segment includes the manufacturing of high- precision components used in industries such as aerospace, defence, energy and semiconductor. Its diverse product range helps meet shifting market demands and strengthens the Company’s position in precision manufacturing. During the year, the segment generated 15% of total revenue.

For more detailed insights, refer to the section ‘Business Overview’ on page 21.

FINANCIAL PERFORMANCE

In FY 2024-25, the Company posted consolidated revenue of INR 2,429.3 Million, up from INR 2,087.7 Million in FY 2023-24, marking a growth of 16%. EBITDA rose to INR 920.6 Million, compared to INR 791.9 Million in the previous year. Profit before Tax reached INR 1,019.0 Million, higher than INR 765.0 Million in FY 2023-24, reflecting a 33% increase. Profit after Tax stood at INR 834.6 Million, rising from INR 581.3 Million last year, recording an uptick of 44%. Correspondingly, basic Earnings per Share for the year stood at INR 17.6.

INITIAL PUBLIC OFFERING (IPO)

The Company successfully launched its IPO through a combination of a fresh issue and an Offer for Sale. The fresh issue comprised 31,84,713 equity shares with a face value of INR 5 each, offered at a price of INR 785 per share (includinga premium of INR 780 per equity share), aggregating to INR 2,500 Million. Simultaneously, the promoters offered for sale 31,84,713 of their existing equity shares, also with a face value of INR 5 each and offered at the same price of INR 785 per share, aggregating to INR 2,500

Prior to the IPO, the Company acquired a 30% stake in Dheya Engineering, a micro-gas turbine design and development company for aero-defence. Building on this, the Company continues to actively pursue strategic acquisitions that enhance long-term synergies and core capabilities.

PRE-IPO FUND RAISE

During July 2024, the Company raised INR 2,500 Million in its first external funding round since inception, marking a significant milestone in its growth journey. It was through three investors namely. Value Quest, Steadview and Evolvence India Fund. The Board approved the issuance of 36,67,090 equity shares, each with a face value of INR 5, at INR 681.74 per share, aggregating to INR 250 Crores, on a preferential basis for cash consideration.

KEY RATIOS (STANDALONE)

In FY 2024-25, the Company reported a stable performance across key financial ratios, reflecting improved operational efficiency and a strengthened balance sheet. The inventory turnover ratio improved from 2.46 times in FY 2023-24 to 2.69 times in FY 2024-25, indicating better inventory management. The current ratio strengthened significantly from 2.10 to 6.55 over the same period, supported by investments made during the year. The net profit margin expanded from 27.19% in FY 2023-24 to 31.18% in FY 2024-25, driven by disciplined cost management and improved profitability.

The Company’s capital structure witnessed further improvement, with the debt-to-equity ratio reducing from 0.32 in FY 2023-24 to 0.11 in FY 2024-25, on account of an increase in share capital. The interest coverage ratio remained largely stable at 1.24 times in FY 2024-25 as compared to 1.30 times in the previous year. The adjusted return on equity stood at 33.08% compared with 53.53% in FY 2023-24, primarily impacted by the expanded equity base.

Ratios	FY 2024-25	FY 2023-24	Variance
Debtors’ Turnover Ratio	4.77	5.29	(9.76)
Inventory Turnover Ratio (x)	2.69	2.46	9.01
Interest Coverage Ratio	1.24	1.30	(4.57)
Current Ratio	6.55	2.10	212.60
Net Profit Margin (in %)	31.18	27.19	3.98
Debt-to-Equity Ratio (x)	0.11	0.32	(65.63)
Adjusted Return on Equity (in %)	33.08	53.53	(20.45)

RISK MANAGEMENT

The Company takes a proactive and structured approach to risk management, aimed at spotting, assessing, and mitigating potential threats that may impact its business operations, financial stability, or strategic objectives. Operating in dynamic sectors, UAML stays alert to both sector-specific and macroeconomic risks.

Additionally, the Company ensures robust internal controls, regulatory compliance, sectoral and product diversification, and continuous monitoring of external and internal developments. These enable the Company to integrate risk mitigation into its core business processes, ensuring resilience, agility, and sustained value creation.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has implemented a solid internal control framework, incorporating a proprietary Enterprise Resource Planning (ERP) platform, rigorous quality assurance protocols, secure IT infrastructure, and well- defined procedures for supplier and customer onboarding. These controls enhance operational transparency, ensure regulatory compliance, support timely execution, and safeguard against fraudulent activities.

While no significant deficiencies have been identified in the current systems, the Company acknowledges that evolving business dynamics may impact their effectiveness. Accordingly, the Company remains committed to regularly reviewing and strengthening its control environment to maintain adequacy and compliance.

INFORMATION TECHNOLOGY

The Company’s IT infrastructure is built on secure and scalable systems developed in collaboration with a reputed software provider. To protect operations, it employs centralised domain management, Multi-Factor Authentication (MFA), endpoint protection, and firewalls, ensuring controlled access and preventing unauthorised activities. Digital manufacturing tools, including 3D modelling and CNC programming software, are utilised to increase precision and streamline production processes.

The Company’s operations have a proprietary ERP system that integrates procurement, supply chain, and end-to-end manufactu ring. It enables real-time tracking of com ponents, vendor performance, and internal workflows, driving efficiency, quality control, and timely delivery. Furthermore, continued investments in IT and software are capitalised as intangible assets, underscoring the Company’s commitment to innovation and technology-driven operations.

HUMAN RESOURCES

The Company’s talent management strategy focusses on building a skilled, diverse, and engaged workforce to foster innovation and operational excellence. Emphasising continuous development, UAML offers regular training programmes, career growth opportunities, and a comprehensive benefits package to support employee well-being. Additionally, safety remains a top priority, with stringent protocols in place to maintain a secure working environment across all operations.

As of March 31, 2025, the Company employed 793 individuals, including both direct employees and contract labourers, spread across key functional areas such as management, engineering, operations, administration, and trainees.

CAUTIONARY STATEMENT

The statements in this section reflect the Company’s objectives, projections, and expectations, which may be considered ‘forward-looking statements’ under applicable securities laws. These statements involve risks and uncertainties, and actual results may differ materially due to various factors. Investors should not rely solely on these statements, as they are not guarantees of future performance. The Company does not undertake any obligation to update or revise these statements.