VL E-Governance & IT Solutions Ltd Management Discussions

Global Economic Overview

The global economy experienced a modest recovery in 2024, with real GDP expanding by 2.8%, a pace like that of the previous year. However, this remains below the long-term average of 3%, as the effects of recent global shocks, structural rigidities, and tightened financial conditions continue to weigh on momentum. Earlier signs of a "soft landing" have given way to renewed concerns, as rising geopolitical tensions, weak investment, and trade fragmentation reintroduce volatility into global markets. The World Bank projects global growth to slow further to 2.3% in 2025, underscoring the fragile nature of the current recovery. In this evolving environment, resilience, strategic alignment, and adaptability will be crucial for businesses to navigate uncertainty and capitalise on emerging opportunities.

Geopolitical tensions, weak investment, and trade fragmentation continue to weigh on global growth, challenging recovery and resilience.

Disinflation has opened the door for policy easing, reigniting investor interest in long-gestation infrastructure sectors.

Advanced economies remained on a subdued growth path in 2024, recording a modest expansion of 1.7%, held back by elevated interest rates and the gradual withdrawal of fiscal stimulus. The United States outperformed expectations with a 2.8% growth rate, underpinned by strong consumer spending. Meanwhile, the Euro Area experienced weaker momentum, primarily due to sluggish investment activity. On the other hand, emerging markets and developing economies (EMDEs) posted a stronger performance, expanding by 4.2%, supported by easing inflationary pressures and firmer domestic demand.

Looking ahead, EMDEs are anticipated to remain the key drivers of global output, with a projected growth of 3.8% in 2025. Global trade, a key indicator of cross-border business activity, rebounded with a 3.4% increase in 2024 and is expected to grow modestly by 3.5% in 2025.

Global inflation eased considerably and is expected to decline further, reaching around 2.9% by 2025 and continuing into 2026. This broad-based disinflation has created room for central banks to begin unwinding the prolonged phase of monetary tightening. In early 2025, the U.S. Federal Reserve, European Central Bank, and several emerging market regulators signalled rate cuts as inflationary pressures receded. Although real interest rates remain higher than pre-pandemic levels, this policy pivot is likely to reinvigorate investment sentiment, particularly in capital-intensive sectors like infrastructure and technology.

Nonetheless, several headwinds remain. Persistent underinvestment in EMDEs, increasing climate volatility, geopolitical tensions, and fiscal pressures in low-income economies continue to pose risks to global demand recovery.

Indian Economic Landscape

India sustained its growth momentum in FY25, demonstrating resilience amid a turbulent global landscape. Real GDP grew by 6.5%, in line with the Second Advance Estimates, reinforcing Indias position as one of the fastest-growing major economies This performance was achieved despite global headwinds stemming from geopolitical tensions and trade fragmentation.

The economys strength was primarily supported by robust domestic demand. A visible recovery in rural consumption, coupled with steady investment activity and a favourable shift in net exports, contributed meaningfully to overall growth. On the supply side, the services sector continued to function as a key driver of growth, while industrial activity registered healthy expansion, particularly in the construction and manufacturing segments. Additionally, the agriculture sector staged a strong rebound, aided by a good monsoon season and record levels of food grain production.

Indias economic momentum continues into FY26, with high-frequency indicators such as e-way bills, fuel consumption, and PMI data signalling sustained resilience. Rural demand has improved with a healthy rabi harvest and favourable monsoon outlook, while urban consumption benefits from rising travel activity. Although some softening is visible in sectors like construction inputs and vehicle sales, inflation has eased due to strong agricultural output and effective policy measures. Despite external volatility from global trade tensions, Indian financial markets have shown stability. Government bonds gained traction in May 2025, aided by the RBIs record surplus dividend and strong Q4 FY25 growth. Indias exports rose 2.8% YoY in May, and forex reserves remained strong at USD 699 billion. The rupee remained relatively stable compared to other currencies. The labour market is also improving, with formal job creation rising and hiring gaining momentum in key sectors such as AI/ML, real estate, and hospitality.

Headline inflation eased considerably, with the Consumer Index (CPI) dropping to 3.34% in March 2025 the lowest level in six years. This was primarily driven by a moderation in food prices and proactive supply-side measures. Core inflation also trended lower, creating space for the Reserve Bank of India (RBI) to pursue a more supportive monetary stance. Reflecting this shift, the RBI reduced the repo rate by 25 basis points each in February and April 2025, bringing it down to 6.0%. Alongside the rate cuts, the monetary policy stance was revised to "accommodative" to foster growth amid persistent global uncertainties.

As of April 2025, India continues to maintain its distinction as the fastest-growing major economy, despite revisions in global growth projections and rising geopolitical and trade-related uncertainties. Multiple agencies forecast Indias real

GDP growth for FY2025 26 to be in the range of 6.3% to 6.7%, supported by strong domestic fundamentals, disciplined

India remains the worlds fastest-growing major economy, with 6.5% GDP growth in FY2024–25.

macroeconomic management, and a sustained emphasis on public capital expenditure. The ongoing moderation in inflation further strengthens the foundation for a broad-based and inclusive economic expansion.

Global Industry Landscape

The global IT industry

The global IT industry witnessed robust growth and continued evolution in 2024, fuelled by rapid technological advancements and shifting enterprise priorities. Looking ahead to 2025, key segments such as data centre systems, software, and devices areexpectedtobesignificant by increased investment in generative AI (GenAI) infrastructure and associated hardware upgrades. According to Gartner, Worldwide IT spending is expected to total $5.61 trillion in 2025, an increase of 9.8% from 2024. Key developments included the accelerated adoption of cloud computing, with organisations increasingly embracing multi-cloud strategies to manage complexity. The integration of AI and machine learning continued to revolutionise business operations, enhancing efficiency and innovation.

In 2025, global technology trends are being shaped by a strong focus on machine customers, AI-augmented development, and sustainable technologies. Organisations are increasingly preparing for an era where non-human entities such as bots, intelligent agents, and smart devices function as autonomous buyers and service users. At the same time, the adoption of AI-augmented software engineering is accelerating, enabling faster development cycles, improved code quality, and more adaptive systems. These shifts reflect a broader move toward hyper-automation and digital operational excellence.

Additionally, platform engineering, industry cloud platforms, and augmented connected workforce strategies are helping enterprises scale innovation, improve resilience, and enhance workforce productivity. A growing emphasis on machine learning security and AI governance also signals the maturing of AI ecosystems. Collectively, these trends are not only driving digital transformation but also reinforcing the importance of agility, trust, and sustainability in future-ready business models.

Global Government Spending on IT and E-Governance:

Global IT spending by government and public service entities is witnessing accelerated growth, propelled by the increasing demand for digital transformation, operational efficiency, and citizen-centric service delivery. Governments worldwide are making strategic investments in advanced technologies, including cloud computing, artificial intelligence (AI), big data analytics, and cybersecurity. The pandemic served as a strong catalyst, prompting public sector agencies to adopt remote delivery models and digital governance frameworks. As a result, the sector is now experiencing a sustained rise in digital infrastructure development, including initiatives in smart cities, e-governance platforms, and integrated service delivery channels.

A key driver of this momentum is the global shift towards more transparent, accessible, and responsive governance. E-governance solutions ranging from online citizen services to digitised backend processes are being adopted widely to enhance efficiency and build public trust. Moreover, growing threats of cyberattacks have made cybersecurity investments a top priority for public sector entities. Additionally, increased regulatory scrutiny has further encouraged investments in IT systems that ensure compliance, privacy, and data protection. Together, these dynamics are setting the stage for a prolonged cycle of robust public IT spending, with emerging economies such as India and China leading the expansion of digital infrastructure.

According to Gartner, global IT spending in the government and education sectors is projected to rise by 8.7% in 2024, reaching USD 824.3 billion in constant currency terms. Over the next five years, aggregate spending is expected to grow at a compound annual growth rate (CAGR) of 9.1%, surpassing USD 1 trillion by 2028. The accelerating push for digital transformation primarily drives this sustained growth, as well as efforts to modernise legacy IT infrastructure and rising demand for citizen services that offer user experiences on par with those in the private sector.

Domestic Industry Landscape

The Indian Information Technology/ Software industry

The Indian IT and Software industry has emerged as a global technology leader, playing a pivotal role in shaping Indias position as a preferred investment and outsourcing destination. With its proven ability to deliver high-quality, cost-effective, and reliable solutions, the industry has transformed India into the top offshoring hub for global enterprises. As of FY2024 25, the sector contributes approximately 7.3% to Indias GDP, driven by strong capabilities in both onshore and offshore services, underpinned by innovation and the rapid adoption of emerging technologies.

The IT-BPM industry (excluding e-commerce) is projected to reach USD 283 billion in FY2024 25, with exports accounting for USD 224 billion. The sector also plays a critical role in employment generation, currently supporting a workforce of

5.8 million professionals, including a significant 36% share of women. With consistent growth in revenues, exports, and job creation, the Indian IT/ITeS sector remains a key engine of economic advancement and global competitiveness.

The United States, the United Kingdom, and the European Union continue to be the primary destinations for Indias IT and ITes exports, accounting for approximately 62%, 17%, and 11%, respectively. Meanwhile, demand from regions such as the Asia-Pacific, Latin America, and the Middle East is steadily increasing, creating new opportunities for expansion into continental Europe, Japan, China, and Africa. The sector remains one of the largest employment generators in the country, not only creating direct jobs estimated at 5.8 million in FY2024 25, with a 36% share of women but also fuelling growth in allied industries, including transport, real estate, catering, security, and facility management.

Indian Government Spending on IT and E-Governance:

Indias public sector continues to demonstrate a strong commitment to modernising its IT architecture, focusing on secure, interoperable, and citizen-centric systems. Flagship platforms, such as the Open Network for Digital Commerce (ONDC), Ayushman Bharat Digital Mission (ABDM), and the National Data Governance Framework, are gaining momentum, reflecting a strategic push towards digital public goods. These initiatives align with the broader national vision of delivering seamless and inclusive public services across critical sectors, including healthcare, education, agriculture, and financial empowerment.

The governments efforts extend beyond scaling existing platforms and are now directed at driving the next phase of digital transformation. Emerging technologies, particularly artificial intelligence, machine learning, and predictive analytics, are being actively explored to optimise public administration, enhance service delivery, and anticipate citizen needs. As the digital-first model becomes institutionalised within the public sector, the demand for scalable, secure, and AI-enabled solutions is expected to accelerate. This presents a compelling growth opportunity for technology providers and e-governance companies, such as VLE E-Governance, which are well-positioned to support the execution of national digital missions and contribute to shaping Indias next-generation public digital infrastructure.

Indias defence manufacturing sector

Indias defence manufacturing sector has emerged as a critical pillar of the nations strategic and economic framework. With one of the worlds most significant standing armed forces and a pressing need to modernise its defence systems,

India has made significant strides in bolstering its domestic manufacturing capabilities. The sector encompasses a diverse range of sub-segments, including military fixed-wing aircraft, naval vessels, missile systems, artillery, rotorcraft, and tactical communications.

The governments strong push towards "Aatmanirbhar Bharat" (self-reliant India) and "Make in India" has led to a sharp uptick in both policy reform and private sector participation in defence production. Public sector undertakings, such as Bharat Electronics Ltd. (BEL), Hindustan Aeronautics Ltd. (HAL), and Bharat Earth Movers Ltd. (BEML), have traditionally driven the sector. However, recent years have seen increasing involvement from private players and emerging defence-tech startups.

Budget Allocation and Export Performance

In the Union Budget for FY 2025 26, the Ministry of Defence received a total allocation of 6.81 lakh crore (approximately US$78.7 billion), marking a 9.5% year-on-year increase. Notably, 1.80 lakh crore (approximately US$20.8 billion) has been earmarked for capital expenditure, including the procurement of new aircraft, warships, and other military assets. An additional 7,146 crore (US$825.7 million) has been directed to the Border Roads Organisation (BRO), signalling the governments continued emphasis on border infrastructure and combat readiness.

Indias defence exports have also surged, reaching 21,000 crore (US$2.43 billion) in 2024. The government aims to elevate this to 50,000 crore (approximately US$7.2 billion) by 2029, with defence products now reaching over 75 countries. According to the Global Firepower Index, India ranks fourth globally in terms of military strength with a score of 0.0979, further underscoring the significance of a robust defence manufacturing base.

Policy Reforms and Indigenisation Drive

To reduce dependency on imports and promote local production, the Ministry of Defence has notified five Positive Indigenisation Lists (PIL), covering over 3,700 items that are now reserved for domestic procurement. The latest list alone includes 346 items with an import substitution value of 1,048 crore (US$126.6 million).

In FY24, the capital acquisition budget adopted a domestic-to-foreign procurement ratio of 67.75:32.25, reinforcing the commitment to indigenous sourcing. Furthermore, 1,500 crore

(approximately US$181.1 million) has been explicitly allocated for startups under the Technology Development Fund (TDF), overseen by the DRDO. These measures are crucial for nurturing innovation, particularly among MSMEs and deep-tech startups.

With a targeted defence manufacturing output of 3,00,000 crore (US$34.7 billion) by FY2029, Indias defence manufacturing industry stands at the cusp of transformation.

The confluence of rising strategic needs, policy support, innovation-led investments, and export ambitions is creating a favourable ecosystem for sustained growth. Indias journey from being one of the worlds largest defence importers to becoming a major exporter is well underway, placing the country firmly on the path of self-reliance, security resilience, and global leadership in defence manufacturing.

Indias IT-BPM sector is projected to reach USD 283 billion by

FY2024–25, solidifying its position as a global technology powerhouse.

Warehousing Infrastructure in India

Indias warehousing sector is witnessing a transformative shift, with Tier II and III cities emerging as new growth hubs. As of 2024, the countrys total warehousing stock reached 533.1 million square feet, with 100 million square feet contributed by emerging cities a fourfold increase since 2017. This evolution aligns with the hub-and-spoke model envisioned during the rollout of the Goods and Services Tax (GST), reshaping the logistics map.

The year 2024 saw a robust absorption of 60 million square feet across 20 cities, driven by rising demand fueled by the e-commerce boom and growth in consumption in non-metro areas. Notably, 60% of online purchases now originate from Tier II and III cities, prompting companies to set up smaller fulfilment centres to reduce delivery times and logistics costs.

The top 8 Tier I cities accounted for 438 million square feet of stock and 51 million square feet in annual absorption. In contrast, the 12 Tier II-III cities contributed 95 million square feet, with 9 million square feet in absorption. Average rentals remain competitive: 24.8 for Grade A and 20.5 for Grade B in Tier I cities, and 22.0 and 17.5, respectively, in emerging markets.

Key regional clusters include Bhubaneswar Cuttack, Guwahati, and Patna in the East; Chandigarh Rajpura, Jaipur, and Lucknow in the North; Coimbatore and Kochi in the South; and Goa, Nagpur, and Nashik in the West. These cities offer lower land costs, better availability, and access to consumption centres, making them attractive for warehousing investments.

Infrastructure initiatives such as PM Gati Shakti, Bharatmala, Sagarmala, and UDAN have enhanced connectivity and logistics efficiency. At the same time, policy measures under Make in India, Digital India, and the National Logistics Policy are creating supportive ecosystems. Production-linked incentives (PLI) are also encouraging companies to establish manufacturing and distribution bases in these cities.

JLLs report, launched at LogiMAT India 2025, emphasised that this decentralised growth is unlocking new opportunities in the logistics sector. As Tier II and III cities continue to expand, they are poised to drive the next wave of warehousing growth in India, offering cost-effective operations, enhanced delivery networks, and significant investment opportunities.

Company Overview

VL E-Governance & IT Solutions Ltd. (VL E-Gov) has undergone a transformational evolution from a service-led e-governance entity into a diversified technology and infrastructure solutions company with national relevance. Rooted in its legacy of delivering high-impact digital public services, the Company today stands at the cusp of a new growth chapter, one that is defined by strategic repositioning and portfolio diversification to enable long-term value creation.

The Companys origins lie in e-governance implementation, where it played a critical role in bridging digital divides by providing front-end government services across rural and semi-urban India. Over the years, VL E-Gov has established robust domain expertise, a pan-India field presence, and deep working relationships with public sector stakeholders. These capabilities continue to serve as a solid foundation as the Company explores new and scalable avenues of growth.

In recent years, VL E-Gov has adopted a deliberate strategy to move beyond its traditional business model. Recognising the limitations of dependency on bid-based government contracts, the Company has identified core growth verticals where it can deploy its institutional expertise and leverage Indias rising public and private sector digital spend. This repositioning involves three critical pillars: infrastructure-led expansion, defence electronics manufacturing, and next-generation digital governance projects.

The most significant pivot is in the infrastructure space. VL E-Gov, in partnership with leading entities, is pursuing large-scale EPC (Engineering, Procurement and Construction) projects on strategic land parcels, with a flagship project covering 400 500 acres strategically located at the intersection of the Mumbai Nagpur and Delhi Mumbai expressways. This project, with an initial outlay of approximately 800 crore, will feature warehousing clusters, logistics parks, and solar installations. With major e-commerce players already established as an anchor tenant, the project is expected to serve as a scalable model and long-term revenue generator, with potential access to an adjacent 2,000-acre extension.

Complementing this is the Companys foray into the Aviation, Aerospace, Defence, and Satellite sectors. The Company has signed a binding term sheet to acquire a 40% equity stake in HELT, a joint venture of Hindustan Aeronautics Limited (HAL). This strategic investment positions the Company to capitalise on future growth opportunities in the design, development, manufacturing, and promotion of high-tech projects and products across electronics, software, hardware, and aeronautical systems, specifically for the Aviation, Aerospace, Defence, and Satellite domains.

Detailed Description of Business Verticals

VL E-Governance & IT Solutions Ltd. (VL E-Gov) has undergone a deliberate and strategic shift from a predominantly e-governance-centric services company to a multi-vertical enterprise operating at the confluence of digital infrastructure, defence & Aerospace, and digital governance service enablement. The Companys current business portfolio is structured across three principal verticals:

1. Digital Services & E-Governance Solutions

This is the Companys foundational business and remains a critical component of its long-term engagement with public digital delivery. VL E-Gov has a strong record in providing services such as UIDAI Aadhaar Enrolments, National Population Registrar, Digitisation of Land Records, Public Distribution System, Inspector General of Registration Services, and various other services, particularly in underserved and remote regions.

The nature of this business is mainly bid-based and project-dependent, with margins and volumes determined by government tenders and policy-driven timelines. While the business will no longer be the sole growth engine of the Company, VL E-Gov will continue to pursue select e-governance projects that align with its strategic roadmap and operating strengths. The experience, knowhow, and field infrastructure from this vertical also serve as enabling assets for the Companys newer initiatives.

2. Infrastructure and EPC Projects

A significant new thrust area for VL E-Gov is its expansion into large-scale Infrastructure Development and Engineering, Procurement and Construction (EPC). This segment aims to develop physical infrastructure assets, with a focus on logistics parks, warehousing zones, and renewable energy installations, particularly solar power installations.

The Company has partnered with key stakeholders to develop a marquee project in Maharashtra, spanning over 400 acres of land, strategically situated at the junction of the Mumbai Nagpur Samruddhi Mahamarg and the Delhi Mumbai Expressway. This mixed-use development will include warehousing infrastructure, logistics clusters, and embedded solar energy solutions.

VL E-Gov operates as an EPC and strategic development partner in this venture, bringing execution capability and domain expertise. The project is designed to be scalable, with a potential additional land bank of 1,000 acres earmarked for future expansion. This business is expected to generate long-term, annuity-like revenue streams and could emerge as a core value driver in the coming years.

3. Aviation, Aerospace, Defence and Satellite projects

VL E-Gov has taken a strategic step into Indias high-priority defence Aviation, Aerospace, and Satellite sector through the signing of a binding term sheet for the acquisition of a 40% equity stake in HETL (a joint venture of Hindustan Aeronautics Limited (HAL)). The acquisition will provide future business growth opportunities in the onics,electr fieldssoftware, hardware, and aeronautical systems required for Aviation, Aerospace, Defence, and Satellite projects.

The scope of work includes the development of mission-critical embedded systems, chips for fighter aircraft, and mission computers, segments that are poised for exponential growth considering Indias push for self-reliance in defence production under the Atmanirbhar Bharat initiative. Regulatory clearances are currently in progress, and execution is expected to commence once all formalities are complete.

Given the high entry barriers, national strategic relevance, and potential for recurring defence orders, this business will represents a powerful long-term opportunity for E-Governance.

Financial Overview

Particulars	FY 2025 (in Million)	FY 2024 (in Million)
Revenue from Operations	306.88	220.11
Other Income	16.99	4.42
Total Income	323.88	224.53
Total Expenses	309.87	300.83
EBITDA	14.39	(76.29)
Exceptional Item	25184.12	1623.02
Profit Before Tax (PBT)	(25,170.12)	(1699.32)
Tax Expenses	0.20	0.00
Profit AfterTax (PAT)	(25170.33)	(1699.32)

Topline Performance:

The Company recorded a 39.5% YoY growth in revenue from operations, increasing from 220.11 million in FY2024 to

306.88 million in FY2025. This suggests improved execution, new business onboarding, and early signs of traction in the restructured business model.

Improved Operational Efficiency:

The EBITDA has turned positive at 14.39 million, representing a stark turnaround from the previous years negative 76.29 million. This reflects tight cost management and better utilisation of resources. Total expenses rose only modestly (3%), highlighting operational discipline.

Exceptional Item:

The extraordinary loss of 25,184.12 million in FY2025 is a prudent provision made towards Expected Credit Losses (ECL) on the Companys financial assets, entirely in line with the requirements of Ind AS 109 Financial Instruments. This reflects our forward-looking approach to risk management and commitment to transparent financial reporting. The ECL provision has resulted in a reduction in net worth for the period. Notwithstanding this, the Company maintains a strong balance sheet, with a positive net worth of Rs. 4,569.66 lakhs. The management is fully committed to closely pursuing the recovery of the underlying assets. All receipts from these assets will be earning accretive returns.

Bottom-line Impact:

Despite operational improvements, the net loss widened to 25,170.33 million, solely due to the exceptional item. Excluding this one-time charge, the Company would have been profitable at the pre-tax level.

As we expand into complex, high-tech sectors, aligning our risk framework with this new model helps us stay resilient, ready, and focused on long-term value creation.

Key Financial Ratios - FY2024-25 vs. FY2023-24

Percent Particulars FY 2025 FY 2024

Change ^Rationale

Current Ratio 16.66 36.19 -53.97% Due to repayment of Trade Payables and ECL allowance on Financial Assets

Debt-Equity Ratio 0.00 0.02 -100.00% Repayment of borrowing

Return on Equity (ROE) -201.84% -6.71% 2909.94% Increase resulting from the Loss incurred due to the ECL allowance on Financial Assets. Trade Receivables - 0.02 -100.00% Due to receipt from receivables and ECL

Turnover Ratio allowance thereon

Trade Payables Turnover - 1.10 -100.00% Due to repayment of Trade Payables

Ratio

Net Capital Turnover 0.71 0.01 7680.38% Due to an increase in revenue and ECL Ratio allowance on financial Assets.

Return on Capital Variance due to an increase in Loss and

Employed (ROCE) -5505.84% -6.80% -80884.93% repayment of Debt.

Risk Management

As VL E-Governance & IT Solutions Ltd. transitions into a multi-vertical technology enterprise with strategic interests in design engineering, defence systems, infrastructure technology, and semiconductor solutions, our risk landscape has evolved accordingly. The Companys ability to foresee, assess, and mitigate diverse risks across its expanding business lines is central to sustaining growth, ensuring compliance, and protecting stakeholder value. Our risk management approach is embedded into enterprise decision-making and regularly reviewed to stay ahead of emerging threats and market disruptions.

By aligning our risk framework with the evolving business model, the Company ensures its readiness for a broader, innovation-led future. This refreshed risk outlook helps build institutional resilience, attract long-term partners, and support value creation across all business lines beyond traditional e-governance.

Risk Category	Description	Mitigation Strategy
Capital Deployment & Project Risk	New business verticals in Aerospace, defence-tech, and semiconductor design require high upfront investments with prolonged gestation and variable return cycles.	Adopt phased investment models, conduct rigorous technical and financial feasibility assessments, and partner with established PSUs and institutions for co-development.
Technology Innovation Risk	Operating in deep-tech sectors demands constant innovation and rapid adaptation to emerging global standards in design, engineering, and manufacturing.	Establish in-house innovation hubs, co-create with research institutions, and integrate IP management practices to stay ahead of technology curves.
Execution Complexity	Large-scale, multi-stakeholder projects across diverse industries entail higher obust r indomain-specifictalent, andimplement execution risks, including integration	Strengthen cross-functional project teams, invest programme management tools.
. challengesandspecialisedstaffing needs

Risk Category Description Mitigation Strategy

Supply Chain and Vendor Risks Semiconductor and electronics projects Develop a diversified vendor base, localise are exposed to raw material volatility, procurement where feasible, and maintain supplier dependencies, and geopolitical strategic inventory reserves. restrictions.

Cybersecurity and Data Operating across sensitive domains Upgrade cybersecurity infrastructure, comply

Compliance like defence, Health tech, and finance with national and international data protection heightens exposure to data security, IP frameworks, and perform regular third-party theft, and regulatory scrutiny. security audits.

Talent & Skill Alignment Risk Shifting to innovation-driven sectors Build university partnerships, establish training requires access to highly skilled talent and reskilling academies, and offer long-term in electronics, defence engineering, and incentives to technical teams. design.

Regulatory & Licensing Risk Operating in regulated sectors such as Set up a regulatory compliance unit, engage with defence, semiconductors, and electronics policy stakeholders proactively, and use legal involves complex licensing, export norms, advisory support for licensing and certification. and clearances.

Financial Risk With increased capital involvement and Maintain conservative debt levels, pursue longer revenue cycles in new verticals, government grants/subsidies, and closely risks related to liquidity, funding, monitor project-level cash flows. and capital efficiency become more pronounced.

Dependency on Government Reliance on government contracts, which Diversify the portfolio by exploring new business

Contracts can be delayed or cancelled due to policy opportunities in design, engineering, and changes or budget allocations. technology infrastructure development across various industries.

By aligning our risk framework with the evolving business model, the Company ensures its readiness for a broader, innovation-led future. This refreshed risk outlook helps build institutional resilience, attract long-term partners, and support value creation across all business lines beyond traditional e-governance.

Human Resources and Management

The Company places a strong emphasis on its human resources, recognising that its employees are critical to achieving business objectives and sustaining long-term growth. As of March 31, 2025, the Companys workforce stood at eight employees. and we also introduced new HR initiatives ranging from leadership development cohorts to comprehensive wellness programs engaging all participants.

The Company has implemented comprehensive human resource policies and practices designed to attract, retain, and develop talent. These policies focus on creating a conducive work environment, promoting continuous learning and development, and ensuring employee well-being.

The Company has implemented comprehensive human resource policies and practices designed to attract, retain, and develop talent. These policies focus on creating a conducive work environment, promoting continuous learning and development, and ensuring employee well-being.

Training and Development Initiatives

The Company is committed to fostering a culture of continuous learning and development. Various training programs are conducted to enhance the skills and knowledge of employees, ensuring they are well-equipped to manage the dynamic demands of the IT/ITES industry. These programs include technical training, leadership development, and soft skills enhancement.

Employee Engagement and Well-being

The Company places a high priority on employee engagement and well-being. The Company conducts regular employee satisfaction surveys to gauge the workplace environment and implement improvements. Initiatives to promote work-life balance, health and wellness programs, and employee recognition schemes are integral to the Companys HR strategy. These efforts have resulted in a 100% employee retention rate in fiscal year 2025.

Diversity and Inclusion

The Company is committed to promoting diversity and inclusion within the workplace. Efforts are made to ensure equal opportunities for all employees, regardless of gender, race, or background.

Future HR Initiatives

Looking ahead, the Company plans to introduce several new HR initiatives aimed at further enhancing employee engagement, development, and well-being. These initiatives include implementing advanced HR technology solutions to improve workforce management, expanding leadership development programs, and strengthening efforts to promote diversity and inclusion.

By focusing on comprehensive human resource policies and practices, the Company aims to build a motivated, skilled, and diverse workforce that is well-prepared to drive the Companys growth and success in the competitive IT/ITES industry.

Corporate Governance Practices and Policies

The Company is committed to maintaining robust corporate governance practices that align with best industry standards. The Companys governance framework is designed to promote transparency, accountability, and ethical business conduct. Key governance practices include:

Board Committees: The Company has established various board committees, including the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, and the Corporate Social Responsibility (CSR) Committee. These committees support the board in overseeing key areas, including financial reporting, executive compensation, and social responsibility initiatives.

Code of Conduct: A comprehensive code of conduct is in place, outlining the ethical principles and standards expected from all employees and directors. Regular training and communication ensure adherence to these guidelines.

Risk Management: The Company has implemented a robust risk management framework to identify, assess, and mitigate potential risks. This framework is regularly reviewed and updated to address emerging threats and opportunities.

Stakeholder Engagement: The Company actively engages with its stakeholders, including shareholders, employees, customers, and regulatory authorities, to ensure their interests are considered in decision-making processes.

Compliance with Regulatory Requirements

We are dedicated to complying with all applicable regulatory requirements and maintaining the highest standards of legal and regulatory compliance. Key measures include:

Regulatory Filings: The Company ensures the timely and accurate submission of all regulatory filings and disclosures as required by law.

Internal Audits: Regular internal audits are conducted to review and assess compliance with regulatory standards and internal policies. Findings from these audits are used to enhance the Companys compliance framework.

Ethical Practices: The Company promotes a culture of integrity and ethical behaviour, ensuring that all business practices comply with legal and regulatory requirements.

Training and Awareness: Continuous training programs are conducted to keep employees and directors informed about regulatory changes and compliance obligations.

By adhering to these corporate governance practices and policies, the Company demonstrates its commitment to ethical business conduct, transparency, and accountability, thereby fostering stakeholder trust and supporting long-term sustainable growth.

Future Outlook

VL E-Governance & IT Solutions Ltd. is entering a transformative phase, steering its strategic vision beyond traditional IT/ITES and e-governance services to establish itself national as a diversified development landscape. The Company is actively repositioning its core competencies to build long-term value in high-impact sectors, including logistics infrastructure, warehousing parks, and the Aviation, Aerospace, Defence, and satellite sectors.

A large-scale infrastructure development initiative in

Maharashtra anchors the Companys foray into logistics and warehousing. Located at the intersection of two national logistics corridors the Mumbai Nagpur Samruddhi Mahamarg and the Delhi Mumbai Expressway the planned 400+ acre logistics hub is set to become a cornerstone of the Companys business strategy. The site is poised for expansion through the development of warehousing clusters, logistics parks, and integrated facilities for storage, distribution, and value-added services.

The Company is also exploring EPC partnerships and strategic alliances with global logistics players to scale the model further. This initiative, once operational, is expected to provide a stable and recurring revenue stream while enabling participation in Indias fast-growing digital and physical commerce backbone.

Simultaneously, the Company is scaling its presence in the defence and aerospace ecosystem, having entered a Binding Term Sheet for the acquisition of a 40% equity stake in HAL-Edgewood Technologies Private Limited (HETL), a Joint Venture of Hindustan Aeronautics Limited (HAL). This acquisition will provide future business growth opportunities in the fields of electronics, software, hardware, and aeronautical systems required for Aviation, Aerospace, Defence, and Satellite projects.

In the medium term, the Company will also evaluate expansion into digital infrastructure, EPC, and technology parks, aligned with the governments infrastructure pipeline and sustainability goals. Additionally, it will continue to selectively pursue e-governance projects, particularly in areas such as land record digitisation and public service delivery automation, where it has proven expertise and a history of success.

With a significantly deleveraged balance sheet, new cash on the books, and a sharper strategic focus, VL E-Governance & IT Solutions Ltd. is well-positioned to emerge as a multi-vertical platform company, combining physical infrastructure creation with advanced technology delivery. The Companys future roadmap is centred on building enduring physical and digital assets that address national priorities, unlock new revenue drivers, and deliver sustainable long-term value for shareholders.

Environmental, Social, and Governance (ESG) Initiatives

VL E-Governance & IT Solutions Ltd. is committed to integrating environmental, social, and governance (ESG) considerations into its business operations, reflecting its dedication to sustainable development and responsible corporate citizenship. The Companys approach to ESG is rooted in its Corporate Social Responsibility (CSR) policy, which outlines its philosophy and guidelines for contributing to the welfare and sustainable development of the community.

Environmental Initiatives

The Company is focused on ensuring environmental sustainability through various initiatives aimed at reducing its environmental footprint. These include promoting ecological balance, protecting flora and fauna, and conserving natural resources. The Company actively engages in projects that support environmental conservation, including rainwater harvesting, reducing water consumption, and implementing energy-efficient practices. These efforts are in line with the Companys goal to minimise its impact on the environment while supporting broader ecological objectives.

Social Initiatives

On the social front, VL E-Governance & IT Solutions Ltd. is dedicated to making a positive impact on the communities in which it operates. The Companys CSR policy emphasises initiatives in areas such as education, healthcare, rural development, and gender equality. Specific projects include supporting educational institutions, enhancing vocational skills, promoting gender equality, and providing healthcare services to underserved communities. The Company also focuses on empowering women, supporting elderly care, and contributing to disaster relief efforts. These initiatives are designed to uplift marginalised groups and contribute to the overall socioeconomic development of the community.

Governance Practices

The Companys governance framework is built on the principles of transparency, accountability, and ethical business conduct. VL E-Governance & IT Solutions Ltd. adheres to the highest standards of corporate governance, ensuring that its operations are aligned with stakeholder expectations and regulatory requirements. The board of directors and the CSR committee play a crucial role in overseeing the Companys ESG initiatives, ensuring that they are implemented effectively and contribute to the Companys long-term sustainability goals.

Internal control systems and their adequacy.

The Company has aligned its current internal financial control systems with the requirements of the Companies Act 2013.

Management maintains internal control systems designed to provide reasonable assurance that assets are safeguarded, transactions are executed following managements authorisation and properly recorded, and accounting records are adequate for the preparation of financial statements and other financial information. The internal audit function also conducts Operations Review Audits to enhance processes and strengthen control over existing processes.

VL E-Governance internal control systems and procedures adhere to industry standards in terms of effective resource utilisation, operational efficiency, and financial reporting. The Company has appointed a reputable firm of Chartered Accountants to oversee and conduct internal audits. The Audit is based on an Internal Audit Plan, which is reviewed each year in consultation with the Audit Committee. In line with international practice, the conduct of Internal Audit is oriented toward reviewing internal controls. The adequacy of the Companys internal controls is tested periodically, and any control deficiencies identified during these assessments are addressed appropriately.

Disclaimer

This Management Discussion and Analysis (MD&A) contains forward-looking statements about VL E-Governance & IT Solutions Ltd.s future performance, business strategies, and growth opportunities. These statements reflect managements current expectations and are identified by words such as "anticipate," "believe," "expect," "intend," "may," "plan," "predict," "should," "target," and "will."

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. These risks include economic conditions, regulatory changes, market dynamics, competitive pressures, technological advancements, and other factors outlined in the Companys filings with regulatory authorities. The Company does not undertake any obligation to update or revise these statements, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, made as of the date of this MD&A.