ZENTECNSE30 January 2023

Zen Technologies Limited has informed the Exchange about Investor Presentation

Zen Technologies Limited

Date: 30th January 2023

To BSE Limited Phiroze Jeejeebhoy Towers Dalal Street Mumbai- 400001 Through: BSE Listing Centre Security Code: 533339

Dear Sir/Madam,

To National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051 Through: NEAPS Symbol/Security ID: ZENTEC

Sub: Earnings Presentation Q3FY 2023

Please find attached earnings presentation for the quarter ended 31st December 2022.

The above https://www.zentechnologies.com/calls-and-conferences.

is also available on

information

the website of

the Company:

This is for your kind information and records.

Thanking You.

Yours sincerely, For Zen Technologies Limited

Afzal Harunbhai Malkani Chief Financial Officer & Compliance Officer

Q3 FY23 Earnings Presentation

Q 3 F Y 2 3

NSE: ZENTEC B SE: ZENTEC - 533339

BLOOMBERG: ZEN IN REUTERS: ZETE. BO

Inside this document

03 Management Commentary

04 Quarterly Highlights

06 Order Book Status

07 Financial Statement Summary

09 About the Company

11 Research and Development

13 Business Model

14 Strong Regulatory Tailwinds

15 Investment Merits

16 Strategic Priorities

17 Way Forward

2 2 0 2

N O

I T A T N E S E R P

R O T S E V N

D E T I

I L

S E I

G O L O N H C E T

N E Z

Management Commentary

We expect a few more big order wins from aggressive purchase being made by Government of India.

Mr Ashok Atluri CHAIRMAN & MANAGING DIRECTOR

I am pleased to share an update on our performance in Q3FY23. Continuing on the strong start to the year, we have further gained momentum in Q3FY23, where both of our business verticals, AMC and Equipment Sales, have reported positive growth.

As previously committed, we have almost reached an annual run rate of ₹40 crores in our AMC business. The cash flow generated from this business has helped us take care of our fixed operating expenses and our R&D initiatives. Strong growth in this vertical has further enabled us to intensify our R&D initiatives, which should bode well for our equipment business in the years to come.

The sales of equipment is the business vertical where growth visibility continues to remain high and the opportunities opening up excite us. We remain extremely confident of recognizing these revenues in the current financial year with a possible spillover to Q1FY24.

On the order book front, we expect a few major order wins coming our way on the back of our aggressive participation in various exhibitions and trade shows. Furthermore, we expect a few more big order wins from aggressive purchase being made by Government of India.

our

In order to capitalize on this burgeoning opportunity, we are broadening professional bandwidth to the team across functions. Our demonstration center at Abu Dhabi is progressing as per plans and will be operational soon.

and adding

capabilities

With adequate liquidity in hand and a favorable industry environment, we remain committed to delivering sustainable and profitable growth. We appreciate your continued support and look forward to updating you on our future progress.

Quarterly Standalone Highlights

Revenue from Operations (QoQ)

EBITDA (QoQ)

Profit After Tax (QoQ)

(All Values ₹ in Crore)

Q3FY23

32.93

Q3FY23

10.27

Q3FY23

7.59

Q3FY22

12.36

Q3FY22

2.00

Q3FY22

0.12

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Revenue Segmentation

(All Values ₹ in Crore)

Revenue Segmentation (Sales of Equipment) (All Values ₹ in Crore)

R&D Expenses

(All Values ₹ in Crore)

Q3FY23

23.25

9.69

Q3FY23

23.25

Q3FY23

3.37

Q3FY22

3.01

9.35

Q3FY22

3.01

Q3FY22

2.87

Sales of Equipment

AMC

Domestic

Export

Q3FY22

Q3FY23

Quarterly Consolidated Highlights

Revenue from Operations (QoQ)

EBITDA (QoQ)

Profit After Tax (QoQ)

(All Values ₹ in Crore)

52.49

11.94

18.66

16.26

1.94

-0.22

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Q3FY22

Q3FY23

Order Book Status as of 31st Dec 2022

Order Book

New Orders

Orders Executed

Total Order Book

Order Book as on 1st October 2022

New Order bagged in Q3FY23

Orders executed in Q3FY23

Total Order Book as on 31st December 2022

AMC: 145.17 Cr Equipment: 287.10 Cr

AMC: 0.60 Cr Equipment: 4.51 Cr

AMC: 9.69 Cr Equipment: 23.25 Cr

AMC: 136.08 Cr Equipment: 268.36 Cr

Total : 432.27 Cr

Total : 5.11 Cr

Total : 32.94 Cr

Total : 404.44 Cr

Financial Statement Summary

Summary of Standalone Profit & Loss Statement

Particulars (₹ in Crore)

KEY PERFORMANCE INDICATORS

Sales

Other Operating Revenue

Total Revenue

Total Operating Expenses

EBITDA

EBITDA Margins

Interest Cost

Depreciation

Profit Before Tax

Profit After Tax

31.12.22

(Unaudited)

30.09.22

(Unaudited)

31.12.21

(Unaudited)

32.93

1.91

34.84

24.57

10.27

21.13

2.80

23.93

15.74

8.18

12.36

0.97

13.33

11.33

2.00

29.47%

34.20%

14.97%

0.45

1.12

10.70

7.59

0.65

0.96

6.57

4.57

0.43

0.92

0.64

0.12

Financial Statement Summary

Summary of Consolidated Profit & Loss Statement

Particulars (₹ in Crore)

KEY PERFORMANCE INDICATORS

Sales

Other Operating Revenue

Total Revenue

Total Operating Expenses

EBITDA

EBITDA Margins

Interest Cost

Depreciation

Profit Before Tax

Profit After Tax

31.12.22

(Unaudited)

30.09.22

(Unaudited)

31.12.21

(Unaudited)

52.48

1.95

54.44

35.78

18.66

33.41

3.15

36.56

23.49

13.07

16.26

1.02

17.28

15.34

1.94

34.27%

35.75%

11.19%

2.10

1.54

15.01

11.94

0.70

1.37

11.00

7.63

0.44

1.20

0.30

(0.22)

Overview

Since

1993

Vision To be a leading global defence training & anti-drone solutions provider.

Mission To provide defence training & anti-drone solutions through innovative and cost-effective solutions.

Overview

A pioneer in developing defence training systems, drones and anti-drones solutions

An IP player (intellectual property)

3 decades About 3 decades of successful track record

25 years Focus in the first 25 years exclusively on simulators and training equipment for armed and police forces

4 years Additional focus in the last 4 years on anti-drone systems also

100+ Institutional customers served

280+ Human capital: 280+ manpower strength

₹404.44 crores Robust order book of ₹ 404.44 crores as of 31 December, 2022

State-of-the-art State-of-the-art R&D facility recognised by the Ministry of Science and Technology, Government of India.

1,000+ Shipped more than 1,000+ training systems across the globe

~₹65 crores R&D investment of ~₹65 crores in the last 5 years

 IP driven business with bill of materials not contributing to more than 10% - 25% of the final product cost

 Investments in R&D over the last years has resulted in continuous new product additions. The company has recently come out with Anti-Drone system technology and is making further investments in development of Air Defence Gun Simulators

 Willing to take short term pain with possibility

of long-term gains

 Investments made in R&D written off in P&L

 High investments made in R&D throughout

the lifetime of the company make creates high entry barriers for a new entrant

~65

CRORES OF INVESTMENTS IN R&D IN LAST 5 YEARS

~17%

OF CUMULATIVE SALES INVESTED IN R&D IN THE LAST 5 YEARS

112

PATENTS FILED

R&D – Our Strong Suit

At Zen, continuous research efforts have resulted in creation of diverse technological solutions and corresponding patent portfolio. Till date the company has filed for more than 112 patents for the pioneering initiatives undertaken, of which 27 have been granted.

R&D Spends over the Years

146.98

87.29

92.22

53.70

49.57

38.96

61.65

52.61

LEGENDS (All Values ₹ in Crore)

Sales

R&D Expenditure

11.93

13.80

12.88

14.82

12.27

12.83

12.72

14.30

9MFY23

FY21-22

FY20-21

FY19-20

FY18-19

FY17-18

FY16-17

FY15-16

Business Model

Annual Maintenance Contract

Counter-Drone Solutions

Combat Training Centre

 A recurring revenue stream with exceptional

profitability margins

 New simulator sales leading to growth in

revenues from AMC

 Growing service revenue from AMC ensuring

 Anti drone systems are used to detect and/or intercept unwanted drones and unmanned aerial vehicles (UAVs).

 A leader in defence training solutions.

 Infrequent but large orders with long closing

cycles.

 System can detect and deactivate drones of

any size within a 4-km radius.

 90% of order from repeat customers.

sustainability

 Remote demonstration – getting positive

 More than 50 Products (incl. Anti-drone

response.

Systems)

 Have already reached about ₹ 40 crores of

annual AMC revenues.

 Will soon achieve ₹ 50 crores of AMC annual

revenues.

 Expect big orders in the coming years.

 Big ticket size with potential orders worth

$ 20 M for a single installation.

 A platform providing Realistic battle

experiences by Integrating Zen’s entire range of Product offerings.

Strong Regulatory Tailwinds

The defence business is a regulated one, which is largely impacted by government policy and budget allocation to the sector. The government’s keen focus on Make in India and Atmanirbhar Bharat campaign has created conducive environment

The Government of India (GOI) has formulated several measures along with strict implementation timelines.

 Aligning Defence Acquisition Procedure (DAP), 2020, increase in indigenized

with the long-term goals of content under various categories

 Aggressive push towards MAKE -2

 INR 52,000 crores allocated for equipment procurement

from domestic defence industry.

 Exports target of

INR 35,000 crores by 2025. Strong support to the industry for exports of equipment to friendly countries by offering attractive financing option through EXIM bank.

 Significant reduction in receivables from government.

 iDEX (Innovations for Defence Excellence) and IDDM (Indigenously Designed, Developed and Manufactured) would help us achieve the goals faster than expected

The confluence of all these factors provides for a strong regulatory tailwind for the Indian defence space.

Investment Merits

Asset-light business model

Increasing Share of AMC which is annuity in nature

Strong regulatory tailwinds

Focus on High Value Complex Systems

Increasing R&D spends with special emphasis on Anti-Drone systems for armed forces

Strong Balance Sheet with zero debt

Strategic Priorities

The business model of the company has been strategically positioned to reduce lumpiness and enhance the profitability in the coming years.

Continue to grow the sales of Equipment and expand the product portfolio with strong focus on emerging space Anti- Drone systems.

Establishing the Demo center at Abu- Dhabi and focusing on export markets expand the international presence and exports with friendly countries.

Scale the the AMC business, where contributions from AMC can take care of the fixed operating expenses.

technical

by capabilities Enhance increasing our investments R&D and getting into high value-added complex systems.

Streamlining operational efficiencies and focusing and enhancing financial performance.

optimization

cost

Way Forward

Increasing Predictability in Turnover

We are working towards strategically positioning the business model to reduce lumpiness. The sale of equipment done in the last couple of years will start contributing to the top line in terms of Annual Maintenance Contracts.

Equipment Order Wins

In the next couple of years the contributions from AMC stream will cover the fixed operating expenses of the business. This will provide stability and predictability to the business operation. The huge order wins of equipment can then offer huge operating leverage and boost to our bottom line.

Strong Government Support to Act as Tailwind

The GOI has formulated several measures along with strict implementation timelines. The governments keen focus on Make in India and Atmanirbhar Bharat campaign has created a conducive environment to make in India for the defence industry. This should act as a strong tailwind going forward

Focus on New Products

The continuous investments in R&D ensure that the products are technologically advanced and suited for the customer requirements. This coupled with ~ 3 decades of track record of delivering value to our customers has not only made us the preferred partner of choice but has also ensured enhanced share of their wallet.

Increasing Focus on International Markets

The keen focus on export markets has resulted in brisk growth in export footprint. The Company has a strong product and projects pipleline in the export market and expects exports to contribute more than 40% to the top financial year. Furthermore fast line in the current clearances from the Government for exports further acts as a tailwind.

Thank You

©2018 ZEN TECHNOLOGIES LIMITED., ALL RIGHTS RESERVED. ZEN TECHNOLOGIES LOGO IS A TRADEMARK OF ZEN TECHNOLOGIES LIMITED. IN ADDITION TO COMPANY DATA, DATA FROM MARKET RESEARCH AGENCIES, STOCK EXCHANGES AND INDUSTRY PUBLICATIONS HAS BEEN USED FOR THIS PRESENTATION. THIS MATERIAL WAS USED DURING AN ORAL PRESENTATION; IT IS NOT A COMPLETE RECORD OF THE DISCUSSION. THIS WORK MAY NOT BE USED, SOLD, TRANSFERRED, ADAPTED, ABRIDGED, COPIED OR REPRODUCED IN WHOLE ON OR IN PART IN ANY MANNER OR FORM OR IN ANY MEDIA WITHOUT THE PRIOR WRITTEN CONSENT. ALL PRODUCT NAMES AND COMPANY NAMES AND LOGOS MENTIONED HEREIN ARE THE TRADEMARKS OR REGISTERED TRADEMARKS OF THEIR RESPECTIVE OWNERS.

Let’s connect

Afzal Malkani

afzal.malk a ni @ze nte c hn ologie s. c o m Chie f F inancial Office r Z en Technol og ie s Limit ed

Diwakar Pingle

diwakar.pin gle@i n .ey. com I nvest or Re lations A dvisor Ernst & Young

Vishal Singh

vishal@con cep t p r .in Conce pt Public Re lations

Archana Jain

archana @ co n cep t i ndi a .co m Conce pt Public Re lations

Abhishek Mehra

abhishek@ the i nves t me ntl ab .i n I nvest or Re lations A dvisor TI L Advisors

Disclaimer:

Statements

Certain in this presentation concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The relating to these risks and uncertainties limited to, statements include, but are not risks and uncertainties regarding fluctuations in earnings, intense competition, political instability and general economic conditions affecting our industry. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

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