ZENTECNSE7 August 2023

Zen Technologies Limited has informed the Exchange about Investor Presentation

Zen Technologies Limited

Date: August 7, 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: Investor Presentation ****

Please find attached Investor Presentation for the quarter ended June 30, 2023.

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

is also available on

information

the website of

the Company:

Kindly take the same on record and acknowledge the receipt.

Thanking you. Yours faithfully, For Zen Technologies Limited

M. Raghavendra Prasad Company Secretary and Compliance Officer M.no.: A41798

Encl: as above

Investor Presentation

Q 1 F Y 2 4

NSE: ZENTEC BSE: ZENTEC - 533339

BLOOMBERG: ZEN IN REUTERS: ZETE.BO

Inside this document

03 Management Commentary

04 Quarterly Standalone Highlights

05 Quarterly Consolidated Highlights

06 Order Book Status

07 Financial Statement Summary

09 Overview

11 R&D - Our Strong Suit

12 R&D Spends over the Years

13 Business Model

14 Strong Regulatory Tailwinds

15 Investment Merits

16 Strategic Priorities

17 Way Forward

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

Mr Ashok Atluri CHAIRMAN & MANAGING DIRECTOR

Zen Technologies' performance for Q1FY24 has set a new record for us in terms of revenue and profitability. This strong performance in the quarter was driven by the successful execution of a significant part of the simulation export and domestic anti-drone orders. The inherent operating leverage of our business model came to the fore this quarter, evident in EBITDA of 51%.

During this quarter, we secured new orders amounting to approximately ₹202 crores. Additionally, in July 2023, we bagged orders worth around ₹500 crores. This brings our cumulative order book position to ~ ₹1,000 crores, a figure that exceeds the cumulative turnover of the last whole decade. We believe this is merely the onset of an inflection point—a positive black swan event, resulting from the convergence of various factors such as #MakeInIndia, #Atmanirbharata, Buy Indian IDDM, Defence Positive Lists, Simulation Framework, and the GoI's Sustainability Commitment. Owing to escalating

geopolitical risks and India’s improved international relations, we are optimistic about making significant inroads in the export markets, especially for simulators and anti-drone systems.

We have a strong liquidity position and a healthy balance sheet with a significant improvement in our working capital cycle. This will support execution of the orders and will fuel our plans for the growth opportunities that will unfold in the coming years.

Quarterly Standalone Highlights

Revenue from Operations (YoY)

EBITDA (YoY)

Profit After Tax (YoY)

(All Values ₹ in Crore)

299%

132.45

414%

474%

68.79

47.13

33.23

13.38

8.21

Q1FY23

Q1FY24

Q1FY23

Q1FY24

Q1FY23

Q1FY24

Revenue Segmentation (Sale of Equipment vs AMC)

(All Values ₹ in Crore)

Revenue Segmentation (Domestic vs Exports) (All Values ₹ in Crore)

R&D Expenses

(All Values ₹ in Crore)

7.67

124.77

Q1FY24

8.99

24.24

Q1FY23

59.39

65.37

Q1FY24

19.95

4.23 Q1FY23

4.89

4.15

Sales of Equipment

AMC

Domes tic

Exports

Q1FY23

Q1FY24

Quarterly Consolidated Highlights

Revenue from Operations (YoY)

EBITDA (YoY)

Profit After Tax (YoY)

(All Values ₹ in Crore)

257%

132.45

452%

71.59

531%

47.09

37.07

12.96

7.46

Q1FY23

Q1FY24

Q1FY23

Q1FY24

Q1FY23

Q1FY24

Q1FY23

Q1FY24

Q1FY23

Q1FY24

Q1FY23

Q1FY24

*PAT Adjusted for Non-Controlling Interests

Order Book Status as of 30th June 2023

Order Book

New Orders

Orders Executed

Total Order Book

Order Book as on 1st April 2023

New Order bagged in Q1FY24

Orders executed in Q1FY24

Total Order Book as on 30th June 2023

AMC: 145.61 Cr Equipment: 327.20 Cr

AMC: 32.05 Cr Equipment: 170.38 Cr

AMC: 7.68 Cr Equipment: 124.72 Cr

AMC: 169.98 Cr Equipment: 372.86 Cr

Total : 472.81 Cr

Total : 202.43 Cr

Total : 132.40 Cr

Total : 542.84 Cr

In July 2023, we secured substantial orders worth ~₹ 500 Crs, comprising Rs. 340 Crores (exports ) and Rs. 160 Crores (domestic ), bringing our current order book position to ~ ₹ 1000 Crs.

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

Q1FY24

(Unaudited)

Q4FY23

(Audited)

Q1FY23

(Unaudited)

132.45

2.63

135.08

66.29

68.79

50.93%

0.35

1.46

66.98

47.13

74.14

0.19

74.33

47.83

26.50

35.65%

0.33

1.38

24.78

17.27

33.23

2.15

35.38

13.38

37.80%

0.59

0.92

11.87

8.21

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 (Adjusted for Non-Controlling Interests)

Q1FY24

(Unaudited)

Q4FY23

(Audited)

Q1FY23

(Unaudited)

132.45

2.68

135.13

63.54

71.59

52.98%

0.42

1.91

69.26

47.09

95.88

(0.01)

95.86

60.69

35.17

36.68%

0.63

1.52

33.02

20.19

37.07

2.17

39.24

26.28

12.96

33.03%

0.65

1.63

10.69

7.46

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, 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

5 years Additional focus in the last 5 years on anti-drone systems also

100+ Institutional customers served

280+ Human capital: 280+ manpower strength

₹542.84 crores Robust order book of ₹ 542.84 crores as of 30 June, 2023

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

~₹73 crores R&D investment of ~₹73 crores in the last 5 years

§ Investments in R&D over the last years has resulted in continuous new product additions. The company has recently come out with Anti-Drone 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 creates high entry barriers for a new entrant

~73

CRORES OF INVESTMENTS IN R&D IN LAST 5 YEARS

~14%

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

110+

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 110 patents for the pioneering initiatives undertaken, of which 27 have been granted.

R&D Spends over the Years (In crs)

4.89

4.15

3.39

1.89

Q1FY21

Q1FY22

Q1FY23

Q1FY24

Business Model

Training Simulation Equipment

Counter-Drone Solutions

Annual Maintenance Contract

§ A leader in defence training solutions.

§ Infrequent but large orders with long closing

cycles.

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

§ A recurring revenue stream with exceptional

profitability margins

§ New simulator sales leading to growth in

§ 90% of domestic orders from repeat customers.

§ System can detect and deactivate drones of

revenues from AMC

any size within a 4 km radius.

§ Remote demonstration – getting positive

sustainability

response.

§ Expect big orders in the coming years.

revenues.

§ Will soon achieve ₹ 50 crores of AMC annual

§ Growing service revenue from AMC ensuring

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, with the

long-term goals of increase in indigenized content under various categories

§ Aggressive push towards MAKE -2, Make in India and Atmanirbhar

Bharat

§ Positive Indigenization list 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

§ Framework for increased utilisation of simulators by the Indian Army, Navy and Airforce & Indian Coast Guard issued by MoD

§ Agnipath Pravesh Yojna (APY) announced by the Government is

another emerging opportunity for our Company

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

Investment Merits

Asset-light business model

Increasing Revenues from Simulators and Anti-drone systems

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 ~ ₹ 275 crores in cash balance as on July 31, 2023

Strategic Priorities

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

Establishing the Demo centre overseas and focusing on export markets to expand the international presence.

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

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

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

Streamlining operational efficiencies and focusing on cost optimisation and enhancing financial performance.

Evaluating tie ups with OEMs.

Way Forward

Increasing Demand for Simulators

The recently announced Policy Document on Framework of Simulators in the Armed Forces has created significant opportunities for us, as it aims to promote simulation- based training across all military domains. Going forward, we will be focusing on leveraging this policy framework to offer innovative, cost-effective, and safe training solutions to the Indian Armed Forces.

Focus on New Products and R&D for Anti Drone

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 markets of Middle East, Africa and CIS countries and expects exports to contribute more than 20% to the top line in the current financial year. Furthermore fast clearances from the Government for exports further acts as a tailwind.

Strong Government Support to Act as Tailwind

The Government's strict implementation timelines and focus on Make in India and Atmanirbhar Bharat has created a favorable environment for the defense industry. This provides a strong tailwind for us, and the recently announced Agnipath Pravesh Yojna (APY) by the Government presents another emerging opportunity for our Company.

Sustainability We collaborated with the TERI (The Energy and Resources Institute ) and worked jointly on overall objectives to enhance environmental awareness and promote sustainability. We also worked on assessment of how Simulator can enhance sustainability in the armed forces and released the report on ‘Supporting Defence Sectors Efforts Towards Sustainability: Application of Simulators in Army Training. This study seeks to assess and quantify the environmental and economic benefits of using simulators for training in armed forces.

Increasing Revenues from AMC

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.

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.

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Disclaimer:

Certain Statements 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 risks and uncertainties relating these statements include, but are not limited to, risks and uncertainties regarding fluctuations intense competition, political in earnings, 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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