ZENTEC

Date: 31st July 2022 To To BSE Limited National Stock Exchange of India Limited Phiroze Jeejeebhoy Towers Exchange Plaza, C-1, Block G, Dalal Street Bandra Kurla Complex, Mumbai- 400001 Bandra (E), Mumbai – 400 051 Through: BSE Listing Centre Through: NEAPS Security Code: 533339 Symbol/Security ID: ZENTEC Dear Sir/Madam, Sub: Earnings Presentation Q1FY 2023 Please find attached earnings presentation for the quarter ended 30th June 2022. The above information is also available on the website of the Company: https://www.zentechnologies.com/calls-and-conferences. This is for your kind information and records. Thanking You. Yours sincerely, For Zen Technologies Limited HANSRAJ Digitally signed by HANSRAJ SINGH SINGH Date: 2022.07.31 13:30:09 +05'30' Hansraj Singh Rajput Company Secretary & Compliance Officer M. No. F11438 Zen Technologies Limited Earnings Presentation Q1FY23 India’s leading defence training solution provider NSE: ZENTEC BSE: ZENTEC - 533339 BLOOMBERG: ZEN IN REUTERS: ZETE.BO Inside the Document 01 02 03 04 05 Management Quarterly Order Book Way Strategic Commentary Highlights Status Forward Priorities 06 07 08 09 Financial Disclaimer Contact Us Annexures Statement Summary 03 Management Commentary Commenting on the performance of Q1FY23, Mr. Ashok Atluri, Chairman, Managing Director commented: "I am pleased to share an update to accompany our order book to the existing levels in the second our Q1FY23 results and happy to report that all our half of the year. efforts during the last two years are now starting to bear fruits. As discussed earlier, two focus areas at Zen remain enhancing our focus on R&D and tapping the We've had a particularly strong start to the year and potential in export markets. To this effect, we have have delivered on our commitment by executing an strengthened our investments in our R&D team and export order worth ₹ 19.94 Cr. on time. This is initiatives and roped in a professional CFO to despite the severe challenges faced due to supply increase our management bandwidth. Furthermore, chain constraints resulting in an erratic supply of with support from the Indian Government to focus on critical electric components. We also remain on exports, we are taking positive strides to establish a track for executing our anti-drone order during the demonstration centre in Abu-Dhabi in a phased year, and I am glad to share that we have already manner. executed the First-off production model for the same. The extremely favourable environment for the Indian defence players created by the current Government Having overcome the supply constraints by acts as an antidote to the Covid-impacted internally re-designing our sub-systems, we remain environment. One example is the Indian confident that we will be able to execute our Government's robust simulation framework, which complete equipment order book (₹ 290 Cr. as of 30th gives us confidence that in the coming years will June 2022) during the remaining part of the year. see a very strong performance. Given the substantial operating leverage built into our business model, we expect FY23 to be a year of #WalkingTheTalk #Atmanirbhar initiatives and robust financial performance at Zen. announced policy actions clearly indicate the Government's resolve to make India self-reliant in ZEN On our order book and order status front, we have defence. This augurs well for companies like Zen TECHNOLOGIESLIMITED received an AMC contract worth ₹ 47 Cr, wherein which have developed and continue to invest in the revenues will be recognised periodically over the developing their IP for global markets." next five years. Additionally, our positive interaction Q1FY23 Earnings Presentation with customers gives us the visibility of replenishing 04 Quarterly Highlights All data ₹ in crores REVENUE FROM OPERATIONS (YOY) EBITDA (YOY) PROFIT AFTER TAX (YOY) 35.00 33.23 13.37 9.00 8.21 14.00 8.00 30.00 12.00 7.00 25.00 6.00 10.00 20.00 5.00 8.00 4.00 15.00 9.13 6.00 3.00 10.00 4.00 2.00 1.00 5.00 2.00 0.70 0.00 0.00 0.00 -1.00 -0.34 Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23 REVENUE SEGMENTATION REVENUE SEGMENTATION R & D EXPENSES 35.00 28.00 5.00 30.00 8.99 24.00 4.50 4.15 25.00 20.00 4.00 3.46 20.00 16.00 19.95 3.50 15.00 12.00 24.24 3.00 10.00 8.00 2.50 5.00 7.34 1.79 0.00 1.79 4.00 4.29 2.00 0.00 1.50 Q1FY22 Q1FY23 Q1FY22 Q1FY23 1.00 SALES OF EQUIPMENT AMC Domestic Export Q1FY22 Q1FY23 05 Order Book Status TOTAL ORDER + NEW - ORDERS = ORDER BOOK ORDERS EXECUTED BOOK Order Book as on New Order bagged in Orders executed in Total Order Book as on 1st April 2022 Q1FY23 Q1FY23 30th June 2022 AMC: 115.63 Cr AMC: 47.16 Cr AMC: 8.99 Cr AMC: 153.80 Cr Equipment: 315.09 Cr Equipment: NIL Equipment: 24.24 Cr Equipment: 290.85 Cr Total: 430.72 Cr Total: 47.16 Total: 33.23 Cr Total: 444.65 06 Way INCREASING PREDICTABILITY IN TURNOVER: Forward 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 ZEN suited for the customer requirements. This coupled with more than 2 decades of track record of delivering TECHNOLOGIESLIMITED value to our customers has not only made us the preferred partner of choice but has also ensured enhanced share of their wallet. Q1FY23 Earnings Presentation 07 Strategic The business model of the company has been strategically positioned to reduce lumpiness and enhance the profitability Priorities in the coming years. Continue to Scale the AMC Streamlining Enhance Establishing the grow the sales business, where operational technical Demo centre at of Equipment the contributions efficiencies and capabilities by Abu-Dhabi and and expand the from AMC can focusing on cost increasing our focusing on product portfolio take care of the optimisation and investments R&D export markets with strong focus fixed operating enhancing and getting into expand the on emerging expenses. financial high value-added international space performance complex systems presence and Anti-Drone exports with systems. friendly countries 08 Financial Statement Summary SUMMARY OF PROFIT & LOSS STATEMENT All data ₹ in crores Particulars Q1FY23 Q1FY22 Q4FY22 Net Sales 33.23 9.13 15.97 Other Operating Revenue 2.15 0.74 2.60 Total Sales 35.38 9.87 18.57 Total Operating Expenses 22.00 9.17 16.07 EBITDA 13.38 0.70 2.50 EBITDA Margins 37.80% 7.05% 13.47% Interest Cost 0.59 0.14 0.62 Depreciation 0.92 0.99 0.90 Profit Before Tax 11.87 (0.44) 0.71 Profit After Tax 8.21 (0.34) 1.40 09 Disclaimer This document which have been prepared by Zen Technologies Limited (the “Company”), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment what so ever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company. This document has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Document. This Document may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Document is expressly excluded. Certain matters discussed in this Document may contain statements regarding the Company’s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability to successfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks. The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Document. The Company assumes no obligation to update any forward-looking information contained in this Document. Any forward-looking statements and projections made by third parties included in this Document are not adopted by the Company and the Company is not responsible for such third-party statements and projections. 10 Let’s connect HANSRAJ SINGH RAJPUT DIWAKAR PINGLE ABHISHEK MEHRA cosec@zentechnologies.com Diwakar.pingle@in.ey.com abhishek@theinvestmentlab.in Company Secretary & Compliance Officer Investor Relations Advisor Investor Relations Advisor TIL Advisors Zen Technologies Limited Ernst & Young Zen Technologies A pioneer in providing state of art Defence Training Solutions, Drones and Anti-Drone Solutions for imparting defense training at a glance and measuring combat readiness of security forces. The company is engaged in indigenous design, development and manufacturing of sensors and simulators technology based defence training systems. 28+ 100+ 109 YEARS OF CUSTOMERS PATENTS FILED EXPERIENCE SERVED ORDER BOOK OF 250+ 1,000+ ~445 EMPLOYEES CUMULATIVE CRORES* INSTALLATIONS *Order book as on 30th June 2022 Business Canvas EQUIPMENT COMBAT TRAINING CENTRE ANNUAL MAINTENANCE CONTRACT • A leader in manufacturing defence • A training platform to provide realistic • A recurring revenue stream with training solution with > 95% market battle experiences by integrating superior profitability margins. share in tank simulators. together the entire range of product offerings. • Addition in simulator installations base • Infrequent but large order size with leads to growth in revenues from AMC long closing cycles is an inherent • Big ticket size offerings with potential characteristic of this segment. order wins worth USD 25M for single • Growing service revenue from AMC installation. ensures profitability even in absence • Huge opportunity size in existing and lumpiness of new equipment products with strong focus on R&D for • Expected growth in export market on orders continuous new additions to product the back of attractive EXIM financing basket. options. • AMC revenues start kicking in after 3 years of equipment installation. • Focus on Anti-Drone Simulators R&D – At Zen, continuous research efforts have resulted in creation of diverse technological solutions and corresponding patent Our Strong Suit portfolio. Till date the company has filed for more than 109 patents for the pioneering initiatives undertaken, of which 27 have been granted. ~71 • IP driven business with bill of materials not contributing to more than 10%-25% of the final product cost. CRORES OF INVESTMENTS IN • Investments in R&D over the last years has resulted in R&D IN LAST 5 YEARS 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 ~18% Simulators. OF CUMULATIVE SALES • Willing to take short term pain with possibility of long- INVESTED IN R&D IN term gains. THE LAST 5 YEARS • Investments made in R&D written off in P&L 109 • High investments made in R&D throughout the lifetime of the company make creates high entry barriers for a new PATENTS FILED entrant. New Product Additions • With changing warfare dynamics, drones have become a major threat to any country’s security. Anti-Drone Anti-Drone • Authorities across the globe investing in Systems Simulators & Drone technologies to neutralize Simulators this threat. • Wide applications. Not only restricted to military training. • A huge opportunity size. • New products to Integrated Air Defence Logistic contribute significantly to the revenues and Combat Simulators Drones profitability in the coming years. Strong Regulatory The defence business is a regulated one, which is largely impacted by government policy and budget allocation to the Tailwinds 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 The confluence measures along with strict implementation timelines. of all these • Import embargo on 101 items (9 items manufactured by Zen Technologies Limited) factors provides to enhance domestic manufacturing. for a strong • Aligning Defence Acquisition Procedure (DAP), 2020, with the long-term goals of increase in indigenized content under various categories regulatory • Aggressive push towards MAKE -2 tailwind for the • INR 52,000 crores allocated for equipment procurement from domestic defence industry. Indian defence • Exports target of INR 35,000 crores by 2025. Strong support to the industry for exports space. of equipment to friendly countries by offering attractive financing option through EXIM bank. • Enhancement of FDI limit to 74% under automatic route. • Significant reduction in receivables from government. Investment Merits INCREASING ASSET-LIGHT SHARE OF AMC business model which is annuity in nature STRONG Focus on REGULATORY HIGH VALUE tailwinds COMPLEX SYSTEMS INCREASING STRONG R & D SPENDS BALANCE SHEET with special emphasis with surplus liquidity on Anti-Drone systems for armed forces