Zen Technologies Ltd. — AGM Information 2019

Sep 23, 2019

ZEN TECHNOLOGIES LIMITED

Certified ISO 9001:2015, ISO 27001:2013, ISO 14001:2015, CMMI ML5 Regd. Office : B-42, Industrial Estate, Sanathnagar Hyderabad - 500 018, Telangana, India Phone: +914023813281, Fax No: +914023813694 Email: info@zentechnologies.com Website: www.zen.in Corporate Identity Number: L72200TG1993PLC015939

Date: 23 September 2019

To The Secretary BSE Limited Phiroz Jeejeebhoy Towers Dalal Street Mumbai- 400001 Scrip Code - 533339

To The Secretary National Stock Exchange of India Ltd., Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051 Symbol - ZENTEC

Dear Sir I Madam,

Sub: Corporate Presentation made at the 26'h Annual General Meeting of the company.

With reference to the above mentioned subject, please find enclosed the corporate presentation made at the 26th Annual General Meeting (AGM) of the company held on Saturday, the 21st September, 2019 at I 0.00 a.m. at I I th Floor, Signature Towers, Opp. Botanical Garden, Kondapur, Hyderabad - 500 084, Telangana, India.

This is for your information and record.

Thanking you

Works : Plot 36, Hardware Park, Near Shamshabad International Airport, Hyderabad - 501 510, Telangana, India

26th ANNUAL GENERAL MEETING

Saturday, 21 September 2019 at 10.00 a.m.

Venue: 11th Floor, Signature Towers

Contents

Zen: Snapshot

State Police Forces & Para Military Forces of Various Countries

Zen Product Results in Google Searches

Milestones

Large Opportunity Size

Combat Training Centre

• Handful of companies globally
• Large value add to the forces with simulated wargames / large scale joint exercises
• Potential order size of USD 50-100 million for a single installation

Indian Army training requirement of 8000 Cr

Global addressable market size of more than USD 8 billion

Large installed base with AMCs – significant recurring income

Abundant Export Opportunities

• Operational Preparedness Increasingly Important in Europe, Middle East and Africa
• Cost of Advanced simulators very prohibitive in Africa and Middle East
• Smaller markets which are ignored by larger established players
• No ITAR restrictions on Exports
• Growing credibility of Indian Defence Vendors with active government encouragement

Zen's Business Model

• Pioneering Defence Training Solution Provider
• Balancing the product and services business mix
• Exports to further diversify revenue base
• AMCs revenues to hit a level where company is profitable even in absence of new equipment orders

Revenue Drivers

Simulator Products

• Orders are of large size and have long closing cycles resulting in revenue volatility
• First mover advantage with many soldiers having trained on company's products

Combat Training Centre (CTC)

Combat Training Centre as a highly advanced & tailored training solution would enable deeper penetration and longevity of relationship

Annual Maintenance Contract

• Long term recurring income with high margins
• Lifecycle of a simulator is 15 years creates lifetime revenue potential of 120% of product sale
• Growing recurring income as simulator installation base increases

Exports

• Focus on sales to underserved markets of Middle-East and African countries
• Focus on developed market sales with a sales team in US

Competitive Edge

Focused R&D driven organisation

• R&D Driven prototyping to develop state of the art training simulators
• Over 90 in-house researchers working on specialised in-house created domain libraries
• Collaboration with universities to further augment research capabilities
• R&D spend of over 65 crs in the last 5 years, ~24% of revenues
• Significantly shortened lead time in developing new simulators with a databank of extensive simulation modules
• Filed 92 domestic and global patents applications of which 23 granted

Total IPR Applications 8 29 33 92 Copyright Trade marks Designs Patents

Zen Technologies Competitive Edge

Comprehensive product range

• More than 50 simulator and other training products for varied training needs
• Comprehensive Customised Training solutions with Combat Training Centre

Credibility with 25-year track record

• Great understanding of Indian defence procurement process
• Good insight into the potential pipeline and armed forces pain-points
• Great credibility within the Indian Forces having supplied over 825 simulators over the last 2 decades
• Over 90% of Indian business is from repeat customers

Best-in-Class Sales Support

• 23% of workforce in after sales support
• Excellent feedback ratings
• Over 99% Uptime of product installations in AMC

Moving Up The Complexity Pyramid

Simulator Life Cycle

Simulator sale of X creates a future revenue potential of 1.2X over the product life

Simulator Product List

• 81mm Mortar Integrated Simulator
• Advanced Weapons Simulator
• Air-to-Ground Firing Range Scoring System
• Anti-Aircraft Air Defence Simulator
• Anti-Tank Guided Missile Simulator
• Armour Combat Training System
• Artillery Forward Observers Simulator
• Automatic Grenade Launcher Simulator
• BMP II Driving Simulator
• BMP II Integrated Missile Simulator
• Carrier Mortar Tracked Simulator
• Combat Training Centre
• Combat Training Simulation System
• Containerised Shooting Range
• Containerised Tubular Shooting Range
• Driver Aptitude Testing System
• Driving Training Simulator
• Hand Grenade Simulator
• Infantry Weapons Training Simulator

• Master Control Station for Live-Firing Ranges

• Medium Machine Gun Simulator

• Multi-Functional Target System
• Rotary Wing Simulator
• ShootEdge®
• Shoot House for Live and Simulated Indoor Tactical Training
• Small Arms Training Simulator SL
• Smart Target System
• Tactical Engagement Simulator (TacSim®)
• TacSim® with Indoor Tracking System
• Tank Simulators
• Tank targets
• T72 Crew Gunnery Simulator
• T72 Tank Driving Simulator
• T72 Tank Gunnery Simulator
• T90 Crew Gunnery Simulator
• T90 Tank Driving Simulator
• T90 Tank Gunnery Simulator
• Tank Zeroing System
• UAV Mission Simulator
• War Gaming Solutions

Defence Homeland Security

• 81mm Mortar Integrated Simulator
• Advanced Weapons Simulator
• Air-to-Ground Firing Range Scoring System
• Artillery Forward Observers Simulator
• Automatic Grenade Launcher Simulator
• Carrier Mortar Tracked Simulator
• Combat Training Centre
• Containerised Shooting Range
• Containerised Tubular Shooting Range
• Driver Aptitude Testing System
• Driving Training Simulator
• Hand Grenade Simulator

Driving

• Automated Driving Simulator
• Basic Driving Simulator

• Bus Driving Simulator

• Master Control Station for Live-Firing Ranges

• Medium Machine Gun Simulator
• Multi-Functional Target System
• Robotic Targets
• Rotary Wing Simulator
• ShootEdge®
• Shoot House for Live and Simulated Indoor Tactical Training
• Small Arms Training Simulator SL
• Smart Target System
• Tactical Engagement Simulator (TacSim®)
• TacSim® with Indoor Tracking System

• UAV Mission Simulator

• Driving Training Simulator

• Driver Aptitude Testing System
• Tatra Driving Simulator

http://www.zentechnologies.com/training-simulators-equipment-systems.php

WHAT'S THE MOST IMPORTANT QUESTION FOR ARMED FORCES?

Are You Combat Ready?

Combat Training Centre

Zen CTC: One Stop Solution for higher Combat Readiness

Facilities

Financials

Figures in INR Millions

	2014	2015	2016	2017	2018	2019
Sales	463.5	785.5	526.1	616.5	389.6	922.2
Sale of Products	432.6	715.3	425.3	486.7	184.3	698.9
Sale of Services	30.9	70.2	100.8	129.8	205.3	223.3
Gross Profit	341.5	542.1	378.7	494.5	323.1	615.6
R&D Expenses	148.55	130.7	142.96	127.24	128.3	122.7
EBITDA Excl R&D	248.2	372.7	239.00	276.94	109.8	348.2
PAT	0.9	157.4	23.2	71.7	2.0	190.5
Total Order Book	40.0	1,190.0	760.0	740.0	3,500.0	2,663.6
AMC Order Book	10.0	790.0	760.0	700.0	1,243.0	1,108.9

Figures in INR Millions

	2014	2015	2016	2017	2018	2019
Net Worth	985.6	1,110.5	1,124.4	1,196.1	1,184.2	1410.1
Long-Term Borrowings	44.4	36.8	77.6	58.0	32.7	88.0
Short-Term Borrowings	124.8	348.2	295.0	21.6	68.3	329.9
Trade Payables	20.9	31.2	20.9	30.7	34.7	75.2
Fixed Assets	438.7	440.6	431.2	446.4	646.4	627.7
Capital Work-in-Progress	10.4	3.1	147.2	166.9	0.0	4.0
Inventories	98.5	150.2	97.9	79.2	115.5	352.8
Trade Receivables	114.6	594.9	80.6	203.5	226.1	733.5
Cash and Cash equivalents	420.2	376.4	679.7	342.1	118.0	36.8

Financial Details

Financial Details

Financial Details

• 64 Crore Export Order Signed around end-2017
• Execution not yet started due to customer-end documentation delays including opening of L/C
• Process still pending at the customer-end

• Tremendous Indian Govt Support
• Focus on countries friendly to India
• Direct approach to various Govts via Indian Embassies
• Less Focus on Exports from USA
• Scale down operations in USA and, further, ramp up from India

Regulatory Tailwinds

MAKE II procedure in the DPP 2016	Industry can suo moto come up with solutions which can solve  or address the challenges faced by Indian Army For accepted solutions the Indian armed forces will give a go ahead  to develop such a system  Indian armed forces will assure the acquisition of such system as a single vendor Developer will have to incur the cost of development 
Make in India	Government of India's keen focus on promoting indigenous manufacturing has  created conducive environment to make in India for exports  Offset clauses require global defence players to partner with Indian manufacturers
Indigenously Designed, Developed and Manufactured	New Category introduced by MoD in DPP 2016:  Under IDDM even Single vendor situations are accepted this opens up several  erstwhile closed opportunities. Govt. to focus on IP ownership of products; not just low-cost coolie  manufacturing done under licence

Growth Drivers

• Conducive regulatory regime has opened erstwhile closed single vendor business opportunities
• Offset clauses require global defence players to partner with Indian manufacturers

• Target smaller erstwhile ignored markets through tailored training solution
• Dedicated marketing team to push sales
• Strong support from government vs approval hurdles in past.
• Products developed under Make II procedure can further be exported significantly enhancing the opportunity size
• Push will be from India rather than USA due to active support from Indian Govt.

• AMC CAGR of 38.5% over last 5 years
• Simulator sales leads to a potential 120% AMC revenue over product lifecycle
• Continued engagement with customers result in potential upsell opportunities.

THANK YOU

DISCLAIMER:

CERTAIN STATEM ENTS IN THIS PRESENTATION CONC ERNING OUR FUTURE GR OWTH P ROSP ECTS ARE FORWARD-LOOKING STATEMENTS, WHIC H INVOLVE A NUMBER OF R ISKS AND UNC ERTAINTIES THAT C OULD C AUS E ACTUAL RES ULTS TO DIFFER MATERIALLY FR OM THOS E IN S UC H FOR WARD-LOOKING STATEMENTS. THE R ISKS AND UNCERTAINTIES RELATING TO THESE STATEMENTS INC LUDE, B UT ARE NOT LIM ITED TO, RIS KS AND UNCER TAINTIES REGARDING FLUCTUATIONS IN EARNINGS, INTENSE COMPETITION, POLITICAL INSTAB ILITY AND GENER AL ECONOM IC C ONDITIONS AFFECTING OUR INDUSTRY. THE COMP ANY DOES NOT UNDERTAKE TO UPDATE ANY FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM TIM E TO TIME BY OR ON BEHALF OF THE COMPANY.

Regd. Office: B-42, Industrial Estate, Sanath Nagar, Hyderabad, Telangana, India – 500018 Phone: +91-40-23812894, 23813294, 23814894, 23813281 Email: info@zentechnologies.com | www.zentechnologies.com

© 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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