Zen Technologies Ltd. — Investor Presentation 2020

Aug 12, 2020

ZEN TECHNOLOGIES LIMITED

Certified ISO 9001:2015, ISO 27001:2013, ISO 14001:2015, CMMI MLS 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: 12 August 2020

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

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

Dear Sir/Madam,

Sub: Investor Presentation

With reference to the above captioned subject, please find attached the updated Investor Presentation - August, 2020.

This is for your kind information and records.

Thanking You.

Yours faithfully,

M. No. A38213

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

Investor Presentation - August 2020

"The more you sweat in peace, the less you bleed in war."

Zen Technologies : Snapshot

In-house Design, Development and Manufacturing of Simulators

Over 25 years of successful track record of serving Ministry of Defence, State Police Forces & Para Military Forces

Listed On BSE & NSE and track record of consistent dividend payment

Establishing global footprints through Outreach Program. Zen Product appears in prominence in Google Searches

Zen's Business Model

• Pioneer & Leader in Defence Training Solution Provider
• Balancing the product and fixed revenue stream from AMC
• Thurst on exports for global presence and diversifying revenue stream
• Significant service revenue from AMC ensures profitability even in absence of new equipment orders

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 fixed income with superior profit margins
• Lifecycle of a simulator is 15 years which creates lifetime revenue potential of 120% of product sale
• Perpetual growth in recurring fixed AMC revenue with augmentation in simulator installation base

Exports

• Thurst on sales to under served markets of CIS, Middle-East and African countries
• Focus on developed market sales with a sales team in US

Simulator Products

Revenue Drivers

Scalability

• Handful of companies globally in this segment
• Large value add to the forces with simulated wargames / large scale joint exercises
• Potential order size of USD 25-100 million for a single installation

Global addressable market size of more than USD 8 billion

Large installed base with AMCs – significant recurring income

Abundant Global Opportunities

• Zen's products are mature
• Growing credibility of Indian Defence Vendors with active government support
• Cost of Advanced simulators very prohibitive in Africa and Middle East
• Larger established players have no thrust for Smaller markets
• No ITAR restrictions on Exports

• The Company has an Asset Light model and outsources most of manufacturing to its supply chain.
• Mostly, software and final hardware assembly is done at the Zen facility
• Hyderabad based vendors have adequate surplus manufacturing capacity to cater to any increase in demand
• Capex requirement will be negligible to execute large size increases 2x/3x.
• The Company has adequate infrastructure. In the rare case of additional integration facility, there is surplus land in the existing facility

Investment in IPR

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 investment 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 93 domestic and global patents applications of which 23 granted
• Almost 38% of the employees are dedicated for centralised R&D centre

Total IPR Applications

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

Growth Drivers

Growth Levers - Strategic diversification

Regulatory Tailwinds

	Industry can suomotocome up with solutions which can solveor address the challenges faced by Indian Army
MAKE II procedure inthe DPP 2016	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
	Government of India's keen focus on promoting indigenous manufacturing hascreated conducive environment to make in India for exports
Make in India	Offset clauses require global defence players to partner with Indianmanufacturers
	New Category introduced by MoD in DPP 2016:
IndigenouslyDesigned, Developed	Under IDDM even Single vendor situations are accepted this opens up severalerstwhile closed opportunities.
and Manufactured	Govt. to focus on IP ownership of products; not just low-cost coolie

Regulatory Tailwinds fortifies…

	•Hon'bleDefenceMinisterannouncedalistof101itemswhichwillbeexclusivelyprocuredfromdomesticdefenseindustry.
Exclusivity toIndigenous Products	•Thelistincludes9simulatorswhicharedesigned,developedandmanufacturedbyZenTechnologiesLimited.
	•IndianIDDM(IndigenouslyDesigned,DevelopedandManufacturing)policychangewillprovidethemuchneededpush

Zen poised for Growth like Special Bamboo Tree

Bamboos include some of the fastest-growing plants in the world,[ due to a unique rhizomedependent system. Certain species of bamboo can grow 36 inch within a 24-hour period, at a rate of almost 1 1⁄2 inch an hour

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

• 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

• 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

• Multi-Functional Target System

• ShootEdge®

• Shoot House for Live and Simulated Indoor Tactical Training

• Smart Target System

• Tactical Engagement Simulator (TacSim®)

• Tank Simulators

• Tank targets

• T90 Crew Gunnery Simulator

• T90 Tank Driving Simulator

• T90 Tank Gunnery Simulator

• Tank Zeroing System

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
• Combat Training Centre
• Containerised Shooting Range
• Containerised Tubular Shooting Range
• Driver Aptitude Testing System

Driving

• Automated Driving Simulator
• Basic Driving Simulator

• Hand Grenade Simulator

• Multi-Functional Target System

• ShootEdge®

• Shoot House for Live and Simulated Indoor Tactical Training

• Smart Target System

• Tactical Engagement Simulator (TacSim®)

• TacSim® with Indoor Tracking System

• Driving Training Simulator

• Driver Aptitude Testing System

And many more…….

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

Are You Combat Ready?

Combat Training Centre

Zen CTC: One Stop Solution for higher Combat Readiness

Infrastructure Facilities

(Figures in INR Millions)

Particulars	2018	2019	2020
Sales	389.6	922.2	1,469.8
Sale of Products	184.3	698.9	1275.25
Sale of Services	205.3	223.3	194.55
Gross Profit	323.1	615.6	1022.27
R&D Expenses	128.3	122.7	148.16
EBITDAExcl R&D	109.8	348.2	784.07
PAT	2.0	190.5	605.3
Total Order Book	3,500.0	2,663.6	1607.9
AMC Order Book	1,243.0	1,108.9	948.3

(Figures in INR Millions)

Particulars	2018	2019	2020
Net Worth	1,184.2	1410.1	1987.46
Long-Term Borrowings	32.7	88.0	1.88
Short-Term Borrowings	68.3	329.9	6.9
Trade Payables	34.7	75.2	51.26
Fixed Assets	646.4	627.7	643.61
Capital Work-in-Progress	0.0	4.0	0.0
Inventories	115.5	352.8	103.53
Trade Receivables	226.1	733.5	443.78
Cash and Cash equivalents	118.0	36.8	102.49

Trends

Trends continues……

(Figures in INR Millions)

• The Company achieved historically highest turnover and profitability during the financial year 2019-20
• The Company prepaid Term Loan and achieved debt free status during the year
• The Company continues to maintain debt free status . The Company's surplus funds reached to new high which has been parked in fixed deposit with prestigious Banks
• Company executed the order from Army 18 months ahead of schedule
• The Company declares 40% dividend

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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