Zen Technologies Ltd. — Investor Presentation 2021

Jul 24, 2021

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Date: 24[th] July 2021

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 Q1 FY 2022

Please find attached earnings presentation for the quarter ended 30[th] June 2021.

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

SINGH Digitally signed by SINGH HANSRAJ HANSRAJ Date: 2021.07.24 15:07:35 +05'30'

Hansraj Singh Rajput Company Secretary & Compliance Officer M. No. A38213

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Zen Technologies Limited Earnings Presentation Q1FY22 India’s leading defence training solution provider

NSE: ZENTEC BSE: ZENTEC - 533339 BLOOMBERG: ZEN IN REUTERS: ZETE. BO

Inside the Document

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01 02 03 04 MANAGEMENT QUARTERLY ORDER BOOK WAY FORWARD COMMENTARY HIGHLIGHTS STATUS 05 06 07 08 FINANCIAL STATEMENT DISCLAIMER CONTACT US ANNEXURES SUMMARY

01 / 08

Management Commentary

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ZEN TECHNOLOGIES LIMITED

Q1FY22 Earnings Presentation

Commenting on the results, Mr. Ashok Atluri – Chairman and Managing Director, said:

“I am pleased with the performance of this quarter given the almost complete lockdown during the quarter. Operating Revenue came in at INR 9.96 cr largely driven by AMC revenues with minimal equipment sale in this quarter. The AMC revenues stood at INR 7.3 Crores in Q1FY22 as compared to about INR 4 Crores in Q1FY21. With an estimated quarterly run rate of INR 8.5 Crores, the AMC revenues are expected to cover all the fixed overheads during the year. This AMC revenue stream has finally accomplished the task the management set for it years ago.

Our order book as on June 30th was about INR 192 cr and with the addition of the INR 120 Crores (received on 9th July 2021), the order pipeline looks strong. The new order also has the possibility of AMC revenues kicking in post our warranty period and this will further add to the annuity revenue stream.”

He also added, “The newly launched anti-drone systems and heavy lift drones have been received very well by the market. The Company expects an order for the anti-drone systems/heavy lift drones in this financial year. We also continue to focus on R&D to improve our product portfolio.”

02 / 08

Consolidated Quarterly Highlights

All data ₹ in crores

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REVENUE FROM OPERATIONS (QOQ) EBITDA ( EXCLUDING OI) (QOQ) PROFIT AFTER TAX (QOQ)
3.00
25.00 21.55 6.00 1.83
2.00
20.00 3.97
4.00 1.00
15.00
9.96 2.00 0.00
10.00 -1.00
0.00
5.00 -2.00 -1.57
0.00 -2.00 -1.01 -3.00
Q4FY21 Q1FY22 Q4FY21 Q1FY22 Q4FY21 Q1FY22
REVENUE FROM OPERATIONS (YOY) E BITDA ( EXCLUDING OI) (YOY) PROFIT AFTER TAX (YOY)
0.00
12.00 9.96 0.00
-0.50
-0.50
9.00
-1.00
-1.00
6.00 4.16 -1.01 -1.50
-1.50
-1.57
3.00 -2.00 -1.70 -2.00 -1.74
0.00 -2.50 -2.50
Q1FY21 Q1FY22 Q1FY21 Q1FY22 Q1FY21 Q1FY22
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QUARTER HIGHLIGHTS:Q1FY22

Revenue Contribution from Sale of Equipment: ₹1.79 crores.

Revenue Contribution from Annual Maintenance Contracts:

₹ 7.34 crores.

Revenue contribution from Exports:

0.76 crores.

Revenue contribution from Domestic: 8.37 crores.

03 / 08

Order

Book Status

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TOTAL
ORDER NEW ORDERS
+ - = ORDER
BOOK ORDERS EXECUTED
BOOK
Order Book as New Order bagged Orders executed Total Order Book as
on 1 [st] April, 2021 in Q1FY22 in Q1FY22 on 30 [th] June, 2020
AMC: 120.37 Cr AMC: 5.49 Cr AMC: 7.34 Cr AMC: 118.52 Cr
Sale of Equipment: 72.3 Cr Sale of Equipment: 2.57 Cr Sale of Equipment: 1.79 Cr Sale of Equipment:73.08 Cr
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04 / 08

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 SALE 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 sale 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

ZEN TECHNOLOGIES LIMITED

Q1FY22 Earnings Presentation

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 more than 2 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.

05 / 08

Financial Statement Summary

SUMMARY OF STANDALONE PROFIT & LOSS STATEMENT

All data ₹ in crores (excluding EPS)

Particulars	Q1FY22	Q4FY21	Q1FY21
Revenue from Operations	9.13	18.91	4.16
Other Income	0.74	0.80	0.69
Total Income	9.87	19.72	4.85
Total Operating Expenses	9.17	16.57	5.06
EBITDA (excluding other income)	(0.04)	2.35	(0.90)
EBITDA Margins	(0.47)%	12.41%	(21.53)%
Interest Cost	0.14	0.25	0.11
Depreciation	0.99	0.98	1.01
Profit Before Tax	(0.44)	1.91	(1.32)
Profit After Tax	(0.34)	1.33	(0.69)
EPS	0.04	0.17	(0.09)

06 / 08

Financial Statement Summary

SUMMARY OF CONSOLIDATED PROFIT & LOSS STATEMENT

All data ₹ in crores (excluding EPS)

Particulars	Q1FY22	Q4FY21	Q1FY21
Revenue from Operations	9.96	21.55	4.16
Other Income	0.75	0.89	0.69
Total Income	10.71	22.44	4.86
Total Operating Expenses	10.97	18.47	5.86
EBITDA (excluding other income)	(1.01)	3.97	(1.70)
EBITDA Margins	(10.16)%	18.42%	(40.77)%
Interest Cost	0.16	0.29	0.13
Depreciation	1.25	1.26	1.24
Profit Before Tax	(1.67)	2.42	(2.38)
Profit After Tax	(1.57)	1.83	(1.74)
EPS	(0.14)	0.17	(0.17)

07 / 08

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Disclaimer

08 / 08

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Let’s connect

HANSRAJ SINGH RAJPUT cosec@zentechnologies.com Company Secretary & Compliance Officer Zen Technologies Limited

DIWAKAR PINGLE

dpingle@christensenir.com Investor Relations Advisor Christensen IR

ABHISHEK MEHRA abhishek@theinvestmentlab.in Investor Relations Advisor The Investment Lab

Annexures

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Zen Technologies at a glance

A pioneer in providing state of art Defence Training Solutions for imparting defense training 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.

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27+ 100+ 109 YEARS OF CUSTOMERS PATENTS FILED EXPERIENCE SERVED ORDER BOOK OF 200+ 1,000+ ~192 EMPLOYEES CUMULATIVE CRORES* INSTALLATIONS

*Order book as on 30th June 2021

Business Canvas	Business Canvas
	SALE OF EQUIPMENT		COMBAT TRAINING CENTRE		ANNUAL MAINTENANCE CONTRACT
•	A leader in manufacturing defence	•	A training platform to provide realistic	•	Arecurring revenue streamwith
	training solution with> 95% market		battle experiences byintegrating		superior profitability margins.
	sharein tank simulators.		together the entire range of product
			offerings.	•	Addition in simulator installations base
•	Infrequent but large order sizewith				leads to growth in revenues from AMC
	long closing cycles is aninherent	•	Big ticket size offeringswith potential
	characteristicof this segment.		order wins worth USD 25M for single	•	Growing service revenue from AMC
			installation.		ensures profitabilityevenin absence
•	Huge opportunity sizein 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 attractiveEXIM financing
	basket.		options.	•	AMC revenues start kicking in after
					3 years of equipment installation.
•	Focus onAnti-Drone Simulators

R&D –

Our Strong Suit

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~67

CRORES OF INVESTMENTS IN R&D IN LAST 5 YEARS

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~17%

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

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109

PATENTS FILED

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

• 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.

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New Product Additions

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Anti-Drone Anti-Drone Systems Simulators & Drone Simulators Integrated Air Defence Logistic Combat Simulators Drones

• With changing warfare dynamics, drones have become a major threat to any country’s security.

• Authorities across the globe investing in technologies to neutralize this threat.

• Wide applications. Not only restricted to military training.

• A huge opportunity size.

• New products to contribute significantly to the revenues and profitability in the coming years.

New Product Additions

ZEN MEDICAL TECHNOLOGIES

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Focus on Medical Developed a Medical Simulators Ventilator

Oxygen Enrichment Unit

*Design conceptual

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Received Transfer of Technology for Oxygen Enrichment Unit

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Plans to introduce 2-3 new products in this segment by end of the year

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Strategic Priorities

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

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

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

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Continuously improve competitiveness, efficiency and drive operational excellence.

Develop and expand the international presence and exports with friendly countries.

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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.

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

• Import embargo on 101 items (9 items manufactured by Zen Technologies Limited) to enhance domestic manufacturing.

• Aligning Defence Acquisition Procedure (DAP), 2020, with the long-term goals of increase in indigenized 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.

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• Enhancement of FDI limit to 74% under automatic route.

• Significant reduction in receivables from government.

Investment Merits

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ASSET-LIGHT business model STRONG REGULATORY tailwinds INCREASING R & D SPENDS with special emphasis on Anti-Drone systems for armed forces

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INCREASING SHARE OF AMC which is annuity in nature

Focus on HIGH VALUE COMPLEX SYSTEMS

STRONG BALANCE SHEET with zero debt

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