TO SHAREHOLDERS
Driving Growth Through Indigenous Defence Technology Leadership
Dear Shareholders,
It is with great pleasure and a profound sense of optimism that I present to you the
Annual Report for Zen Technologies Limited for FY24. As we reflect on the past year, I
am filled with immense pride in our company's achievements and excitement about the
transformativejourney that lies ahead.
Riding the Wave of India's Defence Transformation
I v74 has been truly transform kit. ve For Zen Technologies positioning us
at the for ('front of India s defence technology sector We find ourse ves at the ep centre
of a remarkab e shift in India s defence landscape, prone ed by vis onary government po
cies and a renewed focus on se f re ance
The Make n India and Atmanirbhar Bharat n t. at ves have created a robust ecosystem for
compan es ke ours to thrive I hegovernmentsunwaver ng commitment to intligenous ties gn,
development, and manufacturing has opened unprecet lentet I oppor turn tics for innovation
ant I growth. 7 he introtluction ofthe Indigenously I Designed,
Developed, and Manufac tured (IDDM) category has been a game-chariger, finally aligning
nationc.il policy with our long-held visioi i of indigerrous IP creation.
Industry tailwinds are strorlgly it i ourfavour. The Indian defence sector is projected
to grow driven by increasing defence budgets, foe us on modernisation, and the push for
impor t substitution I he government's ambitious target of achieving defence protluction
worth $25 Billions by 2025, inclutling $5 Billions in expor ts, presents enormous oppor
tunities for companies with strong indigenous capabilities like Zen Technologies.
I urthermore, the ncreas ngfocuson simu ator-based tra n ng nthearmed forces has
amplified the relevance of our cot t> offerings As the Chief of Army Staff recently
emphasised the era of s mu ator-based training hasjust begun, underscoring the vast
potentia that es ahead for our simulation technologies.
This favourab e policy environment nes been comp emented s>y growing global
recognition ofthe need for advanced defence training and anti-drone systems Recent
geopolitica events have high ighted the critica importance of combat readiness and the
increasing threat posed by unmanned aerial vehic es Zen Technologies is uniguely
positioned to address these emerging needs with our cutting-edge s mi, ators and
anti-drone so utions
Soaring to New Heights
I am delighted to i epor t that f v74 has been the most succ essful year in
Zen's history, both in terms of lit laricia performar it e and order book position.
We achieved a record reverlueof 74 50 Crores, represeriting a i emar kable year-
on-year growth of 167%. Our I BIT!)A margins remainet I robust at 43% < )ur I 'AT stood
at 7129 Crores, recording a 743% growth over the previous year.
7 his strong performance was a result ofthe operating leverage built into our business
model. As we scale up operations, ourfixed costs are spread overa larger revenue base,
leading to margin expansion. Our asset-light model, focused oi i intellec tua property
creation ratherthan capita intensive manufacturing, allows us to maintain high
profitability even as we grow rapitily
Our order book stands at an all-time high of -71,402 Crores as of March 31, 2024
providing strong visibi ity for future growth Tms includes significant orders in both our
simulator and anti-drone segments, as well as a healthy mix of domestic and export orders
The export component of our order book now stands at approximate y 35%: reflecting the
growing g oba recognition of our technologies
Looking ahead to FY25, we have set an ambitious target of achieving significant growth
in revenue, and we are confident in our abi ity to execute, given the strong tai winds
inourindustry and our proven track record.
Innovation at Our Core
Atthe heart of Zen s success 'es our unwavering commitment to research and development
Since our inception, we have prioritised innovation and the creation of intelectual
property. This focus has enabled us to develop a diverse portfolio of advanced simuators
and cutting-edge anti-drone systems
To date we have II ed over 155 patents, including 15 filed nFY24 alone Ofthese 155
filed patents, 75have been granted to us so far Zen has a treasure trove of II11
hat cat i keep creating new products intothefuture.
Our R&D-driven approach is Heeply ingrained in our corporate IDNA, with over 30% of
our workforce i Jet Jicated to research and development 7 ids commitment is further bo
stered by our extensive ibrary of software electronic, and mechanica modu es. meticulously
developed over three decades This rich repository enab es us to r apidly conceptua se and
rea 'se new products, keeping us at the forefront of tec hnologica advancement
The strategic value of our growing IP portfolio extends far beyond mere product
development and he ps us for tify our competitive position and create significant ong-term
va ue for our shareholders Our R&D-driven approach has allowed us to capture a
majority of the value chain enhancing our profit ma rgi ns a nd creating formida b e ba
rrie rs to entry for potentia competitors
We remain committed to investing in R&D, however, we maintain flexibility in our
approach, ready to increase this investment if promising opportunities arise. Our focus on
leveraged R&D, despite relatively low spending (~ Rs.85 Crores in the last 5 years),
enables us to stay ahead of the competition and continuously upgrade our products based on
customer feedback.
Innovative Product Portfolio
Our commitment to innovation is reflected in our expanding product portfolio. We have
introduced several new products that address critical needs in the defence sector:
• ADS Camera (Hawkeye): A state-of- the-art anti-drone system camera with
multiple sensor detection modules.
• Ultralight Remote Controlled Weapon System (Barbarik-URCWS):
The world's lightest remote- controlled weapon station.
• Robodog (Prahasta): A revolutionary automated quadruped for mission
planning and threat assessment.
• Sthir Stab 640: A rugged stabilised sight for armoured vehicles, ICVs,
and boats.
These products, especially Hawkeye and URCWS, can be integrated with our AntiDrone
System, offering a unique and comprehensive solution to our clients.
Expanding Horizons
The opportunities before us are truly enormous. The domestic market for defence
training simulators is estimated to be over Rs.15,000 Crores, and we are well-positioned
to capture a significant share of this opportunity. Moreover, the global anti-drone market
is projected to grow at a robust pace over the coming years, presenting a substantial
export opportunity for our advanced solutions.
We are particularly excited about the export potential of our products. The growing
recognition of India as a reliable defence partner has opened up new avenues for companies
like ours. We have already made significant inroads into international markets,
particularly in the Middle East, Africa, and CIS countries. Our recent participation in
defence exhibitions in these regions has generated strong interest.
Towards Sustainable Growth
As we pursue our growth objectives, we remain steadfast in our commitment to
sustainable and responsible business practices. The shift towards simulator- based
training offers significant environmental benefits by reducing fuel consumption and carbon
emissions associated with live training exercises.
A study conducted by The Energy and Resources Institute (TERI), with the support
provided by Zen Technologies, revealed that the adoption of crew gunnery simulators could
lead to potential financial savings of Rs.381 Crores over 30 years, while preventing the
emission of 3,676 Rs. CO2 eq within the same timeframe. Our anti-drone systems
also contribute to enhancing security while minimising environmental impact. We are
actively working to conserve resources, ensure safety, and minimise energy and water
consumption across our operations.
Looking ahead to FY25 and beyond, we are setting our sights on even greater heights. We
have set a target of maintaining a CAGR of 50% for the subsequent three years,reflecting
our confidence in continued robust growth and our commitment to delivering exceptional
results.
Our growth trajectory is supported by a confluence of powerful regulatory tailwinds
that are reshaping the Indian defence landscape. These include the strategic framework for
increased utilisation of simulators across the three services and Indian Coast Guard, the
aggressive implementation of the Buy Indian IDDM (Indigenously Designed, Developed and
Manufactured) policy, the introduction of positive indigenisation lists, the
transformative Agnipath Yojana, and the government's ambitious defence targets. These
initiatives collectively create an unprecedented ecosystem for indigenous innovation and
manufacturing in the defence sector. Looking ahead, we anticipate the emergence of
positive 'black swan' events in the next 2-3 years that have the potential to catapult Zen
Technologies into a new orbit of growth and innovation. These game-changing opportunities
are likely to merge in both domestic and international markets, further amplifying our
global footprint and technological leadership.
As we stand at this inflection point,
I want to emphasise that we are merely at the beginning of our growth story.
The convergence of our three decades of unwavering commitment to innovation, our robust
IP portfolio, and our profound understanding of customer needs has positioned us uniquely
to capitalise on the immense opportunities unfolding before us.
Our recent acquisition of a 51% stake in AiTuring Technologies further enhances our
capabilities in electronic optics and robotics, particularly strengthening our
counter-drone solutions. This strategic move, coupled with our existing strengths, sets
the stage for exponential growth in the coming years. We are not just participants in the
evolving defence technology landscape; we are poised to be the architects of its future,
driving innovation, self-reliance, and excellence in defence training and security
solutions.
Focus on Training and Simulation, and CounterDrone Solutions
Training and simulation, including technical training equipment like virtual simulators
and live ranges, have long been the cornerstone of our company. Recently, the armed forces
have started recognising the increasing need for tactical training, which prepares
soldiers for actual combat scenarios against "real" adversaries. We expect that
tactical training is an area of growth for the company.
The interest in training has surged tremendously post-Ukraine war. Despite Ukraine
being equipped with some of the most advanced equipment, they are still losing to forces
using essentially 20th-century technology. The consensus is that competent
training with older equipment is more effective than just acquiring advanced and expensive
defence equipment.
As Sun Tzu stated in The Art of War, "The Art of War teaches us to rely not on the
likelihood of the enemies not attacking but on our own readiness to receive him; not on
the chance of his not attacking but rather on the fact that we have made our position
unassailable."
Counter-drone systems have also gained prominence due to the emerging threat of drones,
highlighted by their extensive use in the Armenia-Azerbaijan and Ukraine-Russia wars. With
Zen betting on Anti-drone systems as early as 2018, we have been able to generate a
tremendous amount of IP in this field and have a serious edge over other players. With the
Government of India focusing on the Buy Indian IDDM category, we expect that this will
help Zen to be the preferred supplier for Indian Armed Forces.
Fortunately, Zen is well-positioned at the intersection of training and the defensive
use of counter-drone technology - two critical areas that have become focus areas for most
armed forces globally.
We have also started expanding our reach further into autonomous AI robotic operations
and surveillance, consistent with our goal of keeping soldiers out of harm's way.
I would like to express my heartfelt gratitude to our employees, customers, partners,
and shareholders for their continued support and trust in Zen Technologies. Together, we
are not just building a successful company, but contributing to a stronger, more
selfreliant India.
The future is bright, and the best is yet to come. Thank you for being part of this
exciting journey.
Yours sincerely,
Ashok Atluri
CHAIRMAN & MANAGING DIRECTOR.