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Zen Technologies Ltd.

BSE: 533339 Sector: IT
NSE: ZENTEC ISIN Code: INE251B01027
BSE 00:00 | 26 Nov 211.50 -0.85
(-0.40%)
OPEN

213.00

HIGH

217.55

LOW

208.30

NSE 00:00 | 26 Nov 211.15 -1.55
(-0.73%)
OPEN

211.70

HIGH

217.70

LOW

208.00

OPEN 213.00
PREVIOUS CLOSE 212.35
VOLUME 60851
52-Week high 249.50
52-Week low 65.00
P/E 371.05
Mkt Cap.(Rs cr) 1,681
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 213.00
CLOSE 212.35
VOLUME 60851
52-Week high 249.50
52-Week low 65.00
P/E 371.05
Mkt Cap.(Rs cr) 1,681
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Zen Technologies Ltd. (ZENTEC) - Chairman Speech

Company chairman speech

Our Company has always been at the helm of innovation and has always paved the way foradvanced research in military solutions.

Dear Fellow Shareholders

It gives me immense pleasure to present our annual report for the financial year2020-2021. This was a challenging year for Zen Technologies for many reasons. As goes thesaying to never waste a crisis - and we didn't waste this opportunity. We adaptedunlearned re-learned and kept trying new ideas.

Throughout the COVID-19 crisis the Company stood strong. In addition we continued toinnovate both at the process and product level. For instance one of the challenges wefaced during our sales and marketing endeavour was getting our customers to the demolocation. Our products are to be seen and tested it can be very difficult to communicatethe essence of our products virtually or through other medias. Just talking about ourproducts may not translate into our customers believing in its effcacy.

Therefore having a proper demo is crucial and even before the pandemic we barely hadtwo demos a month. Simply speaking the demos improve our chance of sales. But with theadvent of COVID-19 our customer visits were reduced to none and we had to do someintrospection and it is then that we had an epiphany. We thought to ourselves how can wetake our demos to the customers if they are unable to visit the demo centre? With thislarger question in mind we finally embarked on a journey to create a world-class remotedemonstration facility. This was an extremely successful initiative as it had its intendedeffect – the number of potential customers going through the product demo shot fromtwice in a month to an average of four times in a week. These demos were given to both ournational and international customers. At Zen we expect such innovations to result in hugeincrease in orders in the near future.

During the crisis we also expanded our range of products to include drone andanti-drone solutions. We believe that in the anti-drone space we enjoy a privilegedposition and are in the top of the list of companies providing such solutions. Oursolutions were developed completely in-house and are used for identifying and jammingdrones in all bands (not restricted to 2.8Ghz or 5.6-5.8Ghz which most of our competitorssolutions are restricted to). We have integrated a camera to this solution as well and arejust a few months away from developing our own radar solution. Currently we offeroff-the-shelf radars along with our system. Finally in the space of hard kill we arepartnering with companies that have hard kill equipment like laser micro-missiles gunsetc. At the moment we have an integrated solution but just in a few months we should be ina position to offer a range of hard-kill options tailor made to customer requirements.

Another product that we have developed during the crisis is the logistic drone whichis capable of taking 20kgs of weight over 10kms distance in high altitude areas. Thisproduct has a tremendous demand within the armed forces. In addition to the armed forceswe expect lots of non-military applications for this product as well. Other areas that weare focusing on include anti-drone and drone simulators and integrated air defence combatsimulators.

Our Company is unique and one of a kind in the defence industry. The number of playersin this space is very limited and our experience of three decades puts us at the leadingposition within this industry in India. Moreover with respect to some of our productsZen Technologies enjoys a very deep and meaningful position with the customers. This putsour Company on a great footing to remain the industry leader in the future. In additionour years of experience inspire further confidence and trust from our customers thusmaking our Company stronger.

At Zen Technologies our consistent research efforts have resulted in the creation ofdiverse technological solutions and a corresponding patent portfolio. To date our Companyhas filed about 109 patents for the pioneering initiatives undertaken by us. Since ourbusiness is IP-driven and our bill of materials costs usually between 10-30% of the finalprice our contribution post break-even point is significant. We are also a highlyasset-light business entity as we outsource most of our manufacturing to a reliable supplychain which we have developed over the last three decades. Further our high investmentsin R&D throughout our Company's lifetime create a high entry barrier for any newentrant making it a competitive advantage for us.

Our Company has always been at the helm of innovation and has always paved the way foradvanced research in training solutions for military forces. We saw a huge opportunity inthe anti-drone technologies and are proud to share that we have invested heavily in thesenew technologies as we strongly believe that this is the future of warfare.

Drones have been used to locate hidden units and people and therefore it is a greatstrategic tool for anyone using them as we have seen in multiple instances in the pastcouple of years. With drones being a self-sufficient tool which requires remote handlingand minimal human interference it is indeed an individual technological soldier in themilitary forces. Drones are therefore a considerable threat to the integrity and securityof any nation. Therefore anti-drone systems are crucial to ensure that such threats areneutralized and save a country from any security or information breach. Authorities acrossthe globe are investing heavily in such technologies. These new products are expected tocontribute significantly to the revenues and profitability in the years ahead. Our Companyis poised to be the forerunner in this industry in India. With the right trainingequipment and tools Indian armed forces will be geared to fight such battles. Our Companyis aiding and partnering with the Indian Government to ensure that our nation is protectedand safe from any external threat.

We are also pleased to inform that Zen Technologies through its medical devicessubsidiary is focusing its R&D on medical devices. We have already received thetransfer of technology for the oxygen enrichment unit. This foray into medicaltechnologies is expected to add further value to our Company. We will also be buyingtechnologies both from domestic and foreign sources for quicker development of products.

The defence business is a highly regulated one which is largely impacted by Governmentpolicies and budget allocation to the sector. Needless to say that the COVID-19 spectrehas brought in budgetary cuts and re-allocation of funds towards the medical crisis thatIndia is facing at the moment. This has reduced the funds for police and militarymodernisation especially with regards to training. According to Covey matrix trainingwould fall in the second quadrant – which makes it important but not urgent. Manydecision makers in the Government fail to understand the importance of training. Withoutproper training one cannot undertake any mission at hand and it might render adisadvantageous position as well. We hope that the decision makers take cognizance of thisissue during the coming months.

Given the recent turmoil with China with regard to the border issues in Galwan valley(Ladakh) India has taken a strict stance to reduce import of Chinese made goods. To thateffect many emergency procurements were made from foreign countries instead of purchasingfrom the Indian industries. That seemed like a lost opportunity as many companies wouldhave benefitted from the inflow of cash and could have strengthened their indigenousR&D. If such opportunities are lost in the future then the budding defence industrywill wither away.

At Zen Technologies we amplify the thoughts of Mr. Benjamin Netanyahu (Leader of theOpposition in Israel) who said that even if Israeli companies have a 60% capability itstill makes more sense to buy home-made Israeli products rather than buying superior 100%defence equipment from a foreign Company. He believes that the Israeli companies will thenbe incentivised to spend more on R&D which will enhance its capabilities and thecompanies will be able to make far more superior defence equipment. This thought couldpotentially radicalise the defence industry in India and companies such as ours canhugely benefit from it.

GOVERNMENT INITIATIVES

The Indian Government's keen focus on the ‘Make in India' and ‘AtmanirbharBharat' campaigns has created a conducive environment for Zen Technologies and has alsoopened up a huge array of opportunities for us. The Indian Government is promoting andsupporting these initiatives with favourable policies and simpler procedures thatencourage indigenous development exports while discouraging imports. The Ministry ofDefence (MoD) has formulated policies that promote and support self-reliance simplifyprocedures and provide serious impetus to defence export.

The focus of the MoD has now shifted from procurement of equipment to acquisition ofequipment. It implies that efforts will be taken to procure from an Indian vendor and evenif the equipment is procured from a foreign OEM there will still be lot of work that willbe undertaken by the Indian Industry.

For modernization of armed forces under the Capital Acquisition Schemes MoD favoursprocurement under the categorisation of ‘Buy Indian (IDDM)' ‘Buy Indian'‘Buy & Make Indian' and discourages procurement from foreign sources under‘Buy and Make' and Buy Global' categories which are relegated to least preferredoptions.

MoD is seriously pushing for indigenous design development and manufacture of defenceEquipment under ‘MAKE Categorisation' and the list of such products is ever-growing.Only Indian Defence Industry can participate in these developmental projects and ordersfor such products will be given to them.

MoD has put over 200 defence items under import embargo. It implies that these itemscan no longer be procured from a foreign OEM in a fully finished state. They would eitherbe designed developed and manufactured by Indian Defence Industry or they will bemanufactured in India by the foreign OEM in collaboration with an Indian Company. Thisapplies to many simulators as well which are in the Import Embargo list now.

 

The Ministry of Defence (MoD) has formulated policies that promote and supportself-reliance simplify procedures and provide serious impetus to defence export.

MoD is encouraging innovation and any innovation by the industry can now be shared withthem through suo moto proposals. These proposals will be holistically analysed by MoD anduser directorates in a time bound manner. If found useful procurement action for suchproducts will be initiated by the Government. MoD has also allocated funds to DRDO andService HQs to support such innovations. MoD is encouraging export of defence equipmentand is supporting export through suitable strategy for the same simpler proceduresparticularly for issue of NOC defence diplomacy export financing and other incentivesand also through the Defence O_set Policy.

One noteworthy policy by MoD that would positively impact the growth of Zen is aboutgreater involvement of simulators in training of officers and men of the armed forceswhich will significantly cut down the cost incurred by the armed forces presently. Thiswill imply that the armed forces will have to buy simulators for all their legacyequipment and that all future acquisitions of weapons platforms equipment and systemswill be done along with the simulators which will further improve the business prospectsof Zen.

We are certain that our Company is well-positioned to use this opportunity and make themost of it. This strong regulatory tailwind will push our Company to do its absolute bestand further encourage our position as an industry leader with a rich experience of almostthree decades.

WAY FORWARD

Anti-drone systems drones and training solutions will continue to be the corebusiness of Zen Technologies Limited and we have all the simulators required for thelegacy equipment used by the Indian Army. At Zen we will also focus on products embeddedwith Artificial Intelligence so that we continue to provide state-of-the-art equipment toour users.

As far as our export business goes we have many equipments that are of interest tofriendly foreign nations and over the years we have had modest success in selling of someof these equipments to them. We will continue to ramp up our efforts to sell theseproducts to them and utilise such export opportunities.

With respect to the new policy from MoD about greater dependence on simulators fortraining of officers and men of the armed forces we need to work towards ensuring abigger share of this emerging huge business. We have submitted many suo moto proposals ofour products to MoD and a few of them have been accepted and are being procured as well.We endeavour to continue to work in this direction as we develop more products in thefuture.

We are diversifying our defence business in areas other than training simulators andare participating in design and developmental projects of MoD under MAKE Categorisation.These are high value projects and we are implementing some of them in collaboration withforeign OEMs of repute.

ASHOK ATLURI

CHAIRMAN AND MANAGING DIRECTOR

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