Acquisition of Applied Research International Private Limited (ARIPL)
On 14 February 2025, the Company has entered into an agreement to acquire 100% of Applied Research International Private Limited ('ARIPL') for a consideration of Rs. 12,750.00 Lakhs. The acquisition of ARIPL will be completed in 2 tranches, with the purchase of the first tranche of 76% for a consideration of Rs. 8,850.00 Lakhs which was completed on 28 February 2025. The second tranche for 24% of ARIPL, for a consideration of Rs. 3,900 Lakhs, will be completed on or before 28 February 2026, as per the terms of the acquisition agreement.
Acquisition of Applied Research Labs Private Limited (ALPL)
100% shares in ALPL have been acquired for a consideration of Rs. 250.00 Lakhs on 28 February 2025.
Acquisition of Vector Technics Private Limited
On 14 February 2025, the Board of Directors approved the acquisition of 51% of Vector Technics Private Limited ("Vector") for a consideration of Rs. 2,499.88 Lakhs. During the year, the Company has acquired partly paid equity shares of Vector for Rs. 1,069.89 Lakhs and the balance consideration amounting to Rs. 1,429.99 Lakhs shall be paid on or before 24 February 2026.
Investment in Zen Technologies USA, Inc.
During the quarter, the Company has invested US$ 10 million (Rs. 8,686.00 Lakhs) in its wholly owned subsidiary Zen Technologies USA, Inc. to enable expanding the Company's footprint in North America and to leverage on new growth opportunities in the region.
Investment in Bhairav Robotics Private Limited
Pursuant to the approval of the Board of Directors, on 14 February 2025, the Company has acquired 45.33% of shares in Bhairav Robotics Private Limited for a consideration of Rs. 399.96 Lakhs.
(iii) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs. 1/- each. Each equity share holder is entitled to one vote per equity share held.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Provision for impairment of investment:
During the year, the Company assessed the carrying value of its investment in Zen Medical Technologies Private Limited in accordance with Ind AS 36, Impairment of Assets. Based on the assessment of future cash flows, business performance, and other relevant indicators of impairment, the carrying amount of the investment was determined to be higher than the recoverable amount. Accordingly, an amount of Rs. 37.50 lakhs has been recognized as impairment in the Statement of Profit and Loss for the year ended 31 March 2025. The revised carrying value of the investment as at 31 March 2025 is Rs. 37.50 lakhs (Refer Note 5).
For the year ended 31 March 2024, the Company had written off its entire investment of Rs. 224.22 lakhs after assessing it as fully impared in Paladin AI INC.
Provision for impairment of advances:
During the year ended 31 March 2025, the Company has recognised an imparement of Rs. 252.84 lakhs on advance given to Paladin AI INC, considering the recoverability doubtful.
37. EARNINGS PER SHARE (EPS)
Basic EPS is calculated by dividing the profit for the year attributable to equity holders by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit attributable to equity holders (after adjusting for interest on the Compulsory convertible debentures) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
The weighted average duration of the defined benefit plan obligation as at 31 March 2025 based on discounted cash flows is 3.81 years (31 March 2024:4.26 years).
39. CONTINGENT LIABILITIES AND COMMITMENTS (a) Contingent liabilities
I) Claims against the Company not acknowledged as debts:
i) On account of Direct Tax matters - Rs. 435.83 lakhs (31 March 2024: Rs. 441.48 Lakhs).
ii) On account of Indirect Tax matters(Central Excise Duty) - Rs. 823.40 lakhs (31 March 2024: Rs. 823.40 lakhs).
The Company is contesting the demands raised by the tax authorities. The Company's Management and its tax advisors, believe that its position will likely be upheld in the appellate process with respect to Direct Tax and Indirect tax matters. No tax expense has been accrued in the financial statements for the tax demand raised. The Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company's financial position and results of operations.
Income tax demands mainly include the appeals filed by the Company before various appellate authorities against the disallowance by income tax authorities of certain expenses being claimed and and the computation of, or eligibility of, the Company's use of certain tax incentives or allowances.
(b) Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for:
At 31 March 2025, the Company has commitments of Rs. 591.98 lakhs relating to construction of new factory building at Adibatla) (31 March 2024: Rs. 412.96 lakhs relating to construction of new factory building at Maheswaram ).
Key managerial personnel of the Company are covered by the Company's gratuity policy and eligible for compensated absences along with other employees of the Company. The proportionate amount of gratuity and compensated absences cost pertaining to them have not been included in the aforementioned disclosure as these can not be determined on an individual basis.
The transactions with related parties are made on terms equivalent to similar arm's length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.
42. DISCLOSURE PURSUANT TO INDIAN ACCOUNTING STANDARD (IND AS) 108 "OPERATING
SEGMENTS
Operating Segments
The Company has identified 'Defence and Homeland, as its only primary reportable segment. The Board of Directors of the Company have been identified as the Chief Operating Decision Maker (CODM) as defined under Ind AS 108. CODM reviews overall financial information of the Company together for performance evaluation and allocation of resources and does not review any discrete information to evaluate performance of any individual product or geography.
Information about major customers
There are three customers individually contributing more than 10% of Company's revenue and these customers contribute 63.77% of the revenue for the year ended on 31 March 2025. For the year ended 31 March 2024 there is one customer contributing 61.51% of the revenue for the year.
42. FINANCIAL INSTRUMENTS A. Measurement of fair values
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Company has established the following fair value hierarchy that categorises the values into 3 levels. The inputs to valuation techniques used to measure fair value of financial instruments are:
Level 1: This hierarchy uses quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on Company specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
The fair value of trade receivables, other financial assets, cash and cash equivalents, other bank balances, loans, borrowings, trade payables and other financial liabilities approximate their carrying amount largely due to short-term nature of these instruments.
Investment in subsidiaries & associates have been accounted at historical cost. Since, these are scoped out of Ind AS 109 for the purpose of measurement, the same are not disclosed in the table above.
There have been no transfers among Level 1, Level 2 and Level 3 during the years ended 31 March 2025 and 31 March 2024.
43. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's primary financial liabilities consist of borrowings, trade and other payables. These liabilities are primarily used to finance the Company's operations. The Company's principal financial assets include trade receivables, other receivables, investments, and cash and cash equivalents, all of which arise directly from its operating activities.
The Company has an integrated financial risk management system that proactively identifies and monitors key risks, while implementing precautionary and mitigatory measures to address them effectively.
The Company is exposed to market risk, credit risk, and liquidity risk. These risks are managed under the supervision of the Board of Directors, which independently evaluates and controls the overall financial risk management framework. The Board of Directors reviews and approves the risk management policies for each category of risk, as summarized below.
i) Market Risk
Market risk refers to the potential impact of fluctuations in market prices on the fair value or future cash flows of financial instruments. It encompasses interest rate risk, foreign currency risk and other price risks. Financial instruments subject to
market risk include trade receivables and other receivables, borrowings and trade payables. The Company's management is responsible for managing market risk through active oversight of cash positions, foreign currency risk mitigation strategies, borrowing arrangements, and adherence to internal market risk thresholds.
a. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's debt obligations with floating interest rates.
The Company is exposed to interest rate risk because it borrows funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
1% changes in interest rate will increase/decrease the borrowing cost by Rs. 52.20 Lakhs (Pre Tax).
The Company holds deposits with banks and hence is exposed to interest rate sensitivity. 1% changes in interest rate will increase/decrease interest income by Rs. 1017.81 Lakhs(Pre Tax).
b. Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows from an asset/liability will fluctuate because of changes in foreign exchange rates. The Company exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities (when revenue or expense is denominated in a foreign currency).
Any movement in the functional currency of the various operations of the Company against major foreign currencies may impact the Company's revenue in international geographics. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
Exchange gain of Rs. 239.46 lakhs and Rs. 53.21 lakhs has been recognised in the standalone statement of profit and loss for the years ended 31 March 2025 and 31 March 2024 respectively.
ii) Credit Risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from credit exposures from trade receivables, advances given to suppliers (for procurement of goods, services and capital goods), cash and cash equivalent with banks, security deposits and loans.
Trade Receivables and Other Receivables
The credit risk of the Company is managed at a corporate level by the risk management committee which has established the credit policy norms for its customers. The Company expects to continue to derive most of its revenue from the Indian Defence Services under the contracts of the Ministry of Defence (MoD),consequent to which the Company has a negligible credit risk associated with such receivables.
As the Comapany debtors are predominantly the Government of India (Indian Defence Services, Ministry of Home Affairs), Public Sector Undertakings where the counter-parties have sufficient capacity to meet the obligations, the risk of default is considered negligible. Accordingly, impairment on account of expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant period of time as per the accounting policy. Further, the management believes that the unimpaired amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of customer credit risk
In a few cases credit is extended to customers based on market conditions after assessing the solvency of the customer and the necessary due diligence to determine credit worthiness. Advance payments are made against bank guarantee which safeguards the credit risk associated with such payments.
Impairment losses on financial assets have been made after factoring contractual terms and other indicators.
Financial instruments and cash deposits
The cash and cash equivalent with banks are in the form of short term deposits with maturity period of up to 1 year. The Company has a well structured Risk Mitigation Policy whereby there are present limits for each bank based on its net worth and earning capacity which is reviewed on a periodic basis. The Company has not incurred any losses on account of default from banks on deposits.
Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the top management on an annual basis, and may be updated throughout the year subject to approval of the Company's Board of Directors.
The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments.
Refer Note 10 for ageing for Trade Receivables.
iii) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price.
The Company has an established liquidity risk management framework for managing its short term, medium term and long term funding and liquidity management requirements. The Company's exposure to liquidity risk arises primarily from mismatches of the maturities/recovery of financial assets and liabilities. The Company manages the liquidity risk by maintaining adequate funds in cash and cash equivalents. The Company also has adequate credit facilities agreed with banks to ensure that there is sufficient cash to meet all its normal operating commitments in a timely manner.
44. CAPITAL MANAGEMENT
For the purposes of managing capital, the Company considers its equity share capital, securities premium, and other equity reserves attributable to shareholders as components of capital. The key objective of capital management is to enhance long-term shareholder value. The Company actively reviews and adjusts its capital structure in response to evolving economic conditions and compliance with financial covenants. This may involve modifying dividend payouts, returning capital to shareholders, or issuing additional equity. Capital adequacy is monitored through the gearing ratio, calculated as net debt divided by the sum of net debt and total equity. Net debt comprises interest-bearing borrowings, net of cash, cash equivalents, and bank balances.
Gearing ratio:
The Company monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. The Company's policy is to keep the gearing ratio within 50%. In order to achieve this overall objective, the Company makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company aims to ensure that it meets the financial covenants attached to the interest bearing loans and borrowings that define the capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interestbearing loans and borrowings in the current year.
* Net Gearing Ratio for 31 March 2025 and 31 March 2024 not calculated since net debt is negative.
* No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2025 and 31 March 2024.
45. EMPLOYEE STOCK OPTION SCHEME
The objective of the Employee Stock Option Scheme (ESOS) is to attract and retain talent and align the interest of employees with the Zen Technologies Limited as well as to motivate them to contribute to its growth and profitability. The Company adopts Senior Executive Plan in granting Stock options to its Senior Employees. (Employee Stock Option Plan-2021).
During the Annual General Meeting held on 28th August 2021, Zen Technologies Limited introduced the Employee Stock Option Plan-2021, which was subsequently ratified by the shareholders on 29th September 2022, in accordance with the earlier SEBI (Share Based Employee Benefits) Regulations, 2014. The plan received in-principle approval from the National Stock Exchange of India Limited and BSE Limited to issue a maximum of 4,000,000 equity shares with a face value of Rs. 1/- each, under the Zen Technologies Limited Employee Stock Option Plan-2021.
To facilitate the implementation of the ESOP scheme, the ESOS trust had purchased 4,81,524 shares from the secondary market, for allocation to eligible employees under the ESOS scheme. During the year ended 31 March 2024, ESOS trust borrowed funds of Rs. 5.75 Crores and utilised such funds to Purchase additional 1,59,876 shares from secondary Market.
As at 31 March 2025, the ESOP Trust purchased in aggregate 6,41,400 shares from secondary market at consideration of Rs. 1567.66 lakhs.
During the year ended 31 March 2024 the Nomination and Remuneration Committee had approved the grant of 22,500 Employee Stock Options (options) at an exercise price of Rs. 100 per option to eligible employees, as identified by the Committee. During the year ended 31 March 2025 the Nomination and Remuneration Committee had further granted 5,000 options on 4 May 2024 at an exercise price of Rs. 100
per option; 10,500 options on 28 July 2024 at an exercise price of Rs. 500 per option; 47,000 options on 14 February 2025 at an exercise price of Rs. 500 per option; and 1,37,000 options on 28 March 2025 at an exercise price of Rs. 500 per option.
In the standalone financial statements, the Company has adopted the policy of consolidating the ESOP Trust, the related loan and advances appearing in the standalone financial statements of the Company were eliminated and investment in own shares of the Company held by the trust is shown as treasury shares in "other equity".
The fair value of the share-based payment options granted is determined using the Black Scholes Model using the following inputs at the grant date which takes in to account the exercise price, the term of the option, the share price at the grant date,and the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
46. EXCEPTIONAL ITEMS
During the year ended 31 March 2022, the Company filed an insurance claim of Rs. 712.00 Lakhs to compensate for the loss of property, plant and equipment that were destroyed due to a fire at the Company's Demonstration Centre located at Maheshwaram Hardware Park near Shamshabad Airport on November 30, 2021. Out of the claim filed, the Company received an ad-hoc amount of Rs. 200.00 Lakhs during the year ended 31 March 2024. The total insurance claim was subsequently revised to a Rs. 656 lakhs based on the assessment by the Insurance Company. During the year ended 31 March 2024, the Company received an additional amount of Rs. 240.90 Lakhs as full and final settlement from the insurance Company.
The Company has recognised the expenditure incurred in the process of replacing the assets lost and renovation of building which is damaged and the same has been accounted as Property , Plant and Equipment.
Further, the Company has recognised the loss of Rs. 27.96 lakhs pertaining to loss of property, plant and equipment under exceptional items in the Statement of Profit and Loss during the year ended 31 March 2022,
During the year ended 31 March 2024, the Company has received an amount of Rs. 240.90/- Lakhs as full and final settlement against the insurance claim out of total revised claim of Rs. 656 Lakhs. The Company has received Rs. 440.90/- Lakhs as a total claim from the insurance Company.
*Dividend declared on shares held by the ESOP trust which are accounted as treasury shares amounting to Rs. 4.63 lakhs are not recognised as distribution of dividend to shareholders and has been adjusted to other equity.
The Board of Directors at its meeting on 17 May 2025, recommended a final dividend of Rs. 2.00 per equity share for the year ended 31 March 2025. This payment is subject to the approval of shareholders in the Annual General Meeting (AGM) to be held in August 2025 and if approved, would result in a net cash outflow of approximately Rs. 1,805.81 Lakhs.
49. COMPULSORILY CONVERTIBLE DEBENTURES
On 25 November 2021, the Company has made a preferential allotment of 40,64,267, 10% compulsorily convertible debentures (CCD) having face value of Rs. 213/- each, for cash, at an aggregate consideration of Rs. 86,57,65,551. These CCDs shall be converted into equal number of equity shares of Rs. 1/- each at a premium of Rs. 212/- with in a period of 18 months from issue date.
The Company has accounted the compulsory convertible debentures in accordance with Ind AS 109, Financial Instruments, by considering these instrumensts as compound financial instruments, comprising of:
1) Interest payments by the Company is treated as a Financial liability - Borrowings (Note - 18 & 21). The financial liability measured as the net present value of the discounted cashflows of interest payments.
2) The holders of the CCDs have the option to convert them into equity shares of the Company, on or before 18 months from the issue date. In the event of the CCD holder not exercising the conversion option before expiry of the 18 months, each CCD will mandatorily convert into equity shares of the Company at a face value of Rs. 1 and at a premium of Rs. 212 per share on 24 May 2023. The Company has accounted for the conversion option in the CCD as equity and presented the same under "Other Equity" in Note 17. The carrying amount of the equity instrument is determined by deducting the fair value of the financial liability from the fair value of the CCDs.
The CCDs have been converted into equity shares of the Company on 24 May 2023 (Note 16) as per the terms of the issue.
The advance given to others subsidiaries are in the nature of trade advances against orders for supply of goods & services and hence not require to disclose as per regulation 53 (f) read with para A of Schedule V of Securities And Exchange Board Of India (Listing Obligations And Disclosure Requirements) Regulations, 2015.
52. OTHER STATUTORY INFORMATION
(i) The Company does not hold any Investment Property.
(ii) The Company has not revalued its property, plant and equipment and intangible assets during the year.
(iii) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
(iv) The Company has not been declared as wilful Defaulter by any bank or financial institution or other lender.
(v) The Company do not have any transactions with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956.
(vi) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(vii) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(viii) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(ix) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(x) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
(xi) The Company has borrowings and credit limits from banks and NBFCs, secured by hypothecation of inventories and by charge on book debts and other assets of the Company, and quarterly returns or statements of current assets filed by the Company are in agreement with books of accounts without any material discrepancies.
53. Previous year figures have been reclassified/regrouped to
confirm to those of current year.
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