Unimech Aerospace and Manufacturing Ltd

- No significant additional capex planned in the near term; recent investments in modern machinery and automation at Hobel Bellows are sufficient (Page 11). - Maintenance-driven capex expected only; no meaningful new capex anticipated shortly (Page 11). - Current facility is large (200,000 sq. ft.) with scope for advanced automation to improve utilization before new capex is considered (Page 16). - Capex deployment considered once utilization reaches 80%-90%, though exact figures and timing are uncertain and will be communicated in future updates (Page 16). - Initial capex planned by Unimech for developing new capabilities was about INR 100 crores, but acquisition of Hobel Bellows negated the need to do this internally (Page 19). - No additional capex required for securing certifications such as AS9100 (Page 16).

- Current order book: INR 65 crores for the next 6 months, with schedules provided annually and indications for the following year. - Customers give soft orders with an intent spanning 15 to 20 years due to long platform life of engines. - Repeat market demand for bellows/manifolds expected for 20 to 30 years driven by power engines and AI data center growth. - Growth rate guidance: Moderate 15% to 17% CAGR over the next 3-4 years, driven by organic growth and synergy opportunities. - Potential to double current capacity utilization (50%-60%) as demand grows. - Expansion into adjacent segments like aerospace, nuclear, semiconductor, and automotive exhaust systems anticipated. - Long-term growth supported by stricter emission norms increasing high-end metal bellows demand. - Conservative near-term growth with medium to long-term acceleration expected via cross-selling with Unimech’s existing customers.

- Target company (Hobel) is expected to grow at a conservative CAGR of 15% to 17% over the next 3 to 4 years. - Growth drivers include steady organic momentum and synergy-led opportunities with Unimech. - Market for metallic bellows is estimated at $2.6 billion globally, growing at around 6% annually, providing ample expansion potential. - EBITDA margins are strong and sustainable around 50%, driven by the niche, high-quality supplier positioning and high entry barriers. - Current capacity utilization (50%-60%) provides headroom to grow without immediate large capex, supporting margin stability. - Synergies will mainly come from revenue expansion, cross-selling, and entering adjacent high-value segments, not cost cutting. - Management aims to maintain high operating margins while scaling revenues and improving ROCE from around 25% post-acquisition. - EPS growth is expected in line with revenue and margin growth, supported by high cash generation and no additional borrowings planned.

- Current order book stands at INR 65 crores for the next 6 months. - OEMs provide scheduling for a full year and indicate platform usage for the following year. - Orders through OEMs reflect a strong growth opportunity with intent given by customers. - Engine platforms serviced by the company typically have a lifecycle of 15 to 20 years. - Repeat market demand exists for bellows and manifolds due to operating conditions like high temperature and pressure. - Demand is expected to continue for 20 to 30 years driven by high-power engines and AI data center deployment. - Stricter emission norms will increase usage of metal bellows and manifolds, ensuring sustained demand.

- The transaction funding involves a loan and CCD structure between the subsidiary and the holding company, which is internal and does not involve the sellers. - The acquisition is ultimately a cash deal with a 10% holdback to the sellers. - The cash used for the acquisition came from internal funds available on Unimech's balance sheet. - There are no plans for further borrowings to fund this transaction. - The CCDs have a negligible interest rate and are currently not intended for conversion into equity in the near term. - No new equity fundraising or external debt is planned as part of this transaction.