MANAGEMENT DISCUSSION & ANALYSIS Overview For last few weeks, India's economic outlook, Government actions with RBI guidelines and Global macro-economic factors have dominated the news with Rs. touching new heights on a daily basis. The world economy is now showing positive signs of growth and though Europe and China are still behind the strong growth that they have shown over the past few years. As North America and Europe continues to contribute the largest share of the IT industry's revenues, these factors have impacted the industry and led to the leading companies revising their revenue and earnings guidance downwards towards low double digit growth. However as part of the IT industries worldwide, we have successfully continued to move up market and now serve much larger global clients and more combrhensive and market relevant portfolio of consulting services The revitalization of global economy continued during the calendar year 2014 and the global economy ended the year on a better footing as compared to the start of the year. The growth momentum is expected to be carried forward during the year 2015. The financial statements have been brpared in compliance with the requirements of the Companies Act 2013, and Generally Accepted Accounting Principles (GAAP) in India. The Management of TechNVision accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably brsent the Company's state of affairs and profits for the year. The following discussion may include forward looking statements which may involve risks and uncertainties, including but not limited to the risks inherent to Company's growth strategy, dependency on certain clients, dependency on availability of qualified technical personnel and other factors discussed in this report. 1. Industry Structure, Developments and Outlook We began in fiscal 2012-13, realigning our sales, services and engineering organizations in order to simplify our operating model, driven faster innovation and focus on the following three foundational priorities: Cloud Transition Big Data Enterprise Receivables Management We believe that focusing on these priorities will best position us to grow. Gartner considers that through 2015, only 15% of Fortune 500 organizations will be able to exploit big data for competitive advantage and big data will be driving a significant portion of IT spending through 2016. We will continue to seek to capitalize on this market transition. 2. Economy Overview: The US economy grew at an annual rate hovering around 2.6% in the last quarter of 2014 with better growth forecast for 2015. The UK economy strengthened steadily with GDP showing around 1.9% growth during 2014 and it is expected to maintain the revival momentum through 2015. Eurozone continued to show mixed signs of recovery and growth concerns. However, policy action by specific countries is expected to deliver better performance during 2015. While the global economic recalibration is playing out in a relatively measured way, global business leaders are becoming increasingly confident about the sustained economic and business growth than they were last year. Global corporations' performance and investors' confidence were reflected in the sharp movement of world capital markets during 2013. Global Companies are increasingly turning to technology service providers in order to meet their need for high quality, cost competitive technology solutions. Technology companies have been outsourcing software research and development and related support functions to technology service providers to reduce cycle time for introducing new products and services. IT Industry Outlook: We believe our strong brand, robust quality process and access to skilled talent base places us in a unique position to take advantage of the trend towards cost competitive technology solutions. We believe our competitive strengths include: • Commitment to superior quality and process execution • Strong brand and long standing client relationships • Ability to scale • Innovation and leadership Increased confidence of business leaders in their companies' performance and improved sentiment of consumers drove spending in technology products. Investment in technology is among top three priorities of companies across the world. Worldwide interactions with business leaders reveal that role of technology will create biggest impact on their business. An increasing acceptance of the fact that digital technologies will impact business models, processes, new products and services offerings, access to new markets, new customer base and will open up completely new set of opportunities for their companies, is a common feature across industries and markets. As a result, spending on technology & technology services grew at a faster pace (above 4.5%) than global economic growth in 2014. World's largest IT market US grew at 5.6%, while continuing to lead investments in digital technologies. The need to find new ways to reach out to consumers prompted the European companies to invest in technology for optimization & innovation, which led to 3% growth in IT spending during 2014, as compared to a decline in the brvious year. Threats Financial Threats: 1. Financial Currency rate fluctuation: Our exchange rate threat primarily arises from our foreign currency revenues and receivables. The Company derives its revenue from foreign countries around the world. While a large portion of our expenses are in Indian Rupees, at the same time, the operating profit is subject to rate fluctuations. The exchange rate between the Indian Rupee and the US Dollar has been changing substantially and the Company faces the risks associated with rate fluctuations translation effect. 2. Credit Risks: The business of the Company involves extending credit to international customers. This has the inherent risk of delayed payments and defaults. The Company's credit policy addresses this risk. 3. Liquidity: The major cost components of any export oriented software industry are personnel, travelling and marketing costs. Apart from this, capital expenditure to upgrade technology is another regular feature of the cash flow Human Resource Management The human resource philosophy and strategy of your Company has been designed to attract and retain the best talent, creating workplace environment that keeps employees engaged, motivated and encourages innovation. This talent has, through strong alignment with your Company's vision, successfully built and sustained your Company's standing as one of India's most admired and valuable corporations despite unrelenting competitive brssures. Your Company has fostered a culture that rewards continuous learning, collaboration and development, making it future ready with respect to the challenges posed by ever-changing market realities as also technologies. Employees are your Company's most valuable assets and your Company's processes are designed to empower employees and support creative approaches in order to create enduring value. Your Company's unflagging commitment to investing in talent development ensures performance and achievement of the highest order. Internal Control System Internal controls and checks are indispensable to achieve higher productivity and hence increase profitability. Major focus is imparted to achieve operational efficiency in the Company through adherence to defined procedures and policies, to achieve targets. The internal controls cover operations, financial reporting, compliance with applicable laws and regulations, safeguarding assets from unauthorized use and ensure compliance of corporate policies. The Company has appointed internal auditors to check on the validity and correctness of internal reporting, which would in turn validate financial reporting. TechNVision has always been on a look out for implementing best practices of Corporate Governance. The Internal Control systems at TechNVision consist of a set of Rules, procedures & organizational structures which aim to: • ensure implementation of corporate strategy, • ensure reliability and integrity of accounting and management data, • ensure process compliance, • achieve effective and efficient corporate processes, • safeguard value of corporate assets, Statutory Compliance The Company has a Compliance Officer to advise the Company on compliance issues with respect to the laws of various jurisdictions in which the Company has its business activities and to ensure that the Company is not in violation of the laws of any jurisdiction where the Company has operations. The Compliance Officer, who is also the Company Secretary, reports from time to time on the compliance or otherwise of the laws of various jurisdictions to the Board of Directors. Generally, the Company takes appropriate business decisions after ascertaining from the Compliance Officer and, if necessary, from independent legal counsels, that the business operation of the Company is not in contravention of any law in the jurisdiction in which it is undertaken. Legal compliance issues are an important factor in assessing all new business proposals. Risks and Concerns The risk management process is continuously improved and adapted to the changing global risk scenario. The agility of the risk management process is monitored and reviewed for Appropriateness with the changing risk landscape. The process of continuous evaluation of risks includes taking stock of the risk landscape on an event-driven as well as periodical basis. The risk categories covered under the risk management program includes strategic, operational and financial as well as compliance-related risks across various levels of the organization. This includes risk assessment and mitigation at the Company level, business / functional unit level, relationship level and project level. Some of the key strategic risks the Company faces, their impact and corresponding risk mitigation actions undertaken by the Company are discussed in the table: We are subject to Government and regulatory activity That affects how we design and market our products. Regulatory actions may at times hinder our ability to provide the benefits of our software to consumers and businesses, thereby reducing the attractiveness of our products and the revenues that come from them. The outcome of such actions, or steps taken to avoid them, could adversely affect us in a variety of ways, including: • We may have to choose between withdrawing products from certain geographies to avoid fines or designing and developing alternative versions of those products to comply with government rulings, which may entail a delay in a product release and removing functionality that customers want or on which developers rely. • The rulings described above may be cited as a brcedent in other competition law proceedings. We face intense competition The entry of large players will result in fierce competition and raising the bar for eligibility. This will impact the business of the Company. In response to competition, we rely on the following to compete effectively: • a successful service delivery model; • a well-developed recruiting, training and retention model; • a broad referral base; • continuing investments in process improvement and knowledge capture; Our business depends on our ability to attract and retain talented employees. Our business is based on successfully attracting and retaining talented employees. The market for highly skilled workers and leaders in our industry is extremely competitive. Post-recession, the attrition rate in the IT industry has risen again and is one of the major challenges being faced by the industry. As the industry is on the path of recovery from the economic downturn, lateral hiring has reached its peak which in turn has resulted in widesbrad attrition. If we are less successful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver successful products and services may be adversely affected. Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. The Company is constantly exposed to the risk of exchange rate fluctuations. With operations spanning world-wide and revenues earned in major currencies of the world, a majority of Company's expenses are incurred in Indian Rupees. This exposes the Company to a constant risk of foreign exchange fluctuation, adverse fluctuations of exchange rate poses a threat to the profitability of the business. Fluctuations in foreign currency exchange rates can have a number of adverse effects on us. Changes in the value of the Indian Rupee against other major currencies will affect our revenues and thereby our profit margins as well. Service Model Redundancy Newer models which change the manner of consumption of IT services could result in demand combrssion /pricing brssure on the existing model. The Company is continually scanning the market environment and communicating with clients to identify emerging market trends at a nascent stage and come out with innovative service delivery model. Reputational Threat Reputation is built continuously in a timely and quality delivery with integrity. Any damage to this reputation and image of TechNVision could lead to decrease in market share. The Company is focusing on quality and processes, and has developed efficient service models to mitigate this risk. Strict adherence to Company's Quality Management System, Code of Conduct and Corporate Governance framework have helped Company evolve as one of the best Company in the market. Regulatory non-compliance TechNVision is a group of Companies and many laws apply to TechNVision Group. Any failure to comply with any of the relevant regulations could result in financial penalties and reputational damage. The company is assuming consultation of local managers as well as Auditors, Company Secretary, consultants, lawyers, specialists and experts for effective and efficient regulatory compliance. TechNVision is also implementing a security policy that complies with information security and data privacy laws, backed by rigorous processes and a robust infrastructure, which assures physical and virtual security. Analysis of our Financial Statements Accounting Policy The Company's financial statements are abided by the general accepted accounting principles and the Accounting Standards as per Section 211(3C) of the Companies Act 1956 (to the extent applicable) and Section 133 of the Companies Act, 2013 (to the extent notified). The financial statements were brpared under the historical cost convention basis and disclosures were made in accordance with the revised Schedule III to the Companies Act, 2013 and the Indian Accounting Standards. The Company has followed the mercantile system and recognized income and expenditure on an accrual basis. The Company has made all relevant provisions as were applicable as on 31st March, 2015. Over the years, TechNVision has built itself into an organization that not only partners with its customers, but also provides value addition, through a repertoire of innovative solutions and superior quality of services. Today, TechNVision has risen to eminence, as a leading company in the IT / ITES space in the globe. Financial Performance - (Consolidated) TechNVision is a public Company listed on "The Bombay Stock Exchange Limited (BSE)". The financial statements of TechNVision are brpared in compliance with the Companies Act, 1956 (to the extent applicable) and the Companies Act, 2013(to the extent notified) and generally accepted accounting principles in India (Indian GAAP). TechNVision has two subsidiary companies along with their subsidiary companies (including step down subsidiary companies). TechNVision publishes audited consolidated financial results on annual basis as well as quarterly basis. Revenue & Expenditure The total revenues earned by the Company has increased by 9.13% over last year, from Rs. 446.54 Lakhs to Rs. 487.32 Lakhs in FY 2014-15. The total Operating Costs have increased by 12.19%, from last year's Rs. 437.24 Lakhs to Rs. 490.56 Lakhs this year due to increase in debrciation cost. Operating cost as a proportion of Total Income has increased from 97.83% to 100.41% due to our decreased productivities. With the increased level of revenues, the EBITDA has increased to Rs. 16.64 Lakhs in FY 2014-15 as against Rs. 13.55 Lakhs in the FY 2013-14. The Company has registered PBT of Rs. (1.97) Lakhs as compared to Rs. 9.69 Lakhs last year. Balance Sheet Analysis Capital employed The capital employed is decreased by Rs. 7.94 Lakhs from Rs. 18.06 Crores as of 31st March 2014 to Rs. 17.99 Crores as of 31st March 2015. We have ensured judicious use of every rupee invested in the business. Equity capital During the year 2014-15, the Company has not issued any equity shares or convertible warrants. Reserves and surplus Free reserves of TechNVision stood at Rs. 8.33 Crores as on 31st March 2015 which is lower than the free reserves of Rs. 8.40 Crores as on 31st March 2014. The decrease reflects internal accruals to the tune of Rs. 0.07 Crore. External debt The company had negligible external debts during the year except for assistance granted by the Technology Development Board of India. Fixed assets During the year, the company has invested Rs. 0.089 Crore in Computer & Accessories among other assets. 1. Trade Receivables Trade Receivables amounted to Rs. 8.95 Crores as at 31st March, 2015 compared to Rs. 10.18 Crores as at 31st March, 2014. These debts are considered good and realizable. 2. Cash and Cash Equivalent The bank balances include both rupees accounts and foreign currency accounts. 3. Current liabilities and provisions The position of current liabilities is Rs. 1.50 Crores as on 31st March, 2015 as against the last year amount of Rs. 1.56 Crores. Revenue analysis The Company's revenue (net sales) stood at Rs. 4.89 Crores in 2014-15 as against Rs. 4.47 Crores in last year. Margins There was a divergence between the EBIDTA and PAT margins for the year under review. • EBITDA margin stood at 3.41% in 2014-15 compared with 3.03% in last year. • PAT margin stood at 0.10% in 2014-15 compared with 0.99% in last year. Taxation The Company's corporate tax burden is decreased from Rs. 5.23 lakhs in last year to Rs. (2.48)lakhs this year. Our end-to-end solutions We complement our industry expertise with specialized support for our clients. We also leverage the expertise of our various Center of Excellence and our software engineering group and technology lab to create customized solutions for our clients through our network of partners. In addition, we continually evaluate and train our professionals in new technologies and methodologies. Finally, we ensure the integrity of our service delivery by utilizing a scalable and secure infrastructure. Expanding partner network enabling us to reach out to newer geographies resulting in broader client base. Forward Looking Statements This report contains forward looking statements, which may be identified by their use of words like 'plans', 'expects', 'will', 'anticipates', 'believes', 'intends', 'projects', 'estimates' or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the Company's strategy for growth, product development, market position, expenditures and financial results, are forward looking statements. Forward Looking statements are based on certain assumptions and expectation of future events. The Company cannot guarantee that these assumption and expectations are accurate or will be realized. The Company's actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events. |