MANAGEMENTDISCUSSIONAND ANALYSIS

ECONOMY:

The Global economic outlook in the year under review was divergent, with growth in the United States, weaker recoveries in Europe and Japan, while emerging economies like China slowed down in growth rates. According to International Monetary Fund, the global economy is expected to grow at 3.5% in 2015 and 3.8% in 2016. However, Global recovery will continue to be moderate and uneven. While developed economies are expected to strengthen, aided by lower oil prices and low interest rates, most emerging economies are expected to slow down moderately, due to country specific reasons- with India being an exception. The Indian economy is expected to grow by 7.5% in 2015-16. Most economists believe that the Indian economy is at an inflexion point and is set for sustained growth in coming years. Lower oil prices, contained inflation, stable financial sector and policy actions will support growth this year.

INDUSTRY STRUCTURE, DEVELOPMENT AND OPPORTUNITIES:

Technology continues to change the way we live and do business at a dramatic rate. We have entered a world where change is taking place at an astounding pace. Technology breakthroughs play a remarkable role in redefining consumer experience and determining how we lead our life. Consumers are becoming increasingly sophisticated and demanding. They are relying more and more on their mobile phones to operate every part of their professional and personal life.

In 2014, India topped as world's fastest growing smart phone market. Fuelled by the availability of low-cost smart phones and dropping data plan tariffs the absolute number of internet connections is at a record high. However, the total internet penetration in India stands at about 19 percent, which is still lower compared to internet penetration across other countries.

The pick-up of the "e-commerce revolution" has raised the demand for mobiles as well as computers, computer peripherals and software products. The comfort to use computers for entering into commercial transactions and personal entertainment has been on the rise not only in the urban areas but also in rural India. This coupled with increasing per capita income and literacy will boost the appetite of the Indian Technology Consumers. The demand for these products is expected to amplify many times with technological advances and changing consumer brferences.

On the other hand, advancement in technology and processes makes it imperative for businesses to upgrade their IT infrastructure. In today's competitive environment, being stuck with old and outdated technology can prove fatal to any organization's existence. Businesses across the world have realized the importance and benefits of upgrading technology at regular intervals. This brsents an ongoing opportunity for the Company to distribute its offerings to new and existing customers.

Mobile Value Added Services (MVAS): MVAS is one of the hottest market segments in telephony today. It has witnessed significant growth due to increasing funding for mobile governance applications from the government. The Indian MVAS market is expected to grow at a CAGR of 18.5% during the period 2015-2020. The consumer VAS and enterprise VAS market is expected to grow at a CAGR of 19.7% and 19.3% during the period from 2015 to 2020, respectively.

Given the mounting penetration of mobile phones, especially in the rural belts of the country, the demand for the Mobile- Value Added Services is expected to accelerate.

Today, there are several areas that brsent significant opportunities for the mobile industry as a whole:

• Disruption from mobile-first services: every sector is being redefined through the mobile lens. Traditional sector such as transportations and food ordering are now being disrupted by mobile-first services. As this wave of disruption continues, the mobile industry and the companies, which are following a mobile-first approach will benefit.

• Mobile messaging: In the mobile space, mobile messaging is without a doubt the space which has seen the most growth in brvious two years and which has the highest engagement with end users. In China, mobile users use WeChat not only for chatting but also ordering concert tickets and even food. Mobile messaging is at the center of the mobile disruption. Plugging into those new ecosystems brsent an opportunity for countless mobile players who will be able to take advantage of this change in customer behaviors.

• Mobile monetization: A few years ago, there were concerns about monetizing mobile, in particular the effectiveness of mobile ads were questioned. Today, Facebook makes more money from mobile than the web. Monetization on mobile is real and very strong. Businesses are very serious about advertising on mobiles and exploring various channels for online and mobile marketing.

Avance facilitates the clients to synchronize their online and offline offerings to their customers. Its main offerings include Short Code Services, Enterprise Mobile Marketing, Mobile marketing solution suit, E-mail & web integration, Ad insertion program, Wireless Application Protocol, Mobile Coupons Page Elements, OBD/IBD, email Marketing, Call Conferencing Platform and Subscriber Management Platform. With increasing use of mobiles and smart phones, it is criminal for any organisation to ignore the potential of mobile marketing. The budgets for the mobile marketing have seen a substantial rise in the last few years and it is expected to further swell. Avance being an experienced player in this niche segment shall leverage its expertise to provide innovative products and services to its customers.

CHALLENGES:

The mobile industry continues to be extremely competitive and there are several challenges that are affecting the entire industry or selected players within the industry:

• Regulation and policies: Regulation is making it difficult for traditional VAS providers to operate. For instance, the dual confirmation process for service activation that has been introduced in a number of markets created a cumbersome user experience that led to a fall in activation of traditional VAS services.

While the impact of this particular policy is now absorbed, new policies can constantly make it more difficult to operate for traditional VAS providers as well as OTT providers. • Mobile Messaging Services: Mobile messaging services pose a serious challenge to traditional voice and messaging services. They are both an opportunity and a threat. As those services keep growing, they can either become more inclusive (like social networking services which open their platforms) or more exclusive.

FINANCIAL PERFORMANCE:

Company was able to push the revenues beyond the one hundred crores milestone in the financial year under review. Your Company has achieved a top line growth of 20.5% year or year and squeezed the annual loss by 65% year on year. This was a very significant achievement especially in a very competitive environment and a slow economy. In the year under review, the Company raised Rs. 2,01,22,94,895/- through issues of 134,15,29,930 shares of Re. 1/- (Rupee One only)each at a price of Rs. 1.50/- per share, being the price calculated as per provisions of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, on brferential basis.

OUTLOOK:

The rise of digital technologies- such as big data, internet of things and robotics- has created anxiety as well as a sense of opportunity in today's market place. Products ranging from tractors to coffee makers have become networked objects generating constant streams of data. The internet will increasingly become the fabric that connects cities, homes and products we use, and the distinction between offline and online will become imperceptible. It will become one of the basic necessities of life enabling people to do all their tasks online. The rising literacy rate, increasing per capita income, changing consumer brferences, technological changes, user friendly computers and smart phones, roll out of 4G services and many other factors shall accelerate the expansion of the digital world to the rural areas. This would lead to huge rise in demand for the hardware and software products, IT infrastructure, MVAS services and advertising spends.

RISKS AND CONCERNS:

Avance Operates in a very competitive market with competition from both legacy VAS companies and over the top services.

In the MVAS business, most of the business-to-business contracts follow a revenue share model in which the revenue is share between the mobile operator, the content owners and the VAS service providers. As a consequence, the revenue will accrue to the company only if customer's end user subscribers use or subscribe to the services offered by them. As a result, the Company's revenue will be subject to uncertainties that are beyond its control.

Further, with uncertainty looming over global and domestic economy may force businesses to cut down on IT spends thereby affecting company's ability grow at a healthy rate.

K MANAGEMENT

The board is responsible for determining the nature and extent of the significant risks, the Company has to manage these significant risks in order to achieve its strategic objectives. The board believes in the maintenance of sound risk management and internal control systems. Every year, the board reviews the effectiveness of the Company's risk management and internal control system, which cover all material financial, operational, compliance, legal, reputational and sustainable development risks. This review relies on assessments undertaken by the audit committee and such assessments occurred throughout the financial year 2014-15.

Risk Management committee at their meeting held on 24th January, 2015, reviewed the annual risk management policy and the risk management framework which are used by the board and management to identify and scrutinise key risks facing the group, and considered whether those risks are appropriately managed. The committee has laid down following risk management framework:

Risk Management comprises three key components which are as below:

1. Risk identification

2. Risk assessment and mitigation

3. Risk monitoring and assurance

The Risk Management Committee has identified the following major risks associates with company:

1. Credit Risk

2. Market Risk

3. Operational Risk

The risk mitigation plans are reviewed regularly by the Audit Committee of your Company ERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has in place internal control systems and procedures commensurate with the size and nature of its operations. Internal control processes which consist of adopting appropriate management systems and implementing them are followed. These are aimed at giving the Audit Committee a reasonable assurance on the reliability of financial reporting and statutory & regulatory compliances, effectiveness and efficiency of your Company's operations. The Internal Control Systems are reviewed periodically and revised to keep in tune with the changing business environment.

MAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATION FRONT:

Being in the business of technology and business of people, to ensure sustainable business growth and become future ready, over the years your Company has been focusing on strengthening its talent management and employee engagement processes and through the year, organisation's engagement scores has improved to highest percentile in the entertainment sector. Your Company continues to build talent pipeline by hiring fresh talent from renowned campuses and nurturing them and identifying / training top performing resources. The Company values the safety of its employees and constantly raises the bar in ensuring a safe work place.

CAUTIONARY STATEMENT:

Statement in this "Management Discussion and Analysis" describing the Company's objectives, projections, estimates, expectations or brdictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand and supply conditions, finished goods prices, input materials availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.

For Avance Technologies Limited

Sd/- Srikrishna Bhamidipati

Chairman & Managing Director

DIN: 02083384

Date: 4th September, 2015

Place: Mumbai