MANAGEMENT DISCUSSION AND ANALYSIS The financial statements have been brpared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles (GAAP) in India. Management of CyberTech Systems and Software Limited (the "Company") accepts responsibility for the integrity and objectivity of these financial statements, as well as for the various estimates and judgments used in the brparation of the financial statements. These estimates and judgment have been made on a reasonable and prudent basis, so that the financial statements reflect the form and substance of transactions in true and fair manner, and showcase the state of affairs of the Company. Results discussed herein include consolidated results for the Company, including its wholly owned US subsidiary. 1. INDUSTRY OVERVIEW Geospatial technology broadly includes mapping and surveying techniques, remote sensing, photogrammetric, cartography, Global Positioning Systems (GPS) and Geographical Information Systems (GIS). With its unique ability for acquisition, integration and analysis of geographically referenced spatial information, this technology has in recent times been recognised as an effective tool for planning, management and decision making locally and globally. Geospatial technology has made inroads across various sectors in the public as well as private domain in India. As stakeholders across sectors realise the utility and long term cost effectiveness of using geospatial tools and technologies, the geospatial industry is set to progress by leaps and bounds in the coming years. Well articulated policy mechanisms, Government support and the ever increasing domestic demand would go a long way in popularising geospatial technology in India and bring it into the mainstream an aid for effective governance and developmental planning. The GDP in India is expected to approach $9-10 trillion by 2025 and the Indian economy would be characterised by its transformation to being highly industrialised and technologically advanced. India will therefore require an efficient and advanced information and knowledge regime to arm itself for the envisaged economic growth. Geospatial technologies would be central to information management in India in future and the applications of this technology can have great social as well as national relevance. It can support governance, help brpare sustainable development strategies, enable better management of business process and make geographical knowledge available to the citizens. Several Indian states such as Andhra Pradesh, Karnataka, Rajasthan and Tamil Nadu are now using geospatial technology for good governance and efficient management. Until a decade ago in India, government departments and agencies were the only source for geospatial information. Opening up of mapping data and information by the state has enabled enhanced private sector participation in this sector. Several businesses and industries are now using geospatial services in India for analysis of demography, competitiveness, expansion, risk management, target oriented marketing, planning of route etc. The major sectors using geospatial technology in India are: agriculture, telecommunications, oil & gas, environmental management, forestry, public safety, infrastructure, logistics etc. The geospatial market comprises four identifiable components - data, software, hardware and services. Of these two segments, hardware and services have shown significant growth in India. The major software providers in India are ESRI, AutoDesk, Bentley Systems, Leica Geosystems, InterGraph and PCI Geomatics. In India, government as well as private organizations has initiated several GIS based initiatives implementations in the country. The latest in the list is the Government of India's Smart City initiative which more than 500 cities being selected under Project AMRUT( Atal Mission for Rejuvenation and Urban Transformation). 2. Business Overview CyberTech is an upcoming Geospatial Technology Company . More than a decade is over for making a foray into Geospatial Technology Area by CyberTech. CyberTech is providing geospatial support to its various customers in India and overseas. CyberTech has patented its products GeoCivic® and GeoShield®. GeoCivic®, our flagship, GIS-based information management suite, leverages the latest geospatial platforms to build an integrated Governance Decision Support Engine. This engine helps local bodies to leverage locational intelligence for optimum civic planning and development thereby helping them build a truly smart city. GeoCivic® focuses on the four key smart governance elements, with a dedicated application for each element namely Property Tax Management, Public safety and Emergency Management System, Public Health Management System and Citizen Compliant Redressal System. GeoShield, our proprietary public safety solution, is a new-age GIS system that includes ready-to-operate hardware, software, and data using the latest ArcGIS online services. GeoShield helps local bodies to build a centralised, user-friendly geo-information repository with advanced analytics to enhance their emergency decisions and expedite their response, without compromising on accuracy. Local bodies can merge complex, disparate datasets including Geo-RSS, live traffic camera, and other live feeds and give analysts, decision makers and operators a common operational picture (COP). Through GeoShield CyberTech supports all aspects of local bodies situational awareness lifecycle spanning Assessment and Preparedness, Detection and Prevention, and Response and Recovery. This product is under brparation and mostly targeted for overseas local bodies based in USA. Awards CyberTech received the "Skoch Order of Merit" in the 37th Skoch Summit on "Minimum Government, Maximum Governance" held at the India Habitat Centre, New Delhi on 19-20th September 2014. CyberTech has received this brstigious recognition as "India's best governance projects 2014" for the excellent project conceptualized and delivered for the city of Bangalore. The project has been awarded this apbrciation in two categories: 'Smart Governance' & 'Advanced Technology' The Skoch Digital Inclusion awards is a highly renowned and brstigious platform instituting India's highest independent civilian honors in the field of Governance, Finance, Technology, Economics, and the Social Sector. CyberTech's selection has come after a fierce competition among more than 1000 entries from across the country, including leading national and international IT and technology companies. CyberTech's selection for this 'Order of Merit' speaks volumes for the customer acceptance and quality of its GeoCivic® solution. It is a reflection of the success that CyberTech has had at building market-driven solutions on leading ESRI technologies. This achievement will not only help in creating a stronger GeoCivic® brand, but will also create better opportunities for CyberTech to reach out to its target market and deliver better value to its customers. CMMI Recognition CyberTech has been assessed for CMMI for Software Development & has been successfully appraised for Level 3. CMMI is an internationally recognised & accepted model by IT industry for the software development. It assures process oriented approach for delivering Quality Product & timeliness in delivery. Through CMMI, CyberTech now has detailed processes to guide the product lifecycle from its conception to final delivery. CMMI Institute, USA, has now officially published on their Site about CyberTech achieving this brstigious status of CMMI Level 3. 3. Human Resources For an IT Company HR is an integral function. Continuous hiring of right talent is an important function of HR. It also focuses on creating a performance-driven environment in the Company where innovation is encouraged, performance recognised and employees are motivated to realise their potentials. HR not only continuously acquires right people for right place but groom them. CyberTech Maqnagement is constantly in touch with employees to boost their morals. Training programs are arranged to improve their skill sets which in turn helps the company to efficiently achieve their targets, to provide timely support to customers and follow up with the clients to support their software platforms. The Company and its 100% subsidiary have 428 permanent employees on its payroll. Company tries to keep attrition ratio at minimum but simultaneously brpares timesheets to allocate and recover cost incurred on HR to improve its operating margins. 4. Opportunities and Threats Opportunities: Information Technology support services remains an increasingly competitive business environment. With the change in emerging technology areas, companies have become dependent on technology not only for day-to-day operations, but also for the use of technology as a strategic tool to enable them to re-engineer business processes, restructure operations, ensure regulatory compliances, etc. As systems continually become more complex, companies increasingly turn to external IT services provider to develop & implement new technologies & integrate them with existing applications in which companies have made considerable prior investments. Additionally, many companies continue to explore methods to reduce their cost of IT operations. This provides an opportunity for providers to support and integrate company IT systems on an ongoing basis. The Indian IT Industry becomes a powerful tool used by companies to reduce their costs. CyberTech has Alliance partnerships with several leading technology companies in its practice areas including SAP, ESRI, Cisco and Microsoft. The company is well poised to take advantage of the new advanced technologies provided by these alliance partners. These technology alliance partners expect to see major technology opportunities for their customers in the United States. CyberTech continues to focus as a priority on obtaining and providing offshore sourced services for its customers. Any increase in offshore related services should have the effect of increased company margins and profitability and increased longevity of business contracts. The company intends to continue to grow its share in existing clients. This has the supplemental effect of reducing the cost of overhead and delivery cost. Threats: The economic uncertainty of the current worldwide markets makes the future less brdictable than in the past due to the current demand environment. Worldwide IT spending growth has significantly reduced with budget cutbacks on IT spending by customers, buyers in "wait and watch" mode, government units significantly cutting budgets to match expected revenue shortfalls and delayed decision making. Reduction in new client additions, absence of large deals, vendor consolidation, downsizing for greater efficiencies and cost savings as well as pricing brssures — in both onsite and offshore realization put greater brssures on revenues and margins in the last fiscal year and are expected to track lower for some time. The US market is under increasing brssure from general economic conditions as growth diminishes. US spending on off-shoring services have slowed in the face of these market conditions as well as the adoption of protectionist measures by policy makers. CyberTech is also subject to the threats of competing against much larger International IT service providers, the large global Indian IT service providers and more entrenched US and Global System integrators, many of which also provide services to established markets on an offshore basis. The good news is that, global sourcing is expected to increase as focus on cost and 'value' increases with buyers "stretching the dollar" to include greater value delivery. As with other Indian IT Services companies, other general threats to the business continue to include competition among Information and Technology units in India for talented people, which has resulted in rising employee compensation packages and shrinking margins available to IT Companies. We are also seeing a potential backlash in the US from the increasing loss of employment due to outsourced services overseas, resulting in an impact on the country's immigration enforcement procedures. 5. OUTLOOK AND RISKS The Company maintains its focus on the Public sector and Enterprise SAP and GIS custom technology applications. It is expected that its strengthened relationships and alliances with partners such as SAP, Microsoft, IBM, and ESRI will continue to lead to business and revenue growth and increasing profitability with a continued focus on offshore revenue as and when the global market improves. The company will continue to maintain its focus on its ESRI alliance partnership, which has helped in gaining a brsence in the Geographic Information Systems (GIS) practice. The Company is proud to be one of ESRI's main offshore partners & expects to continue to provide offshore support from India to ESRI in building and supporting their applications. The Company continues its focus aligning its sales and delivery structure to an Indian Model. The Company has not kept up with industry growth trends, primarily due to decreased spending in the US public sector and a corresponding decrease in activity at several of our large clients. Additionally, the absorption of new customers in the targeted SAP small/medium client base has not grown as expected. US market conditions continue to soften making it harder to locate new development opportunities for small and medium size companies. The Company intends to continue to grow its offshore business while exploring new opportunities domestically and in adjacent markets, New opportunities will focus on leveraging our US public sector expertise and delivering our market solutions and products to these markets. Companies continue to look for specialized expertise and cost saving methods, both of which are being exploited by the Company. The Company's US subsidiary generated a loss after tax for the period. The Company has been impacted by the worldwide slowdown in discretionary IT spending which has impacted several of our targeted sectors. Due to this slowdown, our clients and many other companies are deferring the implementations of new systems and other discretionary spending. The new paradigm has become one of "reducing the total cost of ownership including the ongoing maintenance and support of IT systems". This has especially affected the SAP market with a significant drop in the sale of new SAP licensed in the current year and lowered expectations of the ongoing cost of maintaining systems. The Company has focused its efforts on driving cost effective support offerings resulting in improved offshore revenue while realizing a detriment to onsite business. This coupled with reduced spending in the public sector and increased brssure by the government to reduce the number of foreign IT workers has negatively impacted growth in the United States. These actions do not forecast a quick turnaround in the US market. The company continues to take all reasonable steps to reduce and optimize costs to improve profitability. Focus remains on expanding the benefits from our alliance partners and creating offshore opportunities where relationships are of a long term nature and recurring services can be provided at a lower cost. Risk management program involves risk identification, assessment and risk mitigation. The Company has evolved following business units. 1. India BU 2. GIS BU 3. AMO BU Each BU has been given full operational freedom to improve the business but their margins are constantly monitored by the Management and Board of Directors and Executive Committee. Each BU has been given targets and means by way of budgets to improve their efficiency and healthy and strategic growth of the Company. 6. INTERNAL CONTROL SYSTEM & THEIR ADEQUACY The company strictly adheres to the internal control systems proven to be effective over the years. The internal audit team carries out extensive audit on all operations at regular intervals. The company implements the policies and procedures so as to safeguard the assets and interests of the company. The internal control systems are implemented with a view to achieve good ethical culture within the organization. The internal control systems would ensure that any vulnerability in the achievement of company's objectives caused by risk factors whether internal or external, existing or emerging, is detected and reported in a timely manner and is meted out with appropriate corrective action. Strong internal controls minimize the risk of frauds by introducing effective checks and balances into the financial system. 7. FINANCIAL CONDITION Your company had consolidated revenues of Rs.66.90 Crores and Rs.5.15 Crores net income in the current year. We expect to achieve significant growth in revenue and net income in the coming year. The financial health of your company indicates adequate and sustainable financial resources to meet with the needs of its business. The Company and/or its wholly owned subsidiary have • Generated cash from its business • Gained more productivity from its assets and properties • Maintained its current dividend level The Company believes it has adequate and dependable resources to meet its liquidity needs, including the ability to raise short term debt, and manage the ongoing mismatched cash flows inherent in a consulting business. 8. Cautionary Statement Statements in this Management Discussion & Analysis Report describing the Company's objectives, projections, estimates, expectations or projections may be 'forward looking statements'. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include economic developments, particularly in the USA, & improvements in the state of Information Technology Services markets, changes in the Government regulations in India & USA, tax laws & other incidental factors. |