MANAGEMENT DISCUSSION AND ANALYSIS 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, based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions 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. ECONOMIC OUTLOOK 2014 on the whole was a good year. The world was beginning to climb out of a recession post the financial crisis. USA lead the way, despite having to cope with funding over its budget. It has been creating jobs and its housing market too has improved sharply. In Europe too there was a better story, though an uneven one. Africa grew encouragingly. But the biggest story has been of the structural shift of the world economy from the developed world to the emerging world. And in the emerging world,India looks most promising. While the world on the whole may not be out of trouble, but 2015 and 2016 are expected to yield much better and balanced growth for the world with IMF forecasting 7.5% growth for the Indian economy. INDUSTRY OUTLOOK The technology industry is one of the most dynamic industries in the world. It is this dynamism that offers growth opportunities to those who adopt with changing times. Newer technologies are emerging; businesses are being transacted in ways unheard of in the past. There are shifts happening in use of devices from PC's to smartphones. Newer opportunities are arriving in mobiles, cloud and big data. E-commerce is gaining traction. However, distribution continues to provide immense value to the vendors and the resellers. But, one needs to constantly evolve to grow and lead. FUTURE OUTLOOK With Indian economy expected to grow at 7.5%,the Digital India campaign, smart cities and broadband penetration plans, the Information technology and the mobile industry is likely to grow by double digit. Your company is constantly upgrading its infrastructure, systems and processes, and closely monitoring the same for optimum output. During the year 2014-15, your company successfully migrated to SAP that will help further optimize the use of its assets. In view of the same, the future outlook is very promising. OPERATIONAL PERFORMANCE: The year gone by has been satisfactory. The Company registered revenue of Rs. 213887.37 Lacs as against Rs. 228818.16 Lacs in the brvious year. The Company's consolidated revenue has grown marginally to Rs. 238888.96 Lacs as against Rs. 236187.86 Lacs in the brvious year. The Net Profit after Tax stood at Rs.1168.57 Lacs as against Rs. 1161.21 Lacs in the brvious year. The Consolidated Profit after Tax grew to Rs.1210.22 Lacs as against Rs. 1172.23 Lacs in the brvious year. SWOT Analysis Strengths: • The company has over 27 years of existence in Indian market • It has well established distribution network across the country • It has brsence in all the states of the country with integrated SAP system • The Company has highly motivated sales team • The Company enjoys extremely good credibility in the industry Weakness: • The Company has high finance cost • It is operating in low margin industry Opportunities: • Domestic IT hardware industry is expected to have good growth • The rapidly growing telecom industry offers huge opportunities • It is serving SAARC countries through its Singapore Subsidiary Threats: • Global IT distribution companies may enter Indian Market • Fierce competition may lead to margin reduction Risks and Concerns 1. Interest Rate Fluctuations Risk: The nature of business in which our Company is involved requires large amount of Working Capital. Our Company has sourced working capital facilities from various banks. Any change in the interest rates could significantly affect our financial condition and results of operations. If the interest rates for our existing or future borrowings increase significantly, our cost of servicing such debt will increase. Any down grading in India's debt rating by the International agencies may adversely affect our ability to raise requisite finances at reasonable costs. This may adversely impact our results of operations, planned capital expenditures and cash flows. 2. Risks Due To Company dependence on the Information Technology Industry and any radical change or downturn may have an impact on our business. Our revenue is brdominantly derived from the sale of IT hardware products as well as telecom products. The industry is highly fragmented in nature and competitive. In case of any downturn in this industry, or if the demand does not keep in pace with the supply build-up in the industry, our business operations may be adversely affected. Further, if we are unable to maintain an upgraded supply of new technological developments in our industry, it may adversely affect our sales revenue and impact our business. 3. Risks relating to Supply Chain Management, any break down in the Supply Chain could affect our operations adversely. Supply Chain Management plays a very vital role in our business. A strong supply chain system is essential to ensure availability of stock at the branch. Ensuring shelf availability for our products warrants quick turnaround time and high level of coordination with suppliers. We rely on our supply chain and adopt operational processes to optimize our inventory position and reduce cost. We strive to keep optimum inventory at our branches and distribution centres to control our working capital requirements. We have set up distribution centres for efficient storage and timely delivery of material to our channel partners. This helps us to minimize lead time and better utilization of working capital. An inefficient supply chain management could adversely affect the results from operations. 4. A slowdown in economic growth in India could cause our business to suffer. Our performance and growth are dependent on the health of the Indian economy. The economy could be adversely affected by various factors such as political or regulatory action, including adverse changes in liberalization policies, social disturbances, terrorist attacks and other acts of violence or war, natural calamities, interest rates, commodity and energy prices and various other factors. Any slowdown in the Indian economy may adversely impact our business and financial performance. 5. Government Policies and Regulation. The role of the Indian central and state governments in the Indian economy has remained significant over the years. Change in the government policy and regulations in the manner adverse to the company, may have a material impact on the profitability of the company. RISK MANAGEMENT The Company has established a well-defined process of risk management, wherein the identification, analysis and assessment of various risks, measuring the probable impacts of such risks, formulation of risk mitigation strategy and implementation of the same takes place in a structured manner. The company has identified and categorized risks in the areas of Operations, Finance & Marketing, Regulatory Compliances and Corporate matter. Necessary internal control systems have also been put in place by the company on various activities across the Board to minimize the impact of various risks. A well-defined and established system of internal audit is also in place to independently review and strengthen these control measures. The Audit committee of the company regularly reviews the report of the internal Auditors and recommends actions for further improvement of the internal controls and remedy for any weakness in the system. INTERNAL CONTROLS: Compuage's well defined organization structure, policy guidelines, brdefined authority levels, and an extensive system of internal controls ensure optimal utilization and protection of resources, IT security, accurate reporting of financial transactions and compliance with applicable laws and regulations. • Compuage has adequate system of internal control in place to ensure that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are authorized, recorded, and reported correctly. • Compuage's internal audit function is empowered to examine the adequacy, relevance and effectiveness of control systems, compliance with laws, regulations & policies, plans and statutory requirements. • Compuage has an exhaustive budgetary control system. Actual performance is reviewed with reference to the budget by the management on an ongoing basis. • Compuage's Audit Committee of the Board reviews the findings and recommendations of the internal auditor. The system is improved and modified continuously to meet changes in business conditions, statutory and accounting requirements. HUMAN RESOURCES: Our Company believes that people and their experience are our biggest assets. Their experience, efforts and dedication are the primary reasons for our consistent growth over the years. In a business model where people are the growth drivers, we are endowed with one of the best talent pool in the industry. We empower our employees at all stages of their careers and provide opportunities to enable them to excel in their individual capacities. We have created an exciting work environment that values individual contribution and helps gain a sense of satisfaction and accomplishment. We believe in developing the potential of each employee and aid her growth as an individual and a professional. We believe this will enhance our prospects and ensure faster growth of our Company. In view of this we have laid down a combrhensive set of policies aiming at attracting, retaining and motivating employees The development and use of human potential and a learning organization is our bridge to continued success in the future. DISCLAIMER: This "Management Discussion and Analysis" may contain what may be considered as "forward looking statements". These statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions 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. For Compuage Infocom Limited Atul Mehta Chairman & Managing Director |