MANAGEMENT DISCUSSION AND ANALYSIS As required under Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, a detailed Report on Management Discussions and Analysis is given below: Economy The country topped the World Bank's growth outlook and grew at 7.6% in 2015-16 and is expected to grow at 7-8% in 2016-17 driven by many favourable macro factors and decisive Government programs and interventions. Inflation is forecast at around 4-5% in 2016-17 helping stability in prices. The impact of Make in India and other policy initiatives have led to increased FDI inflows. The main aim of Make in India campaign is to take the share of Manufacturing in GDP from the current 16% to over 25% by the year 2022, to create 100 million jobs by then. Macro trends, Industry Structure and Development Retail Industry The Indian retail industry is expected to double to $1 trillion by 2020 due to rising income, urbanization, consumer brferences etc. The retail sector witnessed high growth with organised retailing formats gaining prominence, especially in Tier 1 and Tier 2 cities. The kirana stores will continue to be the largest contributor to value share and are likely to account for 60% share. Small & Medium Industry The government is leading the efforts through Make in India and Digital India initiatives to bolster the share of SME in India's GDP to 20-25 per cent by the end of 2025. Currently, there are approximately 48 million SMEs in India, employing around 40 per cent of the country's labour and contributing to 17 per cent of India's GDP. The government has launched many programs to grow this sector. Smartphone Industry India surpassed US to become second biggest smartphone market in the world by crossing 100 million units with an annual growth rate of 15% and user base of 220 million. India manufactured mobile phone worth Rs. 54,000 crore and 20+ mobile phone brands have started assembling in India. India's mobile phone manufacturing is expected to significantly grow in excess of 50% and the brmium smartphone segment growing to 5 million in 2016. Post sales service market The mobile and laptop repair market in India is Rs. 6000 Crore in size and is expected to grow at 20% by 2018. With the entry of global players and existence of a few organized national players in the warranty market and many unorganized players in the out of warranty segment, this market is expected to grow exponentially. Your Company envisages increasing opportunities in this space with high device growth, improved connectivity and social networking. Payment Industry The Payment industry in India is in transition with the entry of small finance banks, payment banks, mobile wallets, brpaid cash cards with an ultimate aim of driving financial inclusion. Debit card transactions climbed 37% CAGR over past 5 years while credit cards grew at 21% CAGR. With initiatives like Jan Dhan Yojana, Unified Payments Interface, Mobile ATM etc, big jump was seen in new accounts opening and usage of cards. Business opportunity arises from such increasing trend for cashless transaction. E-Commerce Industry The e-Commerce market in India is expected to quadruple to $60-70 billion over the next 5 years. Lower costs of connectivity, smartphone proliferation, improving network and logistics infrastructure, easy payment mechanism and superior value propositions are expanding the industry at a rapid pace. Your Company is well positioned to leverage these opportunities. outlook a) Increasing mobile phone penetration and up trading of these devices, driven by aggressive marketing by national and international brands and service providers have expanded the need for high quality after sales services either on an exclusive basis for a brand or on multi-brand offering basis across India. Our Company has developed an excellent network of walk-in stores for reputed international brands and also of Authorised Service Partners. The quality and excellence of the service offerings through these networks have made the Company a brferred choice of the Brands which the Company expects to leverage fully for profitable growth. b) The need for warranty and post warranty services continues to be critical for customers due to increasing sale of devices, catering to enterprises, retail trade and household sector. The entrenched experience of Our Company and the excellence of services culture developed over the years under the reputed brand 'TVS' should enable the Company to leverage the warranty services for the devices through multiple delivery modes like on-site, walk-in centres and repair factories. c) Over the last few decades, the consumer appliances sector witnessed good growth and organized retail formats have gained prominence. Growing e-Commerce opportunities and increased use of debit and credit cards have ushered in an online consumer culture in India. As Indian retail sector continues to grow imbrssively, our Company plans to serve customers by offering products that are robust for Indian environment while providing fast and reliable service. It will leverage the touch points of sales and service partners to focus on the POS business. d) Modern retail formats are expected to grow three fold during the next 5 years. Three key trends to drive growth in modern trade are rapid consumer evolution and up trading; supply-side improvements and positive regulatory environment. These have the potential to significantly grow Point of Sale products. e) Unorganized retail, with flexible credit options and convenient shopping locations, will continue to dominate the retail sector. Smaller cities are likely to witness growth and retail players should gear up to tap the potential in these cities. The Company visualizes opportunity for its POS products and solutions offering value for money, in these smaller centres. f) Micro industries are expected to make a sizeable contribution to the small and medium sized businesses. It is anticipated that IT services will be their largest overall spending category. Overall business sentiment for conventional IT hardware business remains muted. Tablets & Phablets are taking the share of PC sales. Our Company visualizes increasing opportunities for the POS products and solutions in banking and e-Governance space. IT spends are also expected to increase across various sectors like Retail, Hospitality, Manufacturing, Education, Banking Financial Services & Insurance. Business Risks & Opportunities The Company's key imperative over the medium term is to sustain current revenue streams even as we build a strategic framework and drive Servicetec business leveraging the macro trends and business opportunities as described elsewhere. Key success factors (and therefore risks) are brdicated on timely execution of the plans, building the internal capabilities by attracting and retaining talent and keeping pace with technological and market changes. The Board and management of our Company are confident of proactively managing the risks. Internal Control Systems and their adequacy The Company ensures that all transactions are authorized, recorded and reported and has adequate internal control systems to ensure that assets are safeguarded and protected against any loss. The key processes are aligned with ISO9001:2008 system and audited periodically for compliance. The scope and authority of the Internal Auditors are clearly defined. The findings and recommendations of the Internal Auditors are reviewed by the Audit committee of the Board on a periodical basis and necessary corrective actions by the process owners are taken. Risk Management process Our Company has an established sound risk management process which is overseen by the Audit Committee through a structured framework. Strategic, operational and financial risks are identified and mitigation measures are put in place by the Company and reviewed periodically. The Company follows the policy of hedging forex risk on its imports by taking full cover. At brsent, in the opinion of the Board of Directors, there are no risks which may threaten the existence of the Company. Business Planning and Information Technology The Company has moved applications and data base to 'Cloud' based server as planned at the beginning of the year. This has resulted in de-risking the storage of critical information in our own hardware. Going forward, the Company will work on upgrading the software for applications to the current level and help run the business operations in an efficient manner. The Company introduced 'data analytics' during the year by capturing relevant information across various businesses. The information dash boards helped the management and operating teams to have real time information to control various processes and take pro-active steps to manage operations. Human Resource Development The Company has developed structured HR policies and programs in the areas of resourcing, performance management system, competency based training and development and talent management to support the current and future needs of the organization. Leadership development is a key focus area and the Company continues to develop internal talent through structured talent assessment programs, job rotation and cross functional team assignments. Learning & Development is another focus area wherein technical training is given to employees through Internal trainers. Employees are also encouraged to participate in external programs to acquire new skills and update their knowledge based on latest trends in the industry. The Company continues to engage the employees through different forums. The annual Management Kick-off (MKO) meeting is organized for annual goals deployment and followed by a midyear goal alignment meeting, for review. As part of the "Awards, Recognition & Communication" (ARC) program, the Company recognises the employees for their exceptional performance throughout the year. Safety Safety training and safety audit are frequently conducted which enables the Company to maintain accident free performance at the Factories for several years. Corporate Social Responsibility Corporate Social Responsibility (CSR) activities have been embedded in the value system of the Company for many decades. The Company continues to be actively engaged in CSR initiatives for development of the society through partnerships and continued to focus on to helping lesser privileged communities in areas like education, health & hygiene, culture & heritage and actively participated in other welfare projects. The provisions of Section 135 of the Companies Act, 2013 is not applicable to the Company and hence there was no requirement to constitute a CSR Committee, although the board periodically engages in CSR agenda of the Company. During the year, the Company undertook the following initiatives and also encouraged our employees to participate in various CSR activities. Chennai floods: Chennai witnessed unbrcedented rains during the month of December 2015 resulting in partial damage/ full washout of house hold items of some of our employees. As an organization, employees volunteered and contributed their one day basic salary to extend possible support and an equal amount was contributed by the Company. The Company provided food and relief materials to hundreds of affected people in the relief camps. "Project SAHAAI" Under the guidance of the management, around 40 employees volunteered to support the initiative of rehabilitating the flood hit "Micro Entrebrneurs" around the ecosystem and around 120 "Micro Entrebrneurs" were put back on to each of their respective businesses in a week's time. These include petty shops, small ironing outfits, cycle repair shops and road side vendors. During the year, the Company extensively conducted eye camps, health and hygiene, education support and provided infrastructure support to the schools. Cautionary Statement: Statements in the Management Discussion and Analysis Report describing the Company's objectives, projections, estimates and expectations 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, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets, changes in Government regulations, tax laws and other statutes and incidental factors. |